This least week has seen reports that Hyundai is in discussions with Google over a potential partnership on autonomous vehicles and vehicle technology, citing comments Hyundai Motor president Jeong Jin Haeng made after a meeting between South Korea's trade ministry and local automakers. The report comes days after Hwang Seung Ho, Hyundai's executive vice-president of information technology development, told Automotive News that he would like to break down the "fortress mentality" of Hyundai. Hwang said, "As systems get more and more complex, we cannot deal with everything. For some areas that we need to fill the gap, we need collaboration of our partners."
Google has already committed to a partnership with Fiat Chrysler Automobiles (FCA), which is centred on integrating Google's autonomous system into a Chrysler Pacifica minivan. The partnership will see engineers from both companies working together to integrate Google's self-driving technology into the all-new Chrysler Pacifica Hybrid. The two companies will co-locate in a facility in southeastern Michigan, United States to "accelerate the design, testing and manufacturing of the self-driving Chrysler Pacifica", according to an FCA press release.
However, Google has previously indicated it would be interested in working with more than one automaker. Additionally, the head of Google's car project, John Krafcik, also served as the president of Hyundai Motor America for five years. If the two companies did reach a partnership agreement, Krafcik's experience should help expediate their work processes.
There are currently several strategies being employed as automakers move into the autonomous space. Apart from developing the technology on their own (including Ford's autonomous test fleet and Toyota's USD1 billion investments in the space), OEMs can also can leverage advancements being developed by tier-1 suppliers. They can acquire start-up companies (like GM's acquisition of Cruise Automation), and they can partner with Google, and license its technologies. IHS expects different OEMs to approach the solution in different ways, and with this announcement, FCA is clearly signalling that it is likely to leverage a relationship with Google for access to the technology.
The agreement between FCA and Google is also interesting when looking at FCA's CEO Sergio Marchionne’s recent comments regarding who owns the technology in the automotive industry. In January, Marchionne warned the adoption of electric car technology risked continuing a process that he called “disintermediation”, where the primary development of new vehicle technologies are handled less by OEMs themselves and more by suppliers. The last decade has seen a gradual move of R&D activity from OEMs to suppliers, a trend that intensified following the 2008 financial crisis, when suppliers took the brunt of industry pain. Reorganisations and portfolio realignments in the intervening period have encouraged many suppliers to be stronger and more focused on maintaining a competitive advantage in specific product sectors.
Speaking to Financial Times in January, Marchionne said “If we start losing any of that […] we will not be able to hang on to any proprietary knowledge and control of that business […] we won’t be manufacturing the batteries. We won’t be manufacturing the electric motors that are part of that powertrain.” He went on to say that current carmakers retain primary control of making vehicles’ powertrains only.
However, this partnership is in line with Marchionne's views on the capital-intensive nature of the automotive industry with many OEMs working on essentially the same projects. FCA will look to partnerships for access to technology where it does not have either the resources or the expertise to develop on its own solution, as compared with developing in-house core competency. The approach is in contrast with several other automakers who are developing their own systems, or who will lag access to the technology because of lack of resources. For FCA, the project gives access to technology with less investment − though it is not indicated when (or if) this project would lead to specific projects for other vehicles in the FCA stable.
FCA's interest is expected to include not only access to the technology and engineering development, but also the opportunity to sell autonomous vehicles later, whether that proves to be as a contract provider to Google or through its own dealer network. For FCA, the move has potential to get them closer and faster to the technology, incurring less expense than would otherwise be impossible. For Hyundai, this might also be an attractive proposition.
