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Why car companies need to become tech companies

Rob Enderle | Jan. 26, 2017
The biggest risk any industry faces is its inability to change. In the automobile industry, if things don’t change, columnist Rob Enderele writes, there are likely to be fewer car companies left, especially U.S. car companies.

I recently met with Dan Cauchy at Automotive Grade Linux. He spoke to how all the car companies were flocking to participate in his Linux-based open-source platform. Well that’s the way it should be if only as a hedge. It seems that the Japanese car companies are actually excited and engaged, a couple of the European companies are engaged, and virtually none of the U.S. companies are engaged.

Whether the car companies like it or not their industry is becoming a tech industry. Virtually all powerful tech companies are in a race to see who can provide the best solutions for autonomous driving, in-car entertainment, and even propulsion. Tesla is the car poster child for success and their big wake-up call to the market was getting hundreds of thousands of preorders for a car that isn’t due until sometime next year.  

Much like it was when we moved from horses and buggies to cars there was a massive purge of firms that just didn’t want to change fast enough. In addition, at least initially, there was then a large influx of new companies that were better located, staffed and trained to build cars. It isn’t that the big car companies don’t see it coming, they supposedly do, but, with the exception of Japan, they seem to be thinking they have plenty of time.   They don’t.  

Let talk about why there are likely to be far fewer car companies and why the U.S. may be entirely out of the car business if things don’t change more quickly.  

Car companies in the U.S. aren’t agile

With the exception of Tesla, U.S. car companies are historically not agile. The biggest wake-up call likely should have been in the 1970s when, faced with the influx of ever more successful Japanese cars, GM brought out the Vega and Ford offered the Pinto, both of which were crap. This showcased that the U.S. car companies couldn’t respond quickly to change.

They were reminded again of this when gas prices got out of hand last decade and the firms ended up having to sell off or shut down many of their brands to survive. Chrysler had to sell itself first to Mercedes and then the Fiat. Going from U.S., to German, to Italian ownership had to be incredibly painful given the cultural differences.  

Then Tesla hit and even though GM actually had the first viable electric car platform, which was for its time very popular, it missed the boat. It seemed the primary defense was largely not to compete on product, but to block Tesla stores politically, typically not a great long-term strategy because political power tends to shift. And Musk and Trump suddenly seem to be getting on famously.


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