How much of a disruptive threat do the Tech Titans (Big Tech) pose to electric vehicle manufacturers?
In this article, the ‘Tech Titans’ refers to the five biggest tech firms (by market capitalisation) – Facebook, Apple, Amazon, Microsoft and Google (FAAMG) - https://www.pcmag.com/encyclopedia/term/big-tech
How much of a disruptive threat do the Tech Titans pose to electric vehicle manufacturers?
On 21st December 2020, it was revealed that despite several initial setbacks, Apple is pushing forward with their plans to manufacture and release an electric vehicle via Project Titan.1 Exactly a week earlier, Amazon owned Zoox unveiled their autonomous ‘robo-taxi’, designed to transform the way that people move around cities.2 These announcements marked a serious move forwards for the Tech Titans in the electric vehicle (EV) space.
The presence of the Tech Titans in the automotive industry has attracted widespread media attention, as these large technology firms grow ever more powerful and successfully expand into and disrupt many different industries.
The evolving landscape of the automotive industry and changing consumer tastes has piqued the interests of the Tech Titans seeking to capitalise on potentially lucrative opportunities. Their involvement in this industry could significantly impact its direction over the next decade.
To analyse how much of a disruptive threat to the EV industry is posed by the Tech Titans, this article will explore their involvement in three key areas of the electric vehicle industry – Vehicle Production, Autonomous Vehicles and Vehicle Connectivity.
Meeting the Demands of Vehicle Production
The success of Tesla, increasingly ethically conscious consumers and global emissions targets have led major car manufacturers to begin investing billions of dollars into designing and producing electric vehicles. General Motors recently said it will produce 30 new EV models by the year 20253 and Audi has recently launched their luxury E-tron SUV with a single charge range of up to 222 miles.4 Advancements in charging speed, range and reliability and a reduction in vehicle price have pushed electric vehicles further into the mainstream. The lucrative opportunities within the EV industry have also led to several Venture Capital backed and state backed new entrants to unveil and release their own models.
Whilst all five of the Tech Titans have experience of producing and selling products powered by lithium-ion batteries, none of these compare to complexity or size of manufacturing a lithium battery powered electric vehicle. Despite this challenge, Apple’s Project Titan is setting out to producing their own electric passenger vehicle and Amazon (via recently acquired Zoox5) have set their sights on electric and autonomous robo-taxis.
Despite these ambitious unveilings and announcements, tech-focused firms have previously tried moving into electric vehicle production and failed. In 2016, Dyson announced that it would be producing an electric vehicle. However, a few years and more than £500m later, the project was scrapped, with CEO James Dyson saying that the product was not commercially viable.6
Now that all of the major auto firms and government-backed start-ups have their sights set on producing mass market affordable EVs with a high mileage range, some technology firms are bypassing the production of vehicles and just focusing on automated driving technology instead. The Chief Executive of Google Waymo has stated that their “goal is not to build cars” and doing so would be a “distraction”.7
Manufacturing intricacies, stiff competition from both new competitors and incumbents along with thin profit margins make electric vehicle manufacturing a difficult area to succeed in. Tesla took 17 years to turn a profit, but their first mover advantage and success has led to direct action being taken by incumbent automotive companies to begin producing electric vehicles which can compete on both price and mileage range.8
For the Tech Titans to pose a threat to mass market EV companies, they will have to develop a vehicle which can be produced fast enough at a large scale, be affordable to the mass market and have a mileage range which is in line with competitors. Apple’s reputation of producing premium products at a high price is something which is already being done by luxury automotive companies such as Tesla and Lucid.9 As of January 2021, Amazon and Google have focused on robo-taxis and automated vehicles rather than mass market passenger vehicles.10 Technology companies will have to invest heavily and move quickly in order to keep up with the progress that new competitors and incumbent producers are making to even have a chance of being a disruptive threat. This seems unlikely with Apple’s Project Titan, with a report from Bloomberg stating that the car will not be ready for at least half a decade.11
They would also have to produce a vehicle with a key differentiator. The Tech Titans spend vast sums every year researching lithium ion battery technology. A breakthrough in charging technology or range would certainly cause disruption, but they are directly competing with dozens of other firms searching for an identical breakthrough.
A more likely route for the Tech Titans into car production will be through acquiring an existing Automotive company which has already made an impact and has the manufacturing relationships and established supply chains that are so difficult to build out. Technology firms find themselves in a much better financial position than the large automakers who have seen their finances heavily impacted by the Coronavirus pandemic, which will place many automakers in financially vulnerable positions.
Another route that the Tech Titans could pursue are partnerships with existing automotive companies to produce a car on their behalf. This would remove the need to establish complex supply chain relationships and eliminate the quality control issues that new automakers experience. Reports in the early part of 2021 have suggested that Apple may be partnering with a large automotive firm to build the Project Titan car for them.12
Elon Musk has previously stated that the Tesla Model S is not a car but a ‘sophisticated computer on wheels’.13 The Tech Titans are well positioned to capitalise on the increasingly technological sophistication of cars. If the likes of Apple, Amazon and Microsoft do decide to acquire an EV manufacturer or manufacture their own mass-market EV, they have an opportunity to utilise their R&D, existing products and capital to transform aspects and elements of personal transport.
Apple’s Project Titan is shrouded in mystery, with the recent story from Reuters coming from an inside source. This discretion from Apple is hardly surprising due to the difficulties of vehicle manufacturing and public failure of Dyson’s project. The complexities of vehicle manufacturing, the lack of industry experience and the stiff competition make it highly unlikely that any of the Tech Titans pose an immediate threat to EV manufacturers in the short term. However, with the money, R&D and track record of expansion into new industries, this could change very quickly.
The Movement Towards Autonomous Vehicles
The growth in popularity of electric vehicles has arrived at the same time as technology which enables vehicles to drive themselves. Autonomous Vehicle (AV) technology has five levels, with level 0 being zero automation and level 5 being full automation.14 As of January 2021, Tesla’s with their self-driving package achieved level 2 or “partial automation”.15 The Tech Titans, incumbent EV companies and automated driving technology companies are all competing to be the first to reach level 5. The economic and societal impacts of level 5 automated driving are substantial. Logistics companies would save billions of dollars by not needing lorry and van drivers and automated driving would remove the possibility of human error which is currently responsible for 94% of car accidents according to the National Highway Traffic Safety Administration (NHTSA).16
Google’s Waymo is currently the industry leader in the race to produce the technology for vehicles to be fully automated.17 It’s mission is to is to make it safe and easy for people and things to get where they're going and it has tested it’s technology in many cities across the USA.18 2020 was a pivotal year for the company, raising $3.2bn in capital, signing deals with several partners and launching the world’s first truly driverless taxi service in Phoenix, Arizona.19 One of the main partnerships they signed was with Jaguar to allow the future versions of their popular I-Pace Car to become fully automated.20 They also signed deals with Fiat Chrysler to produce autonomous versions of its commercial vehicles.21 Amazon’s Zoox unveiled their first automated robo-taxi towards the end of 2020 and the Tech giant has also made several other automation-related investments.22
The Coronavirus pandemic has bolstered the Tech Titans’ chances of being a key component in the future of automated driving. Some automakers have paused their investment and R&D activities due to the financial impact of the pandemic. Trying to develop their own systems is an extremely costly route to go down and a safer bet for EV manufacturers will be to enter into partnerships with firms like Waymo to save money and have the assurance of working with an industry leader.
Tesla’s “autopilot” feature has been in use since 2015 and has been extremely popular, with Tesla’s racking up over two billion miles as of January 2021.23 The capability and reliability of this feature is one of the primary selling points of their HGV/Semi line unveiled in late 2017, with analysts predicting that self-driving Trucks will lead to hundreds of billions of dollars of savings.24 Even through Autopilot is only at level 2 automation, Tesla owners now have the confidence and trust in the technology. Whilst CEO Elon Musk has stated that the company are “very close” to Level 5 automation, this has yet to materialise.25 Tesla are reportedly considering licensing their self-driving technology to other automakers, which could certainly disrupt the progress that the Tech Titans have made in this area.26
The big five tech firms also face stiff competition from other technology companies. German regulators recently granted Mobileye, Intel’s autonomous vehicle (AV) division, a permit to test its driverless cars on public roads in real-world traffic.27 Whilst Waymo have partnered with several large automakers and continue to improve their autonomous driving technology, the real winner will be the company which achieves level five automation the fastest.
Amazon’s focus on fully autonomous taxis before a mass-produced passenger vehicle indicates a shifting view of mobility itself. Many cities have problems with congestion, largely caused by the high number of privately owned vehicles. With an increasing number of local and national laws on private vehicle ownership and usage in cities, some are touting shared autonomous vehicles to transform how people move around urban areas. Amazon are not the only Tech Titan focusing on shared vehicles, with Waymo launching their autonomous robo-taxi service to the public in late 2020.28
Despite all of this, autonomous vehicles still pose ethical issues and it will require many years of testing, public debate, national and international agreements, to allow fully autonomous vehicles to drive on roads and whilst it is still unclear who will win this arms race, the Tech Titans are certainly a threat.
Society of Automotive Engineers (SAE) Automation Levels - National Highway Traffic Safety Administration (NHTSA)
The Increasing Connectivity of Vehicles
The last 10 years has seen the rise in popularity of internet connected devices, commonly known as the Internet of Things (IoT). As more devices and parts of our lives have become connected to the internet, customers want this level of connectivity and convenience within their cars. Connected Vehicles provide an opportunity for manufacturers to sell more intelligent and safer vehicles which can install ‘over-the-air’ updates, fetch real time traffic information and provide more accurate diagnostics on vehicle health issues.29
The Tech Titans quickly responded to this demand for a more “Connected Car” by creating their own In Car Entertainment systems. Apple’s CarPlay, Google’s Android Auto and Amazon’s Alexa Auto provide consumers with a mobile-like interface and advanced voice recognition technology.30 Recognising the appeal that compatibility with these systems brings, dozens of auto and EV manufacturers now provide these products on top of their own entertainment systems.
However, at this time, the Tech Titans should be seen as partners rather than a threat to EV manufacturers in the In Car Entertainment area. The Tech Titans infotainment systems simply form a layer over the actual In Car Entertainment systems and don’t deeply integrate with the operations of the vehicle. The familiarity they provide does mean that cars are going to continue to provide these systems to draw in potential customers and maintain existing ones no matter how advanced and connected they become. Tesla is an anomaly in this area, as they do not offer Apple’s CarPlay or Google’s Android Auto in their vehicles.31 However, Tesla’s appeal has grown from offering something vastly different to traditional automakers, so it is no surprise that they continue to build out their own infotainment system and reject most offerings from the Tech Titans. As traditional automakers transition to only making electric vehicles, the Tech Titans’ infotainment systems will be here to stay.
Full car connectivity is something that is still years away and will only be realised once 5G has been fully adopted.32 As is the case with most companies processing masses of data, EV manufacturers will likely use the services of the Tech Titans to help support this. Amazon Web Services already have a Connected Vehicle Solution which allows automotive manufacturers and suppliers to build serverless IoT applications that gather, process, analyse, and act on connected vehicle data and Microsoft Azure’s IoT offerings will also help EV manufacturers process the data produced by connected cars.33 However, the role of the Tech Titans in this instance is to support and partner with EV manufacturers rather than directly disrupt or compete with them.
The Tech Titans play an important role in the Electric Vehicle industry and their presence will continue as the industry evolves. The Tech Titans vehicle production efforts do not pose a disruptive threat to the industry at this time but the pandemic has left many automakers with established supply chains and manufacturing relationships in a vulnerable position. The aggressive growth the Tech Titans have shown over the past decade means that entrance to this market by acquisition cannot be ruled out.
At this time, the Tech Titans role in Autonomous Driving and Connected Vehicles does not pose a disruptive threat to EV manufacturers. With internal mass market EV production looking unlikely in the next five years, the Tech Titans are instead trying to capitalise on opportunities to create an industry leading product and then license it to automakers. They have the technical expertise and financial capability to accelerate advancements in the future of mobility and the regular announcements in the media of automakers partnering with them merely demonstrates their credibility.
The pandemic has hit the automakers hard, and the Tech Titans have provided a financial lifeline for some firms to outsource R&D activities in avenues that they simply must explore. Whilst Apple, Google, Facebook, Microsoft and Amazon are often criticised for their aggressive tactics and questionable ethics, they are proving to be vital to the advancement of the EV industry.
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