Automakers, Restaurants and Money Left on the Table

Stop giving away the bar bill.

That’s the advice of Audi of America President Scott Keogh, who may have come up with the best analogy yet – more on that later – for the auto industry’s failure to maintain full control over its own business.

You could say automakers have been in a wrestling match with telecoms, app producers and other technology-driven disrupters over ownership of the new-car buyer in a world increasingly driven by connectivity. But that might be a little generous.

Until recently, the auto industry appeared mostly stuck playing defense, while invading disrupters from Silicon Valley launched new mobility concepts and pumped out connectivity app after app, generating the lion’s share of consumer buzz and drawing most of the attention from Wall Street.

But in recent months we’ve seen the industry begin to counter. Last August, Audi, BMW and Mercedes-Benz teamed up to acquire HERE, the former digital mapping and navigation arm of Nokia, looking to loosen Google’s grip on street mapping before it can lock up an important enabler of autonomous vehicles, the auto industry’s single-biggest technology driver.

In December, General Motors acquired Sidecar, then followed up with a $500 million investment in Lyft in bold attempts to fold the emerging car-sharing and ride-hailing industries into its business model. This month, it ratcheted up the initiative further, announcing the launch of Maven, a new operation that will begin offering a fleet of rent-by-the-hour vehicles at key points around Ann Arbor, MI.

Audi is making similar moves, having taken a 20% stake in car-rental firm Silvercar this month, with Keogh saying the tie-up is just the beginning of a broadening relationship. “We see a lot of opportunities to be even more active in areas like this,” he says.

Ford made a small splash at the 2016 North American International Auto Show with the release of its FordPass app that offers a variety of mobility solutions. “I think it is a natural extension of our business,” CEO Mark Fields tells The Detroit News. “If we ignore it, we do so at our peril.”

The industry’s offensive thrust may be coming just in time for Keogh, who says automakers for too long have been passively ceding the future to the newcomers. He points to Waze, the startup valued at more than $1 billion that created a smartphone app to alert commuters of traffic tie-ups and speed traps as a prime example of automakers missing the forest for the trees.

“That has me wondering, why didn’t the auto industry invent Waze?” Keogh tells an Automotive News World Congress crowd during NAIAS press week in Detroit, noting 70% of the cars Audi sells in the U.S. are embedded with connectivity capability.

“We all have GPS systems, we all have the software to get data from the vehicles, we all have employees with the skills and massive technical knowledge,” he says of the auto industry overall. “But we all failed to think of all the innovative uses that are at our very fingertips as an automotive business.”

Waze is just one example of the industry’s inability to connect the dots, the Audi exec adds, noting dozens of apps “take advantage of our blind spots.”

And that’s where the restaurant analogy comes in. Keogh says automakers for too long have been like a misguided restaurateur who takes on all the fixed costs by constructing the building, buying the ovens and hiring the staff, but then turns over the lucrative bar business to someone else.

“We took the commodity part of the business and let others take the innovation – and the profits that come from innovation,” he says. “If we as an industry want to remain competitive long term, we can’t let that happen.”

Keogh should be heartened by developments of recent weeks. The auto industry still may not win the fight, but at least it’s beginning to punch back.

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