Detroit, Silicon Valley Unlikely Allies Toward Future Mobility

SAN FRANCISCO – Long at odds for their disparate business approaches, where one favored the stiffness of a gray suit and oxford shoes to the laid-back cargo shorts and flip flops of the other, Detroit and Silicon Valley have become unlikely allies on the march to future mobility.

Ian Simmons, vice president-Business Development, Corporate Engineering and R&D at Magna, says northern California became famous for its new-age entrepreneurialism, computing power and sensor technology, but it needs applications to maintain its reputation for innovation.

“You need the automotive industry to commercialize it to scale,” Simmons tells the Wards Intelligence Smart Mobility Summit here. “We can’t exist without each other.”

Magna itself demonstrates the powerful matchup between Detroit and Silicon Valley. The Aurora, ON, Canada-based supplier is linked at the hip with century-old OEMs such as General Motors, Ford and Fiat Chrysler US, but as OEM businesses have shifted and more closely linked with Silicon Valley, it has quickly followed.

Magna now works with a phalanx of tech companies in the region, including Apple, and most recently the ride-hailing service Lyft. Earlier this year, Magna invested $200 million in Lyft to jointly develop self-driving cars.

Other big-time suppliers such as Continental and Bosch operate R&D houses in Silicon Valley, while automakers such as GM, Ford, FCA, Toyota and Volkswagen have brokered partnerships with local companies or outright purchased up-and-coming startups.

GM’s $1 billion play for autonomous-car outfit Cruise Automation two years ago arguably headlines the cross-country deal making, while FCA cemented its position in the technology in 2016 by pairing up with Google’s AV unit Waymo.

Akshay Anand, executive analyst at automotive research company Kelley Blue Book in Irvine, CA, says the annual CES show in Las Vegas further demonstrates the frigid contempt between the two industrial giants has thawed. As the vehicle user experience has emerged as a key brand differentiator, leveraging 100 million lines of software code, the giant consumer electronics event has become a signature event for automakers.

“Automotive technology has emerged so quickly, it’s difficult to differentiate between automotive and technology,” he says. “When I went to CES five or six years ago, there was Ford, Kia and maybe Hyundai, or someone like that, in a small corner of the east wing. Now it’s a wing-and-a-half. It’s literally half the show.

“Automotive companies and Silicon Valley have realized this is a consumer proposition and we can no longer go at this separately because it is so capital-intensive,” Anand says.

John Suh, vice president and founding director at Hyundai CRADLE, says Detroit is the symbolic heart of the auto industry, but centers of expertise exist elsewhere, too, such as Stuttgart, Tokyo, Nagoya and Seoul. And while there are technology hubs elsewhere around the world, such as Paris, Berlin and Tel Aviv, there is only one Silicon Valley, he says, so the auto companies must come west to remain competitive.

“It remains the tech hub,” says Suh, whose Menlo Park, CA-based group was formerly the Korean automaker’s venture-capital arm, but in the past year has expanded into open collaboration with the startup community and early stage new-concept development.

“Therefore, things having to do with digital, with information, with data and so on are happening here, and changes in the automotive industry have everything to do with technology. So, there has to be a meeting here in Silicon Valley between the tech world and automotive.”

Venture-capital investment underscores Silicon Valley’s leadership. According to data from Pitchbook, which tracks VC investment, $339 million went to Michigan companies last year compared with $42.8 billion in California.

Suh says the region enjoys a fortunate combination of capital, savvy investors, esteemed educational institutions and a fluid work force rapidly trading ideas.

“Because of that, the money keeps flowing here,” he says. “That’s why we are here.”

But Silicon Valley also struggles to retain talent long enough to bring an idea to market. Historically, that has been a strength of the automotive industry.

“One of the challenges here in the Bay Area is to maintain talent long enough to execute your longer-term developments,” says Jan-Philipp Gehrmann, director, head of Automotive Sales & Marketing Silicon Valley at NXP Semiconductors.

“It may lead to a tipping point that gets companies thinking, ‘I may want to build my competence center where there is less competition (but) maybe a similar level of qualification and talent,” he says. “We are a semiconductor supplier, so we need to be where the OEM is.”

The panelists have some advice for both industries. For OEMs, be open to new ideas and look at disruptive technology for what it can do for the consumer rather than the grief it may cause your company. Emerging technologies oftentimes do not match current vehicle architectures, either, so tech companies should exercise patience and understanding. Finally, automotive-grade is not a hollow catchphrase.

“Automotive is still very hard,” says Gehrmann. “These cars are in harsh environments, (and) they still have long lifecycles, so that needs to be somewhat reflected in the business case in terms of time-to-revenue.

“But also reliability,” he adds. “That’s where (Silicon Valley) could learn a lot from the traditional automakers, how to bring out products reliably and in a way that makes money.”

Kelley Blue Book’s Anand (second from right) says CES underscores Detroit, Silicon Valley coziness.