The line between the auto and tech industries is rapidly blurring, with the pursuit of autonomous driving and a shift from car ownership towards car sharing and ride sharing. China is widely viewed as the next frontier for growth and many market players are looking to establish a foothold in this country, which requires significant investment.
To keep up with changing market trends, most major auto makers are investing in their own driverless-car technology, which is less costly if done in cooperation with high-tech companies, like Google or Apple.
The union of General Motors with Lyft, the leader in Chinese ride sharing market, is one example of such cooperation. GM is helping to advance Lyft’s self-driving technology and according to Lyft’s announcement, it will test a fleet of self-driving electric taxis in 2017. Google and Fiat Chrysler Automobiles also confirmed a partnership in which the two companies will collaborate on creating and testing autonomous Chrysler Pacifica hybrid minivans using Alphabet’s self-driving technology, which could hit the road by the end of 2016. Tesla Motors Inc. already sells autonomous-driving features that allow drivers to go hands- and feet-free in stop-and-go traffic as well as highway cruising.
Apple is also looking to expand in China with its $1bn investment in the Chinese ride-sharing company Didi Chuxing, a rival of Uber (one of the leading global players in the car sharing market) in China. The iPhone maker will help Didi build up a ride-sharing platform that serves about 300 million users across China. Apple has been working on electric- and autonomous-vehicle technology for two years and Didi could provide not just the learning experience, but the actual platform on which to roll-out an Apple Car.
As the competitive landscape for the transportation market is changing, cooperation between tech and auto companies is crucial to secure future market growth and ease the transition to fully autonomous, on-demand vehicles. Cross investment gives participant players a stake in two burgeoning waves of technology – the sharing economy and car technology, providing significant advantages. Ignoring this trend can result in a struggle to compete in the market, even for significant players, as shown by Uber’s example.
Uber has managed to secure its position in the US market, but is struggling to build its business in Asia. Despite spending millions to try and catch Didi in China, Uber’s business in the country is just a fraction of its local rival, which covers more cities with a bigger fleet of cars. Both companies are in an expensive battle for market share, requiring the raising of capital needed to recruit drivers and subsidize customer fares. The recent team-up between Apple and Didi, coupled with its own lack of cooperative partnerships, further underscores Uber’s growing isolation in this market.
Uber has already proven its ability to provide a commodity service that consumers like, but has no experience in the world of manufacturing. It will almost certainly need an automaker or contract manufacturer to help it transition to the next stage.