Not since the beginning of the automotive industry has it been as open and vulnerable to change as it is today. Car sharing, ride-hailing, electrification, connectivity and the rapid emergence of autonomous vehicles in passenger and industrial transportation are potentially as disruptive as the switch from horse and cart to the car and the railways. Trains, planes and automobiles will never be the same again.
Corporate venture capitalists from a widening group of industries, including insurance, logistics and software as well as the established automotive sector, are therefore seeking and backing new technologies and business models with large volumes of capital. There’s a lot at stake. The costs of missing out on a revolution in transportation will be very high. Transportation is a trillion dollar industry with a knock-on impact on other industries like no other. The future of ‘big energy’ (utilities as well as oil & gas) hinges on the direction of transportation. For the software industry, transportation is a huge undiscovered new territory ripe for commercialisation.
‘Venturing and the future of automotive technology’ is the latest in GCV’s specialist reports. It follows our 2015 reports ‘Venturing in the advanced materials and manufacturing nexus’ and ‘New Fusions in Advanced Materials Innovation and Corporate Venture Capital’, both of which focused on materials innovation. This led us inevitably to the automotive industry, much of whose evolution has sprung from materials and several of whose corporate VCs are leading materials investors. Material innovation remains fundamental to determining the future of the automotive sector, but it is one of just several factors now at play, including the rapid spread of software solutions that connect transport and make it smarter and more efficient. We’re also seeing the emergence of new business models that are turning the industry on its head.
In September 2016, in remarks to investors, as reported by the FT, Ford’s CEO, Mark Fields, preached what will have sounded like a new automotive religion to many of his shareholders. “We are really rethinking our business models … for years we have very much thought about the ‘thing’ and how much of the ‘thing’ we sold. Now we are thinking more about usage … and so miles travelled becomes an important metric,” as important as the number of cars sold.
Nevertheless, these ‘things’ have to be manufactured, assembled and delivered. How we will transport ourselves in the short and long term is open to contentious debate, but that we will transport ourselves isn’t. Human beings need to move around and so do the goods we consume. We can’t predict where the car industry is going. But we can say with certainty that it’s not going away. This report is a review of the venturing activities of those determined to shape its future and prosper.
I am grateful to Denso International America, Castrol innoVentures, Magna International, and Bright Box for sponsoring this report.
Denso Corporation is a global automotive parts and components manufacturer based in Japan. Tony Cannestra leads its corporate venture practice out of San Jose, California and describes his job as identifying strategic investment opportunities in technologies that can transform “the guts and brains of the automobile … the mission critical components”. He thinks the technological road map for autonomous vehicles (AV) is mostly clear, though worries “whether we can get there … in computing power and data processing”. On his daily commute Tony drives a 2001 Yukon XL with just under 200,000 miles on the odometer. His wife thinks he should change it. Tony doesn’t.
Castrol InnoVentures is a corporate venture capital arm of Castrol, which is part of BP. Its job is to create new value and new revenue streams for Castrol. Jonathan Tudor, its UK-based investment director, says connectivity, autonomy, efficiency and mobility as a service are key investment priorities. “Mobility is going to be a big theme for us. We see new generations happy to access rather own vehicles. They want mobility as a service. We’re also looking closely at machine learning, AI and data.” Jonathan drives an S Jaguar and a BMW i3.
With $32bn in revenues last year, Magna International, global automotive supplier, is probably the largest company you’ve never heard of. Its OEM clients range from Aston Martin to Ford and just about everyone in between. Ian Simmons, a Canada-based Brit who began his automotive career as a mechanical engineer with Ford in the UK nearly forty years ago, is charged with running Magna’s “all-tech” venturing strategy. Ian says he “wants the venturing and innovation world to understand that Magna is an active player in the transformation of the vehicle and the automotive landscape in general”. He drives a Ford Edge and a BMW 335i, and for fun, a 1980 MGB and 1973 Triumph TR6.
Bright Box is a Switzerland-based provider of hardware and software for the connected and autonomous vehicle. It has enjoyed fast growth partly by defying some of the conventional advice to automotive start-ups; focusing on customer rather than product development and making the OEMs’ national sales companies its priority markets rather than the OEMs themselves. That’s now changing as OEMs play catch up and seek connectivity and autonomy solutions for the customers who want them today, not tomorrow. Bright Box’s proposed methodology for growth in the connected and autonomous car markets is informative reading for both start-ups and corporate VCs. A year ago, Bright Box’s Chairman, Ken Belotsky sold all his BMW X6 and Audi A6. He says he “travels so much that having a car doesn’t make sense … I prefer UBER and GETT or any other reliable local taxi aggregator. If I need a car for several days, I just rent it.” The more you travel, the less you need a car? This is just one of the existential questions posed to the automotive industry in this report.
GCV’s forthcoming events will further discuss them. On December 1st in London, the world’s leading corporate VCs gather for ‘Venturing and the future of mobility and automotive technology’. Then in January at the Global Corporate Venturing and Innovation Summit in California, transportation will be high on the agenda, in both the main programme and break-out sessions. To get involved, please contact me on tom.whitehouse@london-eif.com
The data published in the report comes from GCV’s proprietary Auto and Mobility Analytics. To test drive this analytics package, again, please contact me.
I hope you enjoy the report and look forward to any comments and feedback. We’ll be updating the report with fresh data from 2016. If you have news you want to share, just let me know.
