Why Apple and Google Will Dominate the Self-Driving Car Industry

By Mike Elgan  |  Posted 2015-10-31 Print this article Print
Google Apple Cars

The answer is: no.

3. Electrification

Electric cars are vastly more efficient, environmentally friendly and even potentially more high-performance than ugly, dirty combustion engine cars.

Companies like Apple and Google (as well as Tesla, which is also a Silicon Valley company) are expert at optimizing software and microprocessors for better battery life and more efficient use of electrical power.

4. "Uberfication"

Thanks to on-demand transportation services like Uber, it will increasingly become obvious to many people around the world that it's cheaper and easier to not own a car.

This trend will help change the psychology of using cars and what they're all about. They'll be increasingly viewed by both owners and non-owners as mere conveyances. The association between identity or individuality and car choice will be weakened and broken. A car is a car is a car. This leads to the final point.

5. Commoditization

As Okuyama so brilliantly prophesied, we're clearly heading into a world in which there are two kinds of cars: fancy, expensive, elegantly designed cars for rich people who drive them as status symbols; and the cars for the masses: a commodity conveyance whose main appeal is low cost.

Self-driving cars will be far safer than human-driven cars. Today, more than 30,000 people are killed in car accidents each year in the United States alone, and globally, that figure is nearly 1.3 million.

Meanwhile, Google X's self-driving cars have driven on public roads more than a million miles without causing a single accident. As the sales of self-driving cars spread, the cost of insurance for those with self-driving cars will go way down, while the cost for human-driven cars will go way up.

Actually driving a car may become a luxury for well-off consumers. Eventually, owning a manually driven car will be like owning a sailboat—it will be seen as a beautiful, exotic, expensive, antiquated, skill-requiring luxury that also happens to be potentially dangerous.

The entire automobile industry will come to resemble the smartphone industry. On the one hand, you'll have the iPhone-like cars, which cost four times more than the average price and will inspire rabid enthusiasts who will revel in every detail of the physical product.

On the other, you'll have the mass market Android-like cars, where the "hardware" needs only be good enough to deliver the thrilling experience of the operating system and apps. In this analogy, the "user experience" of riding in a car will be all about the interior—the sound system, video screen, game console, etc., but not about the wheels, motor and chassis.

And for Android fan boys: Yes, I know that some Android phones match the iPhones in sophistication, but in general, the Android platform globally is mostly about low-end phones delivering pretty good experiences.

Apple and Google could never compete in today's car market. I'm talking about tomorrow's car market where everything will be different.

All those things that will be different—automation, computerization, electrification, "uberfication" and commoditization—are advantages for Silicon Valley and disadvantages for Detroit and other car makers around the world.

Whatever expertise and talent Apple and Google lack they can buy. In fact, they're already doing so. Okuyama pointed out the poaching by Apple and Google of the electrical and automotive engineering talent that they want as one piece of evidence supporting his fear that these companies would eat the car industry as it exists today.

Ultimately, it's all about resources. And Apple and Google have more.

In fact, the value or market capitalization of Apple alone is roughly double that of GM, Ford, Toyota, Fiat-Chrysler and Honda combined.

Apple and Google have a strong incentive to get into the car business, too. Both companies—but especially Apple—need to keep growing. As the car user experience becomes more about content consumption than driving, Apple and Google will want to control these platforms without having to rely on other companies to allow their participation.

So it's time to get our heads around what Ken Okuyama is saying. Apple and Google are going to become car makers—and they're going to dominate the industry.


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