Weekly Brief: Lookout, VW is Now More Transport Than Automaker

Carmakers don’t want to be carmakers anymore, writes Andrew Tolve.

Just look at Volkswagen, which announced a $4Bn investment last week to transform itself into a device and software company. “To deal with [the changing transportation landscape], we need to reinvent the automobile,” said Michael Jost, VW’s chief brand strategist.

VW’s stance is hardly novel. Many carmakers have now stated their intention to shift from traditional carmakers to champions of technology and mobility and who can blame them? As more people flock to cities, the need for personal cars is dropping, especially in the age of Uber and Lyft. Why pay soaring insurance rates and deal with dinged up bumpers and street parking when you can summon a ride within minutes on your smartphone and can rent a car or share one whenever you need to get out of town?

Even if you don’t live in a city, the odds are growing that you can telecommute to work and, before long, you may be able to get your groceries delivered by drone or picked up and dropped off by a self-driving car, as Waymo and Walmart are now piloting. These changes haven’t hurt car sales yet but they will soon if the number of licensed drivers is any indication. A recent report from University of Michigan’s Transportation Research Institute found that in the last 30 years the percentage of licensed drivers dropped across nearly every age group, most glaringly in young people. The percentage of licensed 19-year-old Americans, for instance, fell from 87% in 1983 to 69% in 2014, and those numbers show no signs of reversing.

The truth is that, if you look at the broader arc of history, personal cars are on the precipice of being rendered obsolete. Kudos to the automotive industry, VW included, for recognizing this and thinking boldly and proactively about their future, especially at a time when most carmakers are still riding good returns in their traditional market segments.

However, there’s no sign that these massive investments from carmakers are being spent wisely. Connected Car 101 is to deliver a decent infotainment unit. Every carmaker wants to do it and has spent millions over the last 20 years to make it happen and yet infotainment units manufactured by carmakers continue to be lackluster — clunky, over-complicated and error-prone. Consumer Reports famously labeled them a “growing first-year reliability plague”. Most consumers would prefer that carmakers step aside and leave it to the real device and software companies out there, like Apple and Google, which happen to make much better infotainment platforms in the form of Carplay and Android Auto.

Likewise, most carmakers sense that self-driving cars represent the future and are pumping millions of dollars into autonomous tech. However, Google’s Waymo and other tech start-ups like Cruise Automotive and Drive.ai are the clear front runners in the space. General Motors was smart to abandon in-house development and use that money to snatch up Cruise Automotive instead, just as it was smart to invest $500M in Lyft rather than pursue a nationwide ridesharing service of its own. The same goes for Toyota investing $1Bn into Uber.

Who knows, VW’s investment may end up paying off big or it may be a missed opportunity to invest in a tech company that already knows what it’s doing.

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