Auto industry: from Detroit to Silicon Valley

Issue# 119, Nov 23rd, 2021

The center of gravity for the automotive industry is no longer only Detroit, in the U.S.A. There is a gradual shift towards the Silicon Valley, as digital transformation spreads its wings. Ford and General Motors are looking at investment and partnership in chip design and manufacturing. Apple's plans are to flex its muscles in chips to make autonomous cars. It is not just the chip design and manufacture that is a challenge for Detroit from the digital biggies. They find matching Tesla's volume for electric vehicle (EV) manufacturing also to be a challenge. Waymo has tied up with UPS for autonomous trucks to be used for goods delivery. Here are some recent reports on this shift of the center of gravity from Detroit to the Silicon Valley. Like U.S.A, other countries have their own Detroits and Silicon Valleys.

Ford and GM into chip production

Detroit’s two biggest auto makers— Ford and GM are looking to get into the semiconductor business, after a year of computer-chip shortages that snarled their global factory output. The number of semiconductors in a modern car, from the ignition to the braking system, can exceed a thousand. As the global chip shortage drags on, car makers from GM to Tesla find themselves forced to adjust production and rethink the entire supply chain. Ford outlined a strategic agreement with U.S.-based semiconductor manufacturer GlobalFoundries Inc. to develop chips, a pact that could eventually lead to joint U.S. production. - WSJ

GM's partnership for chips

GM's President Mark Reuss said the company will co-develop semiconductors with several producers to make chips that can handle more electronic features in its vehicles, a revamp of strategy. GM currently uses a wide assortment of semiconductors in its cars. It now plans to reduce the types of chips it uses to just three families of semiconductors over the next several years. That would reduce the variety of chips GM orders by 95%, making it easier for producers to fulfill the company’s needs and boosting margins, Reuss said. - Bloomberg?

Apple's autonomous car plans

Apple’s car team had explored two different scenarios for self-driving cars, Bloomberg reports. One involves a vehicle with limited self-driving abilities focused on steering and acceleration. That’s in line with what competitors like Tesla and Google’s Waymo are doing. The other plan involved a car with full self-driving capabilities that doesn’t require any human intervention. While Apple has never built a car before, it has one massive advantage over traditional carmakers. It has a great deal of expertise in building the brains of smart devices. Its custom chips that power the iPhone, iPad, and Mac are industry leaders. Rivals have yet to top Apple.

Matching Tesla's EV volumes

Carmakers are no longer just struggling to match Tesla on EV technology, but are scrambling to come close on production too. For years it had been assumed that the main carmakers that build millions of combustion engine cars a year could rapidly scale up their EV production — as soon as they nailed battery technology and enough consumers showed an interest. But forecasts for six big car groups out to 2024 indicate that Volkswagen is the only legacy carmaker on track to overtake Tesla for EV production. - Financial Times

Waymo-UPS partnership for robotic trucks

Waymo, Alphabet Inc.’s autonomous driving unit, is expanding a partnership with UPS beyond urban delivery vans to include robotic semi-trucks to haul much bigger loads for the global logistics giant in Texas. Current supply-chain headaches, backed-up ports and a shortage of long-haul truck drivers have increased interest in companies that are developing autonomous solutions to smooth out delivery snags. - Forbes

Online car buying

Covid has dramatically changed how we do our shopping, altering not only the type of products we are willing to buy online, but also how we make some of our most expensive purchases. The pandemic coincided with the rise of a new breed of car dealers like Cazoo and Cinch, which let shoppers buy, part-exchange and finance used vehicles entirely online. According to data from AutoTrader, 72% of customers are interested in conducting more of their car-buying process online. - BBC

Government incentives for EVs

Electric vehicles continue to get a lot of attention. Biden’s bipartisan infrastructure bill includes specific references to bolstering the U.S.'s EV charging networks. Car companies are quickly refashioning their lineups to incorporate more plug-in models and investors are betting big on Tesla and other newer challenger brands, such as Rivian and Lucid Group. Governments around the world are making a major push to accelerate EV adoption among buyers, looking to reduce greenhouse-gas emissions and seed growth of cleaner technologies. - WSJ