Google Vs. the Car Industry - Who is Winning? !!!

The story I read today about German automakers and politicians trying to limit Google's control especially relating to its automotive plans evoked extremely mixed reactions in my head. One on end, automakers such as Audi/VW are almost saying we don't need Google in the car but are still part of the Open Automotive Alliance and on the other end oranges to apples comparisons are being made saying if Google is allowed to expand in the automotive industry, there might be extreme collapses like how Android kicked select vendors like Nokia out of business. Of course am no expert to question the number of legal issues Google faces in general in Germany and Europe over patent issues, anti-competition and privacy issues but having spent considerable time researching the connected car, smartphone and vehicle automation market, I can definitely comment on whether the reactions to from the automakers on Google's plan is extremely shortsighted. Let’s define a few basic elements before we get to the actual debate,

--> Show me one OEM who has the brand loyalty that Apple and Android (not Google) has - probably the one OEM who matches up to this is the obvious new software entrant to the automotive industry Tesla but ask other OEMs and they will tell you the reason is -" its still early days and the volumes are small, let them get bigger and we will see how they perform and how profitable they are", immediately popping a $ value question to that. Probably Apple and to a large extent Google drummed up the kind of brand loyalty for their respective OS platforms in such a short span of time , something that is near to impossible and unreasonable to expect from the auto industry even the Germans.

--> Numbers dictate and Android/Google is not the only reason Nokia failed in the Smartphone market - I read an article somewhere that quoted Android as the biggest fall reason for Nokia and few other smartphone brands. Failure driven by lack of innovation and forward thinking should not be equated to other reasons. Android was born to compete with Apple and give people a choice and its success today is reflective of the kind of loyalty it has. And handset vendors like Samsung did not straight away move to Android, they did so after failing with their own "Bada" and moving to the biggest competitor to Apple made a lot of sense. And the sheer amount of market share Android has gained in several markets worldwide does showcase an extremely loyal user base, even though from a business perspective handset vendors might be having a really terrible time doing business with Google.

--> Consumers just don’t care about connected car technology – The top 5 vehicle purchase drivers in North America have hardly changed over the last many years and connected car tech just doesn’t feature in this top 5 list. The perceived vehicle safety, fuel economy, price, select comfort features and interior/exterior styling and even Powertrain options matter a lot but not connected car tech even if dissected by demography. Still for most customers the ability to connect their smartphones, use its content and call/text is far more important than the 911 system, the really expensive in-dash navi that is not uptodate, etc. There are OEMs who have been vociferous and extremely visible on their connected car plans like GM with its LTE plans even if it has been questioned by every industry pundit and analyst, there are others who are doing the follower stuff. Audi and VW don’t want Google to get any concrete control in the car fearing similar results like the smartphone market but at the same time were probably the early birds to join Apple Carplay and Android Auto. The reason might be justified in the sense that they want to provide these options to their customers but at the same time the native options they offer are crowd pleasers. This is the fate of many other OEMs whose primary offer is a smartphone hybrid system with native navigation and access to growing list of apps but are really searching for that gold in the connected car space. So when select OEMs say they don’t want to cede control to Google, I really wonder what control they are talking about because eventually these 2 smartphone platforms will grow very big because of consumers.

--> Regulation is spoilsport for innovation on most occasions – Uber and Tesla are primetime examples of innovations that consumers love and want but increasingly facing challenges in multiple regions because of regulations and the lobbying power of extremely conservative industries. Yes these companies are also in the market to make money like its traditional competitors but the fact that they disrupted an aged and defunct business model that its competition follows even today irks them even more. To some extent the same comparison can be made to how automakers are reacting to Google and its plan for the connected and autonomous car. The same industry that says Google’s autonomous model will never work is also in parallel developing its own level 3 and 4 tech. If they are so sure that Google’s model will not work, why not stop at just providing select ADAS features such as FCW and LKA that have proven its impact on reducing accidents/fatalities. Yes everyone knows why Google is extremely keen to conquer the level 4 driverless tech- to conquer the third fastest growing IoT segment and advertising $ in that medium but the fact remains that Google is miles ahead of others in this game and they definitely do have a shared mobility model in mind for this that might be street legal and safe still meeting their business goals.

Having said all that, let’s focus on connecting a few dots

• Lets not go back to the era where even TomTom was treated as a Threat in this market – There was a time back in 2004/2005 when I started researching this market when PND players were called threats/wiping out forces because they were able to deliver a system at 1/10th the price of the in-dash system and they delivered it when it mattered to consumers most. The timing, price to performance value and accessibility were the reasons the PND market became really big. The same TomTom and Garmin today are valuable partners to OEMs on the content side. The same trend is now applicable to the smartphone world, this is a feature that consumers want and use in the car or while walking and heck if they can during sleep. So on one end the Carplays and Android Auto should tick the must to have boxes while doing this BOM for future car models. This atleast will ensure for consumers there is no digital break in the car.
• OEMs know what value they can deliver, they are just not accepting it – Ford moved from Microsoft to a QNX developed SYNC 3.0 system, a new UX that is being dubbed flat and simple/not sexy but a massive improvement from the earlier one where mistakes have been corrected. On the other end, I was discussing this iceberg concept with my colleague where much of the money from the connected car is in the bottom of the iceberg internally driven and not the b2c focused offerings which are just not yielding the money be it an OnStar type service or UBI or connected apps or HMI. None of the OEMs who are talking about protecting their data from Google and Apple have shown a business model that is viable to them and the entire ecosystem making money from the connected car and its segments. Using concepts like OTA, prognostics and the telematics infrastructure, OEMs can do many things ranging from delivering critical recall alerts, doing the scheduled maintenance in a much better way and using all of this data to internally create a profitable business but only pockets of OEMs are showing direction in this. There are also then OEMs such as Honda who are using the Android standard and a powerful NVIDIA processor to deliver a power in-car system clearly favoring the mass standard. And there are OEMs who are talking about V2X on a separate wireless infrastructure, delivering in-car apps embedded on the dash, using LTE and even possibly 5G in the near anvil embedded in the car, bringing augmented reality windshields and so on that really confuses you as to what is the real priority here and the money making tool. No one is yet to show anything concrete on this.
• Why not use Google as a partner in the vehicle automation game – agreed Google’s end intentions are very different compared to conventional OEMs but the industry knows that in the vehicle automation game, it’s all about algorithms and the airtightness of the electronics and software. Agreed that German OEMs are as good at this as others and a few others are as well but the larger group will definitely benefit from the advanced research and support that Google can provide. A simple issue that exists in the vehicle automation game is automakers are still trying to fit the value proposition between comfort vs. safety vs. assist and that’s the reason most of them are doing the same traffic jam assist and calling it by different names. The recent announcement on automatic valet parking and retrieval by BMW and Audi does showcase innovation but not a market need and the same can be argued about Google’s level 4 tech but if it’s applied in a completely different transportation setting then the game is entirely different.

Of course there are far bigger accusations on Google and its plans, and what it does once it gathers data access in a certain market and that is very much up for debate but in this case the current reactions seem extremely short-sighted. With CES 2015 around the corner and Google expected to unveil its Android M for cars, am sure the automotive industry is keen to know more and see how they can convert this opportunity into $, all said this is an industry which is always looking to better than 16% net margin figure.