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Ford’s Google Deal Suggests Full Frontal Assault Unlikely

Ford’s Google Deal Suggests Full Frontal Assault Unlikely.

“I do not believe that Google seriously intends to ever build cars itself”

Auto makers, worried that high tech companies will be muscling in on their traditional territory, will surely be breathing a sigh of relief if news Ford Motor Co plans to supply cars for Google’s autonomous vehicles is confirmed.

Automotive News reported Monday that Ford and Google are expected to announce a deal during the Consumer Electronics Show (CES) in Las Vegas early next month. Ford would supply vehicles for Google’s next-generation internet connected and then autonomous cars.

Automotive News said it had “learned” about the deal, but didn’t provide firmer sourcing, or any more details.

The nightmare scenario for the traditional automotive industry is that it would wake up one morning to find Google or Apple or some other well financed technology company would blind side it with new computer driven cars, leaving it only with low-margin, out-dated products.

If the Ford-Google news is confirmed, this development won’t surprise Elmar Degenhart, chairman of German supplier Continental Ag. Degenhart said in a recent interview with German news agency DPA Google is more interested in tapping into a massive new internet market offered by autonomous cars that building them.

“I do not believe that Google seriously intends to ever build cars itself,” Degenhart said.

“Google is trying to expand to other business fields – particularly because it has to demonstrate additional potential for growth. And Google is interested in developing the car as an additional source of information and data. Because we know the internet is a given at work and at home. The biggest blank spot in internet use today is the car,” Degenhart said.

Connect market the goal
“We have around one billion vehicles ……. on the roads that are driven for an average of one hour per day. This then theoretically results in a potential extra billion internet users per day – if everyone were allow the car to do the driving and use the internet during this time. But even a fraction of this would be of interest to the internet industry. This is another reason why Google is urging the automotive industry to finally implement more automated driving functions. They are doing this in a very skilful way, at the same time building up their image and reputations as a technology company,” Degenhart said.

Investment researcher Evercore ISI said if the story is confirmed Ford should get much credit for being the first big vehicle manufacturer to reach an agreement with a major technology player and potential market disrupter. It had some questions too –

  • Would this be purely a contract manufacturing arrangement? If so, what are the volumes, what are the economics?
  • What would be the timing of any project, when would the first car hit the road over what period would the project be scaled up?
  • Would Ford build a dedicated car for Google or use vehicles from its existing line-up?
  • Where would Ford manufacture product for Google, at a dedicated site or within existing facilities?
  • What powertrain would any such vehicle have, internal combustion engine, hybrid, plug-in or battery electric?
  • Would these vehicles be sold to the general public or wodned by Google/Ford to offer Uber-esque services?
  • Would the vehicles be semi-autonomous (98 per cent autonomous) or actually driverless?

Continental’s Degenhart cautioned though that the advent of autonomous cars isn’t likely for a while yet, while mass car makers could still be threatened by a car made by or for Apple, by similar auto components makers.

“In the next 10 or 15 years, we won’t see any robot taxis in New York with no steering wheels or pedals. This is science fiction – it’s a fantasy. The traffic scenarios over there would be much too complex and unpredictable for this,” he said.

“If companies like Apple decided to build cars, we at Continental would be interested in doing business with them as a systems supplier. The same is true for the European, American, or Asian car manufacturers. These would be other attractive customers for us. The customer-supplier relationship would then deal with areas in which we were not in competition with one other,” Degenhart said.

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