Volvo Cars and Autoliv, one of the world’s largest auto safety equipment makers, are creating a unique autonomous vehicle software company. CIOs at automakers and suppliers should investigate joint ventures, acquisitions and other opportunities in response to the growing competition.
On 6 September 2016, Swedish car maker Volvo and Stockholm-based Autoliv announced plans to create a company to make autonomous vehicle software. The partners expect the new, not-yet-named company to begin operations in 2017 and complete a full autonomy system by 2021. The new company will start with 100 employees each from Volvo and Autoliv, with the aim of building up to 600 total employees
The Volvo-Autoliv plan represents the first time a major car maker and auto safety company have created a company to pursue autonomous vehicle software. The plan has the potential to shake up the market, forcing competitors to investigate options such as:
Forming similar joint ventures between automakers and suppliers
Acquiring small software makers to gain intellectual property
Securing an exclusive license from a technology company for control software to ensure differentiation in operations.
Developing their own technology
Hiring software staff to build internal software capabilities
Defining long-term strategies and securing funding for a new product, through predictive modeling analysis of how it will impact the company long-term with a new stream of revenue.
In response to the emergence of this new company and other players, CIOs will need to assess the capability of software makers and be careful who they work with, given the likely market disruption and risk of having to start over with new technology.
The new company is well positioned from a safety perspective, an issue that has come under scrutiny following the recent death of a motorist who was using Tesla’s semi-autonomous mode. Autoliv is a leader in auto safety, installing systems in tens of millions of vehicles annually. Unlike some software startups, Autoliv understands automakers’ needs for robustness. Volvo has a strong reputation for safety and is establishing itself as leader in vehicle autonomy. It already has a development agreement with Uber Technologies to make “base vehicles” on which the car-hailing company can put its self-driving technology.
The new company will face competition from Delphi Automotive PLC, which is developing its own control software to sell to automakers, as well as Alphabet and other software companies, some of which may be able to come to market sooner.
The proliferation of players creates a talent challenge as well, given the small number of experts in the field. CIOs should anticipate a challenge to recruit talented engineers for designing control algorithms. A shortage already has led companies like Toyota and GM to make acquisitions.
The new company intends to sell to other automakers. However, it’s unclear whether other car makers would be willing to purchase an autonomy system developed in-part by a rival car maker. Toyota, GM and Volkswagen have been developing their own software. Meanwhile, technology companies such as Alphabet have their own control software and are looking to automakers to build vehicles for them. Car makers with their own development programs are unlikely to purchase a system from this new company because they have invested in their own system. The new company may still put pressure on rival safety equipment suppliers to develop similar capabilities or to create joint ventures with automakers.
CIOs of auto companies and suppliers:
Create a system with metrics to evaluate the performance capabilities of autonomous software providers.
Develop an acquisition strategy to supplement or create in-house software development capabilities.
Develop a strategy for building and protecting intellectual property to avoid loss of work if a software maker is acquired or goes out of business.