The Merging Worlds of Technology and Cars (BW)

The line between the technology and automotive industries is blurring. The rise of rideshare companies such as Uber and Lyft means that transportation is being tied ever more closely to your cell phone, while autonomous driving technology is turning your car into a computer. But these developments are expensive: Carmakers’ R&D budgets jumped 61 percent, to $137 billion from 2010 to 2014.

Fiat Chrysler Chief Executive Officer Sergio Marchionne thinks it makes no sense for carmakers to spend billions of dollars developing competing, yet largely identical systems. To share some of the risk—and the cost—the incumbent automotive giants and their would-be disruptors are teaming up in an ever-growing, ever more complex series of alliances.

So Fiat Chrysler, for instance, has paired up with Google to develop 100 self-driving minivans, and is in discussions with Uber about a similar venture. Google has, in turn, invested in Uber, as haveToyota, Microsoft and Tata, owner of Jaguar Land Rover. Bill Ford, chairman of the eponymous carmaker, has meanwhile invested in Lyft, as has General Motors, and Lyft has partnered with China’s Didi, itself the subject of a $1 billion investment from Apple.

The prize is lucrative, and the carmakers want to ensure that software players don’t win the lion’s share of it. McKinsey estimates that rideshare and onboard-data services could generate an additional $1.5 trillion of annual automotive revenue by 2030, adding to the $5.2 trillion from traditional car sales and services. And it’s attractive for consumers too: It costs an average of $8,558 per year to own a car in the U.S., but each vehicle is used just 4 percent of the time. Ridesharing in an autonomous vehicle could ensure that cars are always in use.