April 27, 2016

The race to self-automation

Many automakers and tech companies are pushing for self-driving cars to enter the marketplace sooner.

Is consolidation inevitable in the automotive industry? Fiat Chrysler Automobiles CEO Sergio Marchionne certainly believes so. Fiat has been on the hunt to merge with one of the automotive industry's major names, such as Toyota, Ford or Volkswagen, after its failed merger ambitions with General Motors last year, according to Bloomberg.

Marchionne has not been shy to speak frankly about his views of the current state of the industry. He feels that consolidation is necessary as the quickly rising costs of technology used to develop energy-efficient and self-driving cars is difficult on less expansive car companies, like Fiat. The industry as a whole, he believes, spend far more on product development than it does on investing in shareholders and companies.

What is Marchionne's grand plan?
While Fiat had a decent last year of earnings, Marchionne is a staunch supporter of consolidating with a successful industry leader. Fiat already spends far less than its competitors on research and development, and wants to pursue a merger with a company boasting a more well-established R&D team to avoid wasteful duplicity. Fiat Chairman John Elkann fully supports Marchionne's M&A intentions and even sent a letter to shareholders at Exor, an automaker investment fund, last year, according to The Detroit Free Press.

"Some of FCA's competitors are convinced that they should not engage in 'doubling down with the past' (i.e. consolidation), but embrace disruption with new technologies and business models that address the 'mobility' market, which is twice as big as the one just selling new vehicles," Elkann explained. "For FCA, if you look at doing something with the 'Big Guys,' our internal analysis indicates that you could end up with annual savings close to $10 billion."

What about the rest of the industry?
While not all major automaker giants are making substantial moves to merge in the near future, many technology and automotive leaders are joining forces to help push self-driving cars into the marketplace sooner. Google, Uber and Ford have formed a coalition to prompt federal action regarding self-automated vehicles, according to Reuters.

This week, the National Highway Traffic Safety Administration held two public forums to go over regulations for self-driving vehicles where it also took questions from leading tech organizations and automakers. The agency hopes to release its standards for self-driving cars for companies, states and policymakers by July.

At this moment, many states, such as California, are considering banning the use of self-automated vehicles that do not have pedals or a steering wheel in the event of an emergency. These vehicles without human controls are not legal, though Google opposes this regulation. All these companies can do now is urge legislators and policymakers to consider the numerous benefits of self-driving cars and to take steps to ensure their acceptance and legality on the road in the near future.