It might seem antithetical for an automotive enthusiast magazine to allocate pages to the idea of life without cars. But this is the reality we live in. Five years ago, the concept of ride-hail and ride-share was barely a blip on society’s nav screen—a quirky Silicon Valley experiment. Now Uber is so commonplace that it’s in peril of becoming this generation’s trademark-protected verb, like Xerox.
This reality is also confronting automakers, who are being stretched to serve more masters than they ever expected. Making great engines and cars for the world’s drivers used to be the extent of the mission statement in Detroit, Stuttgart, and Tokyo. But automakers are now being pulled in multiple directions with the emergence of autonomous technology, battery-powered and fuel-cell vehicles, and, yes, creating cars suitable for ride-sharing.
That is a stressor on the balance sheets of every automaker, who still have to conduct their original Rust Belt businesses to satisfy demand for 80 million internal-combustion vehicles a year globally.
Spread so thin, and to make ends meet, many automakers are making alliances they once would have considered unfathomable.
To be sure, the existing cross-pollination of ownership interests, partnerships, and joint ventures among the world’s car companies resembles a drunken spider’s web. Expect even more entanglements.
January’s announcement at the Detroit auto show of Ford and Volkswagen partnering for global midsize pickup trucks and light commercial vehicles is just the latest in a line of eyebrow-raising deals—such as forever-rivals GM and Ford combining on a 10-speed transmission for their pickup trucks. But the language used during the VW-Ford executive conference call was far more pointed than the traditional “joining forces of excellence” claptrap heard in the past.
“The industry is undergoing widespread fundamental change,” Volkswagen AG CEO Herbert Diess warned. “We need to create scale effects in clearly defined areas. Partnerships are highly relevant. [They] will be necessary.”
The Detroit show also was the venue for the unveiling of another joint-venture exploration many would have deemed improbable not that long ago: the 2020 Toyota Supra. Built in partnership with BMW’s Z4 convertible, the Supra coupe would likely not have been born had Toyota tried to go it alone.
It wasn’t hard for Toyota to do the math: It would cost somewhere in the $500 million range to develop a bespoke platform and create a modern, emissions-worthy inline-six engine true to the Supra’s heritage—for a low-volume vehicle that might not generate a profit. Codeveloping with BMW was a logical way to share cost.
Sure, the snarkfest about the Supra not being a “real” Supra raged for a bit, but let’s be frank: BMW builds some fantastic inline-six engines and sporty-car platforms. Toyota did its own tuning. This is hardly badge engineering. Get the full story right here.
At its heart, the Supra is the epitome of what automakers face today: Who blinks first and sacrifices near-term goals in order to go all-in with future technologies that may or may not bear fruit within a decade?
“We have to ask how many dollars we put against today’s technology to give profits to our shareholders, as opposed to investing in tomorrow,” Jim Lentz, CEO of Toyota Motor North America, said in an interview.
“At some point you hit a dead-end, because you don’t have the resources,” Lentz said. “You don’t want to arrive too early (to the new technology) and find there’s no party, but you don’t want to be late and be left behind.”
Lentz said it’s not prudent for an automaker to single-handedly invest in the development of its current automotive business (which includes expensive sports cars), as well as hybrids, plug-ins, hydrogen fuel cells, and EV powertrains and platforms—not to mention autonomous transport. And this is from a company with $28 billion in cash lying around.
This realization has led to a remarkable transformation at Toyota, who previously used partnerships sparingly and tried to keep as much R&D as possible in-house. In the past few years, company scion Akio Toyoda has forged strategic relationships with Tesla, Subaru, Mazda, and BMW. Lentz says this might be just the beginning.
Several years ago, visionary FCA CEO Sergio Marchionne predicted an era of industry mergers and consolidation to reduce unnecessary duplication of investment and tasks. We may be hearing the opening stanza of Marchionne’s symphony.
More by Mark Rechtin:
- The Chinese Are Coming
- Next Year Is Here
- How We Determine our Car, Truck, and SUV of the Year
- You Can’t Buy Love, Bug
- A Decade’s Progress
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