The sale of Nokia HERE to three German carmakers last month offered a timely reminder of how self-driving cars have captured not only the popular imagination, but also the interest of a diverse range of acquisitive investors.
Because the concept of an autonomous car straddles the distinct sectors of manufacturing and technology, classic automobile brands and upstart ‘unicorns’ alike are competing to develop driverless car technology. And because no single company has all the requisite skills and assets to tackle this unique challenge, interested parties are positioning themselves through acquisitions and takeovers.
Private equity and venture capital firms are also eyeing investments in autonomous vehicles with interest, attracted by the industry’s enormous growth potential. Cisco CEO John Chambers predicted last year that the entire ‘Internet of Everything’ represented a $19tn opportunity; separate estimates have suggested that driverless car industry alone could be worth around $1.4tn within just the next decade.
What this leaves us with is an intriguing situation in which a multitude of buyers are competing with one another to acquire the companies and proprietary technology they need to win the race for the self-driving car.
This cross-sector competition was in evidence during the sale of Nokia HERE. It was confirmed in August that a consortium of German carmakers – Audi, Daimler, and BMW – had emerged victorious in the bidding process, agreeing to buy Nokia’s digital mapping service in a €2.8bn acquisition.
The justification for the purchase was simple: the fundamental piece of technology needed to crack the autonomous car nut is a mapping system capable of delivering high-definition map data of public roads. Nokia HERE is widely considered to be the most advanced digital mapping system in the world, challenged only by those of Google and TomTom.
As such, the competition to buy HERE was extensive and diverse. Ride-sharing tech behemoth Uber partnered with Chinese web services company Baidu and private equity firm Apax Partners. Other private equity investors reported to be in the running included Hellman & Friedman, while all of Google, Apple, and Amazon were variously rumoured to be considering offers. HERE became the flashpoint for a face-off between the auto, tech, and private equity industries.
However, while Audi, Daimler, and BMW’s ultimate bidding success represented a major coup, it was far from a decisive one. Instead, it was only the latest and most high profile in a succession of deals struck by parties seeking to steal a march on the self-driving car industry.
Uber, which in February launched the Uber Advanced Technologies Center in Pittsburgh to conduct R&D into mapping, vehicle safety, and autonomy technology, bought the California-based mapping platform developer deCarta in March, and then digital navigation technology assets from Microsoft in late June – only days after dropping out of the bidding for HERE. Meanwhile, in May it emerged that Apple had purchased precision GPS company Coherent Navigation.
On the automakers’ side, German driveline and chassis technology developer ZF Friedrichshafen completed the acquisition of TRW in May, incorporating the US automotive supplier as a new division called “Active & Passive Safety Technology”. As news of the Nokia HERE agreement first broke, German auto parts supplier Bosch signed a deal with Dutch digital mapping company TomTom to collaboratively develop the digital mapping technology that will put self-driving vehicles on public roads by 2020. And in July it emerged that UK car parts maker Delphi Automotive was to buy HellermannTyton for £1.1bn, setting the company in good stead to deliver the in-vehicle electrical architecture that connected cars will require.
What is striking about these deals is that, while the purchasing companies are similarly acquisitive to the point of often pursuing the same targets, car suppliers/manufacturers and tech companies tend to envisage two very different routes to the common destination of the driverless car.
For carmakers, the move towards the autonomous car is an incremental process, beginning with the augmentation of traditional driving through the incorporation of DAS (driver assist system) technologies. In Germany, after a test drive of Audi’s ‘piloted driving’ concept back in April, the Federal Transport Minister Alexander Dobrindt called on German auto manufacturers to press on and replicate their world-leading position in the field of fully automated driving.
By contrast, Google (whose leadership in the field of self-driving cars dates back to its acquisition of 510 Systems in 2011) is focused exclusively on developing the operating system for self-driving cars. Similarly, Uber is targeting a fundamental overthrow of the automotive industry through the creation of a fleet of driverless vehicles that would supposedly eliminate the need for private car ownership altogether – though a better mapping platform also has the shorter-term, incremental benefit of improving the company’s signature ridesharing app.
These conflicting approaches reflect divergent visions of where the automobile industry is headed, beyond the development of autonomous vehicles. This, then, is what’s at stake when auto and tech companies go toe-to-toe in M&A: the very future of vehicular travel.
The Nokia HERE deal exemplified this conflict. The fact that domestic rivals Daimler, Audi, and BMW were willing to work together hints at the existential threat that traditional car manufacturers believe they are facing from tech companies expanding into the field of autonomous vehicles. Even more revealingly, the German triumvirate is planning to maintain HERE as an independent platform that continues to serve other rival carmakers, in the hope that they too share their connected car sensor data. A number of analysts have remarked that what was most important about the HERE deal for Audi et al. was not so much that they won, but that Google, Uber, and Apple did not. It may seem that the brokering and dealmaking of corporate execs is far removed from the utopian enterprise of building futuristic, self-driving cars, but the reality is very different.
The battles and bidding wars taking place in today’s boardrooms will determine how all of us travel on tomorrow’s roads.
This article was written by Paul-Noël Guély from Forbes and was legally licensed through the NewsCred publisher network.