The Importance of Strategic Technology Partnerships in the Automotive Industry

Movimento Blog

The most spectacular business mistakes tend to come from successful companies who overshoot by entering into new markets that do not come directly under their expertise, in the hopes that their established market brand will be able to push these products easily.

Take for example, Colgate Kitchen Entrees. Being a successful toothpaste brand, Colgate believed they could leverage their brand loyalty to sell frozen meals in the 1980s. This did not go well with customers. Despite a huge marketing campaign, in which Colgate planned to spend as much as $16 per customer impression on TV and in magazines, the meals did not even make it through their first year.

If Colgate wanted to succeed, what should they have done differently? Ideally, they could have partnered with experts in frozen foods, relying on their industry knowledge to make a great product and perhaps even used a different name for the product line in place of their own brand name.

The lesson learned here is that a single company cannot do everything by itself. As the automotive industry prepares for the arrival of fully autonomous cars, this is of increasing relevance to OEMs. Rather than trying to do things alone, partnering with technology companies and other organizations may be the most viable (and mutually beneficial) economic model. An example of this can be seen in the partnership between Nvidia and Baidu, and in Baidu’s search for additional collaborators. These new alliances are a demonstration of how an uncharted market can be made to work for all the key players involved.

Baidu and Nvidia

To say that ‘Baidu is big’ is an understatement – the Chinese search giant is one of the most successful technology firms in the world. Some of their figures are revelatory:

  • Share of China’s search engine market:2%
  • Daily active mobile users: 665 million
  • 2016 Revenue: $10.16 billion

While these numbers do not quite match Google (which finished 2016 with a revenue of $89.46 billion), Baidu is emulating its American counterpart by investing in everything – from photo apps to cloud storage to, yes, self-driving cars.

Over the last few years, Baidu has invested heavily in the idea of autonomous vehicles, establishing key partnerships in order to do so (and recognizing, perhaps, that their talents might not lie in automotive). Their recent and perhaps the most notable one is their partnership with the Santa Clara chipmaker, Nvidia.

Nvidia has made some good developments in the last couple of years. In November 2016, they were hailed as making the “most energy-efficient supercomputer of all-time,” and their partnership with Baidu is also turning industry heads. Nvidia is a market leader in the “System on a Chip” (SoC) – a single, integrated circuit (IC) that basically emulates an entire computer or processing center.

The Nvidia SoC, known as PX 2, is designed to handle inputs from LIDAR, radar, cameras, and other self-driving sources. It uses a Pascal architecture (a GPU microarchitecture developed by Nvidia) to power its graphic processing units, instantly turning raw information into workable data, which the chip uses to learn from and react to its environment. Nvidia estimates that these processors will perform 24 trillion deep learning operations every second. This is the level of machine learning that helps cars understand the world, letting them determine whether a particular noise is associated with an onrushing car, a bicycle, or just an ice cream truck on the other side of the road. Through this, vehicles adapt to human behavior so that they can avoid accidents and actually learn to drive instead of just steering the vehicle.

Baidu has been quick to take advantage of the technology. The company expects to have self-driving cars on Chinese roads by 2018 and is hoping to mass-produce them by 2021. These plans are remarkable, considering Baidu only established their ‘Autonomous Driving Unit’ in 2015. Google and Apple, by comparison, have both been working on their self-driving projects for years. But it is partly because of smart partnerships, like the one with Nvidia, that Baidu is already running public autonomous driving tests.

Still, this does not mean that everything has been a smooth sail for the technology giant.

The Need for Strategic Partnerships

For the last several years, Baidu had partnered with BMW to try to bring self-driving cars to the road faster. That partnership ended in mid-November 2016 due to conflicting launch schedules. Baidu partnered with Ford, Daimler, Intel, Microsoft and Velodyne (a popular LIDAR supplier) in 2017 to work on Apollo – Baidu’s self-driving platform – with the ambitious goal of putting fully autonomous cars on the roads and highways by 2020.

Baidu is hoping to solidify its platform by forging strategic partnerships with whom they can share their technology, including the revolutionary PX 2 chip. These partnerships give Baidu the opportunity to enter the American automotive market. After all, American drivers are largely unfamiliar with Baidu and might be reluctant to buy a car from a company that they know only as a foreign search engine. It would exactly be like buying frozen food from a toothpaste manufacturer.

Besides brand recognition, American manufacturers also bring other unique offerings to the table – expertise in auto manufacturing; experience with meeting federal, state, and local regulations and a history of working within American safety standards. Balancing all the various interest groups, partnerships and regulatory bodies are key to bringing autonomous cars to the road, which Baidu seems to realize.

This is essentially the way today’s industry works where forward-thinking companies find successful partnerships to incorporate market expertise outside their own domain in order to minimize brand weaknesses and maximize brand strengths. OEMs should also build strategic partnerships with technology companies that have the expertise to boost their growth. The automotive industry has enormous institutional strength, but they also have a history of doing things on their own. As Baidu illustrates, this may not be the fastest way forward.

Baidu is a search giant with big dreams, so they found new partners – including experts in processing units – who are helping to make their self-driving car an approaching reality. OEMs can do the same, whether they partner with makers of aftermarket infotainment systems or providers of secure and adaptable Over-The-Air (OTA) software updating platforms.

Incorporating expertise from other domains is key to achieve success in today’s automotive industry, which is equal parts technology and equal parts steel. Working with any partner who can help you pull ahead of the competition is the only way to take charge of the new automotive world.

As the auto industry is changed by technological and economic currents, OEMs and Tier-1 manufacturers will need to partner with technological specialists to thrive in the era of the software defined car. Movimento’s expertise is rooted in our background as an automotive company. This has allowed us to create the technological platform that underpins the future of the software driven and self-driven car. Connect with us today to learn more about how we can work together.

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