What the Ford/Google Driverless Partnership Really Means
Not an earthquake. All the Earthquakes.
It has begun. Ford and Google will partner to build Driverless Cars, according to sources. I must be Nostradamus. Just last week I explained “How Car Companies Can Survive The Self-Driving Car Apocalypse,” and now Ford has allegedly done precisely what I suggested OEM’s need to do to ensure their survival. Ford, as the first American OEM to partner with Google, has now gained a temporary but Brobdingnagian advantage over every other legacy OEM on the planet.
Yes, Brobdingnagian. On the scale of size, that’s bigger than big, massive or colossal.
Everyone else making cars better have a plan, because this partnership changes everything. Let’s break this down point-by-point, starting with the rumors I believe to be true and ending with my predictions for the coming months:
1. Legally Separate Entities? Duh.
No surprises here. Reports have already suggested Google’s Self-Driving Car unit will be spun off as a standalone “Alphabet” company in 2016. Of course Ford would do the same. Liability is the first and most obvious concern, at least until the legal issues around Autonomous Driving are sorted out by regulators on a federal level, which is inevitable. Google, Volvo & Mercedes have already stated they would accept full responsibility for any accidents that occur under full autonomy, which makes Ford’s apparent reticence odd. It might tell us something about the nature and pace of their twin-pronged autonomous product roll-out, which we’ll get to in point #3 and #4.
2. The Consequences of Non-Exclusivity
Of course the partnership is “understood to be non-exclusive.” Google would never agree to anything else. Look at this from their side. If they want to go to war with Uber, they need an OEM to build a mountain of their little Wall-E pod cars. Soon. The United States will be the first battleground. What was the alternative initial American partner? GM? I’d pick Ford, too. Former Ford CEO Alan Mulally is on Google’s board, and Google Self-Driving CEO John Krafcik used to work at Ford in engineering. Both are intimately knowledgeable with Ford’s manufacturing capabilities. The pieces all fit, except for Ford not being big enough, even as the world’s seventh largest manufacturer. We know Google has been in discussions with other manufacturers for some time. Google needs the flexibility to do battle globally, and even if a manufacturer existed with sufficient capacity and global reach, it would be madness to license their AD to a single partner at this early stage in the Self-Driving Apocalypse.
As for Ford, they had no choice. I’m sure they not only wanted to sign, they had to, to prevent GM from doing so first, if the latter ever had a shot. FCA? You don’t need to be Nostradamus to know they were a distant third in Google’s callback list. Rumors suggest Toyota and Daimler’s Self-Driving R&D is ahead of everyone but Google and Tesla, but Tesla doesn’t factor in a war this size. At least not yet. Ford not only wanted access to Google’s tech, but to...
3. The OEM First-Mover Advantage
This may be temporary, but it is still an advantage. Ford, as the first OEM to partner with Google, wins two-fold here. Google’s Self-Driving tech will not only drive Ford’s new unit, but will bleed upward to the latter’s product lineup until reaching ubiquity. Ford sees the writing on the wall. The center of car production/sales gravity will eventually and permanently tip toward Self-Driving Cars. They might win half the battle in the US market merely by manufacturing the coming Google-branded units, if their Gen 1 Wall-E car are of truly superlative quality. If not, I’m sure Google has an out. I’m also sure neither side wants to see Google use it.
The battle’s second half is now Ford’s to fight from a position of technological strength vis-a-vis Toyota, Daimler and the other OEMs. Daimler CEO Dieter Zetsche has already said they won’t be the Foxconn of car companies, ceding that business for now—at least in the United States—to Ford. If anyone else wants to get in on manufacturing Google’s US-targeted cars, they’re not too late, but with Mulally and Krafcik where they are, first-mover might never have been an option.
How quickly will Ford capitalize on this advantage? I predict Ford will announce full assumption of liability for their Self-Driving products—just like Google, Volvo and Mercedes—at CES in two weeks. If they don’t, they’ll have failed to exploit both the technological and public relations leap this partnership provides. But they will. Trust me. My Nostradamus factor has been running at 90% so far, at least on this topic.
4. What Precisely Will These Entities Do?
The report refers to the partnership as moving “toward a new business of automated ride sharing.” We already know Google wants to do battle with Uber, and can infer that Ford will build the first iteration of Google’s competing product. But Ford? Their new unit will be pure Mobility with a focus on EVs, possibly under a sub-brand. ForDrive, anyone? They’ve already gotten their car-sharing feet wet with their Smart Mobility Plan and a partnership with Getaround. Although Ford may offer an in-house sharing services under the new unit, the first of many more battles will likely begin with car rental companies, who don’t appear to have any meaningful plan for the future whatsoever. One could write a novella about that one.
5. What This Means For Uber and Their BIG Secret
The biggest target in the coming shared-services war is now on Uber’s back. Uber needs a manufacturing partner. Uber’s Self-Driving R&D progress is the best kept secret in the automotive world. More importantly, when Google boasts about 1M miles driven autonomously, they do so knowing that Uber may nearly have a full house when it comes to collecting data. It just isn’t AD data. How many tens of millions of miles of data has Uber collected at consumer level about taxi usage patterns? Orders of magnitude more than anyone else. It is almost certainly in an inverse correlation to what Google knows on that same topic. Where Google has much to learn, Uber doesn’t, and Uber has a shorter road to travel toward deploying full AD than Google does in deploying taxis.
What does Uber need? They need a Ford. Soon.
6. My Craziest Theory
Something tells me the non-exclusivity in the Ford/Google partnership wasn’t completely reciprocal. Something tells me there was a single clause restricting one side of the partnership, at least for a few years.
If I were Google, I would have insisted that Ford be forbidden from building Uber’s Self-Driving Cars.
Crazy. But possible. Given that Ford needed Google more than Google needed Ford, it makes sense.
Which leads us to...
7. The Second Biggest Question in the Automotive World
Who will build Uber’s Self-Driving Cars? If it isn’t Ford, there are too many variables for a good guess. In the US market, between GM and FCA, you know my pick. We know it won’t be Daimler, at least not for now. Toyota? Nissan? Uber, light-years ahead of all but one company in app-based car services, is going to need more manufacturing sooner than almost anyone else. They’re already in more markets—actively on the ground—than anyone else. Their cost of market entry is already lower than almost anyone else. The instant Self-Driving Cars clear regulatory hurdles, Uber will be the first company to deploy Self-Driving cars. Mark my words. Unlike Google and Apple, their current business is already in the business, and they are one partnership and one law away from going where everyone else wants to. They already have what everyone else needs: a massive customer base who use their app. How many people use Getaround? Turo? Ouicar? Gett? Arro? How many billions will Google and as-yet unaligned OEMs need to spend to pry Uber users away to a rival service?
8. The Biggest Question in the Automotive World
So, in the US, we’ve got Google/Ford vs Uber/TBD vs. Apple/TBD.
The next five years will be exciting. Let. Them. Fight.
P.S. I omitted Tesla for a reason. They have a secret, hiding in plain sight, but it deserves its own story.