Automotive Technology is Once Again Driving Innovation

Self-driving cars and new safety features are providing job and investment opportunities

16 April 2015

Photo: Mercedes-Benz

Mercedes-Benz premiered its self-driving car at this year's Consumer Electronics Show in Las Vegas, highlighting its interior features.

Anyone walking around the annual Consumer Electronics Show (CES) in Las Vegas in the last year or two probably noticed that it has become somewhat of an auto show. No longer just TVs, video games, and cameras, CES now boasts a major presence by carmakers like Audi, BMW, Mercedes, Toyota, Volkswagen, and others.

On another front, it has been widely reported that Apple hired 150 key engineers from Tesla, offering them big pay raises and signing bonuses of up to US $250,000. It’s hard to say whether Apple will go into the automobile business directly and build an “iCar,” but it’s clear that linking mobile devices like iPhones to the car dashboard makes a lot of sense. Could it be that the automotive industry is once again an exciting driver of new technology innovation? It appears so.

As a banker focused on mergers and acquisitions (M&A) and also an electrical engineer, I am always on the lookout for growth areas in technology because that’s where I can find clients. Specifically, I keep my eyes open for technologies that large companies are looking to bring in-house by acquiring smaller companies through M&A or strategic investments. Just when many of us thought that innovation in automobiles had stopped, a new wave of technical innovation is happening, one that is driving new investment, mergers and acquisitions and, even better, more jobs for engineers.

TRICKLE-DOWN FEATURES

Google, BMW, and other companies have recently generated substantial interest in self-driving cars. The truth is that mass-market adoption of self-driving cars is probably a long way off, and most people will probably still prefer to have control when possible. However, R&D and attention to developing cars that can drive themselves are creating features that will trickle down to regular cars. It reminds me of what happened with NASA and the Space Shuttle. In 2015 none of us are driving spaceships to work, but many of their innovations are being used in everyday life. Take, for example, cellphone cameras and MRIs, both which were originally developed for NASA’s spacecraft. R&D for self-driving cars is creating and optimizing technologies that could be used in almost any vehicle, including automatic control systems, collision detection and avoidance, navigation, and in-car infotainment.  

The most obvious crossover use case is tying together the complex systems used for navigation, control systems for steering and braking, and cameras and sensors for awareness of others on the road. It’s easy to connect the dots here. Even if the car isn’t self-driving, anti-lock brakes and cruise control can passively assist the drive and even take control if necessary. The collision avoidance feature could take over to prevent an accident, or the navigation system could gently steer the car toward the correct exit for the driver. Someday every car, even the low-end models, will have these features.

THE NERVE CENTER

The dashboard has become one of the top-selling features for cars, as this is the central “user interface.” View almost any recent car commercial and you’ll notice the focus is on the infotainment system in the center console, not the rest of the car. A well-designed console can certainly sell more cars. The dashboard has also become one of the most serviced components as it houses all the software that runs those features.

Users want a visually appealing easy-to-use display. They want to be able to integrate functions of their smart phone like media playback and navigation. They also want to be able to play a Blu-ray DVD for the kids in the back seat. And they want the display to be nondistracting while they are driving. Because of these reasons, the dashboard is arguably the most important focus of innovation by the industry and will continue to be for years to come. The good news is that the functions it houses are software-based, which makes it easier to upgrade and add new features. The ability to innovate will also continue to attract smaller companies to the sector, which could either partner with or later be acquired by larger automotive and electronics companies.

INVESTMENT OPPORTUNITIES

Where there is a rapidly changing technology market, mergers and acquisitions are sure to follow. I expect the next few years to be active for mergers, acquisitions, and investments in the automotive technology sector. Acquisitions will occur when bigger companies want to quickly grow market share in larger deals, or when they need to bring in specialized R&D or intellectual property they have not been able to effectively develop themselves. For example, this March NXP Semiconductors announced it was acquiring Freescale for US $12 billion, creating a $40 billion semiconductor powerhouse and the largest supplier of chips for the automotive industry. Other recent deals include six by Dassault in the last two years, and automotive audio technology maker Harman’s acquisitions of Symphony Teleca and Red Bend, both software services providers for mobile communications, and S1nn, which develops infotainment and audio products for the automotive industry.

The next couple of years in the automotive technology industry are sure to be interesting. So buckle up!

Brent Lorenz is an IEEE member and a managing director and coleader with The McLean Group Technology Practice. He got his start as a technical sales engineer for Texas Instruments.

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