Top Carmakers Disagree About the Car of the Future

Automakers and Silicon Valley upstarts are kicking their efforts to define the car of the future into a higher gear, even though many of the players disagree about what that car should be.

The emerging autonomous vehicle technology sector is still in a turbulent stage akin to the old debate over "Betamax versus VHS" format. Standards are not yet defined, winners and losers are not sorted out and major players disagree sharply about the best way to bring the promise of safer, smarter cars to market.

Consider the contrasting visions of the automotive future put forward at the Consumer Electronics Show in Las Vegas this week by Mark Fields and Dieter Zetsche, the chief executives of Ford Motor Co and Daimler AG, respectively.

Ford's approach, Fields says, is to focus initially on connecting cars and their drivers to the mobile Web, with apps as the building blocks, and work on sensors and software that eventually will enable the development of fully autonomous vehicles in the next decade. Ford wants to develop affordable technology for a broad swath of consumers - the philosophy behind founder Henry Ford's Model T.

Daimler's Mercedes-Benz has a different idea from Ford - and worlds apart from Internet company Google Inc, which has jolted the automotive establishment with its high-profile effort to develop a fully self-driving city car.

Zetsche presented a futuristic Mercedes prototype at CES that could drive itself down city boulevards while passengers used hand gestures to call up information about restaurants along the route or receive invitations to party from friends nearby.

Where Ford wants to make autonomous cars for "Everyman," and Google envisions cars as pod-like appliances, Daimler presented robotic driving as part of a technology package that sets its premium cars apart from plebian rides. At the same time, Zetsche said Daimler could extend the self-driving concept to tiny "green" cars such as its Smart EV or into car-sharing programs such as its Car2Go enterprise - potentially challenging Google in that sphere.

"I hope you will still recognize us as being the inventor of the car," Zetsche told Reuters. "But we should be defined by our future, not by our past."

Sense of Urgency

The urgency among the companies looking to profit from connected vehicle technology, including the hardware and software required for automated driving, is increasing. Several automakers, including Mercedes, General Motors Co and Volkswagen AG's Audi, have said they want to have vehicles capable of significant levels of hands-free driving on the road between 2016 and 2020. That means contracts to supply hardware and software need to be signed now.

The head of Google's autonomous vehicle project, Chris Urmson, is scheduled to speak next week at an industry conference in Detroit to send the message that Google wants to forge partnerships with traditional automakers and suppliers to get its technology on the road.

Research firm IHS Automotive has estimated that self-driving car technology will add more than $31 billion in revenue for Google by 2040.

It is not clear, however, how automakers and such traditional technology suppliers as Continental AG, Delphi Automotive PLC, Robert Bosch GmbH or Visteon Corp, will welcome Google and other Silicon Valley companies looking to muscle their way between automotive brands and their customers.

Volkswagen, for example, announced at CES this week that it has partnered with Google rival TomTom to provide mapping data for its vehicles. Accurate maps are critical for autonomous driving, and they also provide richer information to drivers based on their location.

Shaking up Status Quo

Investors are betting that whatever happens, the status quo will be upended. Enthusiasm is high for companies positioned to benefit from increased automation and digital connectivity - including ride-sharing companies such as Uber, which aim to blow up traditional car ownership.

Valuations for some technology upstarts in the auto sector have soared above many of the industry's stalwarts.

"You will see the Old Guard lose its (share price) multiples and the New Guard valued at crazy levels," said Cathie Wood, chief executive of Ark Investment Management LLC, which invests in shares of companies it believes will benefit from the growth in connected and autonomous vehicle technology.

The traditional auto sector is also investing heavily to avoid being eclipsed.

"It's protecting our future," said Tim Yerdon, vice president of Visteon's connected services. "We have to play in it one way or the other."