Tech Companies Face Rocky Road to Making Cars

Silicon Valley may think it can build a better car. But should it?

As tech giants like Google and Apple look to automobiles as the next frontier for innovation, they face a looming reality: Cars are a lot harder to manufacture and sell than smartphones.

Industry veterans and critics warn that the auto business is a different animal. It’s fraught with massive costs to erect auto plants, complexities in developing new sales and service systems, and daunting liabilities involved when human lives are at stake.

Automakers recalled a record 64 million vehicles in 2014, shattering the old record of 30.8 million set in 2004.

General Motors Co. has had to pay $5.3 billion to cover fines, victim compensation and the recall of millions of vehicles for faulty ignition switches. Toyota Motor Corp. paid a $1.2 billion fine for failing to report safety defects, and Volkswagen Group has set aside $7.3 billion for the potential costs of its emissions scandal.

“I think, like so many Silicon Valley techies, that they believe they are smarter than the world’s automobile business, and that they will do it better,” said Bob Lutz, a retired General Motors vice chairman. “No way.”

He added that tech companies would pay the same high prices for expensive components such as electric car batteries, likely pushing retail prices of their vehicles out of reach for the average driver.

“It will be a huge money loser,” Lutz predicted.

To be sure, Google and Apple have plenty of cash to burn, with about $270 billion in the bank combined. But the challenges of the car industry may be steering them to find ways to revolutionize automotive technology without becoming actual automakers.

Google

Mountain View, California-based Alphabet, the new holding company for Google and its affiliated businesses, has spent six years working on cars that can drive without human assistance. But the company says it doesn’t want the responsibility of building the robotic vehicles.

Instead, it plans to make the self-driving system available to automakers that already have factories, dealerships and experience.

Apple

Apple CEO Tim Cook told an audience this week that the automotive industry is ripe for “massive change,” with new software, electric motors and self-driving capability becoming “much more important, in a huge way.”

But Cook avoided commenting on reports that Apple may be building its own car, according to a video recording of his remarks Monday at a technology conference sponsored by The Wall Street Journal.

Uber

Self-driving technology has also piqued the interest of Uber, the fast-growing Silicon Valley startup that operates a ride-hailing service in cities around the world. Uber said earlier this year that it was partnering with Carnegie Mellon University to research and develop new technologies for mapping, vehicle safety and autonomous driving.

The company hasn’t said whether it hopes to use autonomous technology to replace its thousands of drivers, who work as contractors driving their own cars.

Tesla

Electric car maker Tesla Motors, also based in Silicon Valley, serves as both role model and cautionary tale for companies thinking of getting into the car business.

Tesla is admired for its elegant, emissions-free vehicles packed with technology. It does no advertising but has built a global fan base. It also illustrates the challenges of the industry.

Read more of the original article in Detroit Free Press

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