NEW SEATS AT THE AUTOMOTIVE TABLE

Silicon Valley and China are often thought of as the new ‘seats’ of disruptive, high-tech automotive influence. But while that is certainly true, another region is now also attracting a great deal of attention from the giants of the automotive world, as Automate’s Harrison Boudakin reports in this article

There is a profound, pressure-cooker-like atmosphere building in the automotive industry at the moment, the likes of which we have never really seen before. Among automakers, analysts and lawmakers, there is a palpable sense that some pretty major tectonic plates are starting to shift. A triad of trends – electric motoring, autonomous driving and the rise of the ‘connected universe’ – are the forces behind this geological disturbance of the status quo, and they are forcing many of the self-confident, corporately-led automotive giants to re-set their expectations, and re-approach (if you will) the future with new eyes.
One of the by-products of this is the emergence of some surprising new epicenters in design and engineering. For decades, the nexus points that shaped the thinking inside the motor world, existed mostly around the traditional centers of manufacturing: think Detroit in America, Swabia and Bavaria in Europe, and Tokyo and Seoul in Asia.
Now, though, pockets of next-generation expertise are appearing like flash-points all over the place, fueled by ambitious venture capitalists, as well as funding injections from local governments keen to get their regions on the map. California’s Silicon Valley was really the first of this new breed, but if you apply the old Nixonian cliché and “follow the money”, it becomes clear that some other new heartlands of cutting-edge development are rising out of the woodwork.
One example of this is Israel. To capture it in a phrase: the growth here has been spectacular, rapid, and historically unprecedented. Israel as a country is 60 years younger than the car itself, and it has almost no history as an automotive center. Yet it is now increasingly drawing the attention of almost every automaker in the world, with all of the big players jostling for a stake in the game.
A critical coalescence of factors have allowed this self-styled ‘start-up’ nation to become such a hotbed of creativity. Per capita, Israel has more engineers than any other country on Earth; and it is second only to Silicon Valley in terms of programming, product design and marketing specialists. Ranked by NASDAQ-listed companies, Israel beats every nation bar China. In terms of sheer density of talent, then, it is clear that Israel has become quite the world-beater. 

And as is the way these days, where the start-ups go, so too go the next-generation of automotive thinkers. Remarkably, Israel now has more than 550 start-ups specialising in transportation technology – and in much the same vein as Silicon Valley, the vast majority of these start-ups are not interested in the design and manufacture of the car as a whole. Instead, they are focused on creating the software and hardware that will underpin the digitalisation of the automotive universe.
So far, Israel’s highest-profile contribution to the motor-world has been Mobileye. In March 2017, the driverless car specialist was acquired by Intel for a whopping $15 billion, a decision which – quite literally overnight – rocketed Israel straight into the motor-industry major league. Thanks to Intel’s extensive involvement in the auto sector, Mobileye now has working relationships with 27 different automakers, including BMW, Fiat Chysler and Audi. As a result, analysts predict that at least 15 million vehicles are now driving around with some form of Mobileye software or hardware, with that number expected to grow rapidly in the next few years. 
But that’s merely the tip of the iceberg. Whether we’re talking about battery development, wireless charging, or data security software, Israel has companies working on all kinds of cutting-edge technology – and automakers are now doing their best to claim a stake in the ones they think have future potential. 
All this has made for an incredibly complicated matrix of investments and partnerships. Mercedes-Benz, for example, has thrown more than $50 million at a Tel-Aviv-based ride-sharing company called Via, following Volkswagen’s decision to invest $300 million in Gett, an Israeli specialist working to develop fleets of shared, ‘smart’ vehicles. 

Then there’s NNG, a navigation and cyber-technology firm that was bought by Ford for an undisclosed amount two years ago – analysts estimate the deal was worth tens of millions of dollars. 
What we’re witnessing, then, is the automotive world’s great ‘hedge’ continuing with a vengeance, with manufacturers looking to defend themselves against the rising influence of tech-centers (like Israel) by jumping into bed with potential players as they emerge, and at the earliest feasible opportunity. The view is that if they don’t, they risk missing a flashpoint of entrepreneurship that might just mature into a key-stone of next-gen engineering. 
But if we in Australia pause just one moment for thought, it is worth considering what an opportunity this presents for us. Years after our native car manufacturing sector entered terminal decline, the global auto industry is reinventing itself in the roiling currents of data, digitisation and deep connectivity. The marketplace for big ideas, as a nation like Israel proves, is no longer limited to those traditional spheres of automotive clout like Germany, the US and Japan.
The possibilities for us in this new knowledge economy are immense, and should be grasped by Australian innovators and entrepreneurs.
Because if one takes the broader view here, it is clear that there’s something of an uncertain race going on right across our automotive world, based around a fundamental question no-one has yet answered: 

Are software companies going to figure out how to move into the auto-industry, faster than the automakers figure out how to become software companies? Moreover, do car manufacturers even want to ‘become’ software companies, or is it better if they simply absorb tech entrepreneurs as they emerge, and hope their investment pays off in the long run?
What we do know for sure, however, is that regions like Israel, Silicon Valley and China have become the key battlegrounds in which these uncertainties will be settled, as the motor-world tries to determine what its own future will look like, and where the new seats of power will ultimately lie.
With any luck, Australia might just gain itself a seat at the table too.

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