Quick: Which company is the world's biggest spender on research and development?
No prizes if you think it's Alphabet, or Intel, or Pfizer, and get to the back of the class if you picked Alibaba, which spent almost a quarter less on R&D last year than German tire-maker Continental.
In fact, dirty, scandal-hit Volkswagen counts as the world's most innovative company, with $15.1 billion in R&D spending over the past 12 months, according to data compiled by Bloomberg.
That's not a one-off. Auto companies outlaid about $71 billion on R&D over the past year, the data show, behind only healthcare and computing and telecommunications firms.
Such huge expenditures should put automakers in the box seat for the development of driverless cars. In fact, quite the opposite's happening.
R&D by the biggest U.S., German and Japanese carmakers fell last year for the first time since 2009, the data show. Honda plans to cut about 30 billion yen ($275 million) from its budget over the current fiscal year while BMW is telling investors that innovation will swallow a smaller portion of revenue in future.
You don't have to look too hard to find an explanation for this anomaly.
Where automakers once spent their money on developing the best cars, they're increasingly having to set it aside to meet costs from an epidemic of fuel-emissions and safety scandals.
Suzuki Motor fell as much as 15 percent Wednesday after it said it used an improper method to test the fuel efficiency of vehicles. It's one of the few automakers that hasn't yet been tainted by the Takata airbags scandal, which has caught up all 12 companies named in the above chart.
It's anyone's guess how much the Takata affair will cost. Jefferies has put a price tag of $7 billion on the process, while a person familiar with the matter told Bloomberg's Yuki Hagiwara and Takako Taniguchi that a worst-case scenario could stretch as high as $24 billion.
That could be the tip of the iceberg. Volkswagen's diesel-testing scandal has already created a 16.2 billion euro ($18.3 billion) hole, and Credit Suisse has estimated it could eventually drain as much as 78 billion euros, according to CNN.
Mitsubishi Motors, GM, Daimler and Peugeot-owner PSA are also carrying out probes of dodgy testing or fuel-efficiency claims. Mitsubishi's scandal could easily burn through its 462 billion yen in cash and equivalents, Koji Endo of Advanced Research Japan reckons.
All this shelling out of cash could instead be building carmakers' futures. But the problem isn't just about dollars and cents.
While management's playing whack-a-mole, they're distracted from the fleet of rival autonomous vehicles coming down the line.
It's impossible to calculate how much the focus on fixing legal troubles is overshadowing the technical challenges of driverless cars. VW's quarterly investor conference last month is a good guide, though. The hour-long event was dominated by the company's ``diesel crisis'' -- referred to directly and indirectly at least seven times, with no talk of driverless cars or driver automation.
It's not that carmakers lack ambition. But their formidable competitors in the form of Apple, Google, Tesla, Alibaba and Baidu aren't saddled with similar baggage, leaving them free to write their own rules.
With 14.5 million vehicles expected to be sold with autonomous features by 2025 and self-driving kits alone likely worth $42 billion, the race to be first will be expensive, and brutal. Big auto isn't going to win if it's too busy paying for past mistakes.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
China's BAIC Motor and Changan Auto are also moving into driverless cars.
A self-driving kit comprises software and sensors that help turn regular vehicles into self-driving ones.
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