Carmakers Should View Tech Companies as Threat, Analyst Saysby
Morgan Stanley's Jonas says car industry would be upended
Google `would use Ford as a host and devour them later'
Automakers such as Ford Motor Co. and Toyota Motor Corp. should consider the arrival of technology companies like Google Inc. in their industry as a lethal threat rather than a growth opportunity, Morgan Stanley analyst Adam Jonas said.
“You’re talking about the end of human driving, the end of private ownership, the end of the internal-combustion engine and the end of car dealerships,” Jonas said at an Automotive News conference Wednesday in Detroit. “Other than that, it’s business as usual.”
Google may form a partnership with a company like Ford relatively soon, but mainly to get access to knowledge the automaker has gained by having millions of cars on the road worldwide, the analyst said. Ford and Alphabet Inc.’s Google are discussing working together, including a joint venture to build cars using the Silicon Valley company’s technology, a person familiar with the talks said last month.
“They would use Ford as a host and devour them later,” said Jonas, who spoke in a presentation at the conference and in an interview there. He added that every established automaker is vulnerable. Statements by companies about wanting to collaborate with Silicon Valley often gloss over the risks, Jonas said.
“There’s all this talk about disruption,” Mark Fields, Ford’s chief executive officer, told reporters following a speech in Detroit. “We’re disrupting ourselves. And we are looking at this from a position of strength today in terms of the financial health of our business and saying, ‘How do we position the company for success in the future?’”
Johnny Luu, a Google spokesman, declined to comment about Jonas’s remarks, as did Steve Curtis, a Toyota spokesman.
“Many auto firms now openly admit tech disruption of the core business model is real, radical and happening now,” Jonas wrote in a note to clients on Wednesday. “Nearly all of them view the changes as presenting greater opportunity than risk. Investors don’t seem to buy it.”
Not all automakers are looking to cooperate in a world of self-driving vehicles and car sharing.
Carlos Ghosn, chief executive officer of Nissan Motor Co., said Tuesday that the automaker will battle back against the emergence of car-sharing with more connected vehicles that drivers can personalize. He downplayed the impact ride-hailing companies Uber Technologies Inc. and Lyft Inc. will have on the economics of the car business, after General Motors Co. invested $500 million in the latter company.
“We’re not going to facilitate this trend,” Ghosn, who runs both Nissan and Renault SA, said in an interview at the Detroit auto show. “We’re going to make the cars much more sexy, much more attractive, and we’ll see how people react.”
Jonas said that the basic problem for automakers is that they’re still selling cars and trucks instead of the miles that people travel, he said.
“Once you buy a car, you drive it, you fuel it and you maintain it. And they say, ‘We’ll see you in seven years so we can screw you with another Corolla sale,’” the analyst said, by way of example. Most automakers have little or no relationship with customers for years between transactions made at independent dealerships, which consumers often find frustrating.
To make things worse, most cars are actually in use only 3 percent of the time, and sit in parking lots for the rest, Jonas said.
Meanwhile, Google and Apple Inc. are interested in a $14 trillion annual market that consists not just of selling, servicing, repairing and insuring cars, but also of the time drivers spend trapped behind their steering wheels, according to Jonas.
Google wants to use that time as opportunity to pump data, entertainment and Web connectivity into a space drivers can’t escape, while Apple also wants to sell hardware and services, he said.
That’s why a ride-sharing company like Uber may be able in a few years to achieve the $250 billion annual revenue that Toyota didn’t achieve for seven decades, he said.
In remarks at the same Detroit conference Tuesday, John Krafcik, head of Google’s self-driving unit, said the company’s goals for self-driving cars include reducing accidents and providing more mobility for the elderly and disabled, not to boost advertising revenue.
Automakers like Toyota have been slow to react to what he considers a threat from companies such as Google because they need to devote so much time, effort and money to running their traditional car businesses, Jonas said.
“They’re fighting a two-front war,” he said. “It will really get bad when the next recession hits.”
(For more coverage of the Detroit auto show, click on SHOW.)