Collaboration is the key for survival of the auto industry

The frighteningly high levels of investments required for new technologies – EVs especially – make the collaboration between different manufacturers and service providers inevitable.

The frighteningly high levels of investments required for new technologies – EVs especially – make the collaboration between different manufacturers and service providers inevitable.

The trend in the automotive industry of growing relationships between various manufacturers, service providers, and hi-tech companies is no more secret than the fact that the entire industry is moving towards electrification. However, what’s interesting is that it’s growing at a rate never witnessed before. In the past few months, new ties have been forged and existing ones have been consolidated, so-much-so that here we have a story dedicated solely to the idea of industrial partnerships.

There’s hardly any doubt that this development will play a crucial role in shaping the future of the automotive industry. So, here is a graphical table, encapsulating the most important alliances forged in the industry so far.

One of the most important collaborations of the industry is the merger (in progress) of FCA (Fiat Chrysler Automobiles) and PSA, who, after having announced their eternal love for each other, are now in the process of exchanging engagement rings.

The historical significance of the announced Franco-Italian American merger aside, there are many developments underway with the potential to bring historic rivals closer together or to make manufacturers look for particular expertise – even on the margins of the automotive industry – in various tech companies, whether start-ups or established enterprises, in the hope of securing competitive advantages in the race towards the future.

The contours of the collaborations between BMW & Mercedes and Ford & the Volkswagen Groups have become clearer than ever. Moving East, while the union between Nissan and Renault seems to be in a bit of a crisis, Toyota’s hegemonic strategy is aiming to control manufacturers like Suzuki, Subaru and Mazda.

These developments in industrial partnerships are driven by the need to share the enormous development costs of electrification and other technological revolutions that are happening at a, well, revolutionary rate. In the past few months, the landscape of cooperation with third party companies has drastically changed. Alongside those dedicated to artificial intelligence, those focused on the research and production of batteries are also gaining ground.

European manufacturers are now intent on decreasing their dependence on China and South Korea and, therefore, are supporting and promoting the ‘Made in the EU’ idea. The French and German governments' project to create a public-private Airbus-style consortium to develop local production is a step in this direction.

After all, electrification is the future towards which the automotive industry is rapidly moving, and, for that reason, it requires more resources than anything else. Now, economies of scale are more important than ever for manufacturers. Producing a high number of EVs to get lower prices from battery suppliers is one of the reasons for PSA’s interest in FCA. Volkswagen has already decided to share its MEB platform with Ford. The thing is that it’s becoming apparent that alone, you won’t get very far. Some people, like Sergio Marchionne, understood this years ago.

Given the fact that at the very heart of electrification lies the question of profit, which has been further intensified by the massive haemorrhage of money caused by the very process of electrification, everyone seems to have become a prophet of consolidation. The question, however, is – will it be enough?

Collaboration is key
Faced with the challenges of the technological revolution (and the financial uncertainties that the related investments raise), it’s important for the auto industry to find shared land for research and development and ensure specific know-how, even from outside the sector. The diagram here highlights the main technical cooperation agreements and the links between the different carmakers, as well as the major tech companies.