Automakers seek that Silicon Valley vibe — and value
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General Motors was once the most potent symbol of American industry. Silicon Valley now holds that title — and GM, just like other legacy automakers, wants back in.
Why it matters: Tech bros from California are increasingly holding sway over the car guys from Detroit as the auto industry tries to find the way to an electric, autonomous, software-driven future.
Between the lines: GM dreams of a future where its cars serve as a digital platform — like a smartphone or tablet — that generates recurring software revenue.
- That requires expertise lacking in Detroit, so carmakers are recruiting talent from Apple, Google and other tech giants.
- Automakers are also hoping a Silicon Valley mindset will lead to a Big Tech stock valuation.
Friction point: While the tech sector likes to "move fast and break things," cars need to be safe and high-quality. Reconciling the two imperatives isn't easy.
Where it stands: Software developers are attracted to the automotive industry, Scott Tobin, CEO of mobility software consulting firm Envorso, tells Axios, because they see an opportunity to bring digital innovation to physical products.
- Such innovation results in cars that can get better over time as they're updated over the air.
- Meanwhile, automotive engineers are focused on safety, reliability and regulatory compliance — critical factors no matter how advanced the tech inside the vehicle. Plus they have 100+ years of institutional experience and deep customer knowledge that Silicon Valley folks lack.
- "Put those two together and that's the winning solution," says Tobin.
The latest: General Motors, which has made giant bets on EVs, autonomy and software, is trying to find that balance.
- The automaker continues to recruit software talent, including for its Mountain View, Calif., office.
- Meanwhile its new tech bosses — both Apple alumni — recently eliminated more than 1,000 software and services jobs, mostly in Detroit, in order to streamline development and avoid duplication.
Catch up fast: Before EVs, specialized software was typically embedded into hundreds of small computers controlling individual features on cars, like power windows or electronic stability control.
- EVs are far more integrated, with designed-from-scratch electrical architectures and a handful of centralized computers controlling everything from vehicle functions to infotainment systems.
- The challenge for a carmaker like GM is to reorient itself around this new approach. It no longer needs engineers who specialize in software for window actuators; instead, it needs engineers who can work on entire systems.
Zoom in: GM now senses an opportunity to challenge Tesla, whose reputation has plummeted in part because of its polarizing CEO Elon Musk.
- But the company had to delay some of its most promising plug-in models, like the Chevrolet Blazer EV, because of buggy software that caused flickering screens, looping error messages and glitchy charging issues.
- GM says most of those issues are behind it now.
What's at stake: GM aims to have 30 million connected vehicles on the road by the end of the decade, up from 16 million in 2021.
- And it expects those cars to generate $20 billion to $25 billion in revenue by 2030 from software-enabled subscriptions like assisted-driving technology and WiFi-connected infotainment services.
- That's up from $2 billion in 2021, which was mostly from its Onstar safety and security system.
- If GM does manage to boost its recurring software revenue sixfold from $125 per car to $750 per car by 2030, that would help spur GM's share price, which trades at a fraction of the earnings multiple that Tesla enjoys.
- A higher stock value, in turn, would give GM more leverage to raise money in the market and attract talent.
The big picture: Others across the auto industry are also seeking more expertise to lead the transition to software-driven computers on wheels.
- Ford Motor hired a former Apple and Tesla exec to lead its digital transformation, and created a small California-based "skunk works" team (led by another former Tesla engineer) to develop a low-cost EV platform.
- And global giant Volkswagen all but abandoned its in-house software efforts in favor of a joint venture with California-based Rivian, a newcomer that's far ahead on software.
The bottom line: The auto industry understands that software is the key to its future, but it's clear it needs Silicon Valley engineers to get there.
