Jan 15, 2021

Axios Navigate

Happy Friday! We made it through another eventful week. Let's look ahead to the future, shall we? Today we're exploring the rise in software-defined cars.

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  • Smart Brevity count: 1,256 words, a 5-minute read.
1 big thing: the cloud-based car is arriving

Illustration: Annelise Capossela/Axios

The notion of the car as a "computer on wheels" is moving past the realm of hype and closer to reality, which will transform the driving experience and improve road safety, too.

Why it matters: The arrival of long-promised technologies like 5G connectivity and new high-performance computers means cars will improve over time, instead of depreciating the minute they leave the dealer lot.

  • With software updates, buyers will be able to add features or services that weren't available at the time of purchase or enhance their ride with customized apps.
  • And once 5G is widely deployed, cars will also be able to communicate with each other and with the surrounding ecosystem, providing situational awareness and helping to avoid collisions.
"Just like our phones and our televisions, the car is no longer this static, fixed product that you’re buying. Now it keeps getting updated. It's part of the ecosystem. If there’s a new charging station built in your neighborhood, your (electric) car will know about it."
— Nakul Duggal, senior vice president of Qualcomm Automotive

Yes, but: This is nothing new to Tesla, whose high-tech cars are already like mobile supercomputers. But for legacy automakers whose technology is finally catching up, it's nothing short of revolutionary.

Driving the news: At this week's virtual CES show — and at technology showcases timed to coincide with the event — companies were promoting what they call "software-defined vehicles."

  • It means software in the cloud — not the mechanical parts under the hood — will control both a car's operation as well as the passenger experience.
  • Panasonic, for example, touted a new head-up display enhanced with augmented reality — graphics projected on the windshield that provide real-time awareness about traffic, obstacles or directions.
  • Harman, meanwhile, introduced a new cloud-based platform that would let passengers turn their car into a video gaming arena or virtual concert venue.

Between the lines: It's all being driven by a convergence of big, important trends, explains IHS Markit analyst Brian Rhodes.

  • 5G has arrived. The first 5G-equipped vehicles are already on the road in China, and arriving soon in the rest of the world. With a fatter pipe, information can move more quickly in and out of vehicles.
  • Existing cars can't handle that data explosion, so carmakers are stripping out a patchwork of 100-plus control units for individual functions like airbags and windows and replacing them with a few super-efficient, high-performance computers designed by big suppliers like Continental and Aptiv.
  • The shift to electrification means there's plenty of juice to run those new electrical architectures.

What to watch: BMW's iX, an electric SUV starting production this summer in Germany, will be the first 5G-capable vehicle in the U.S. It goes on sale later this year in Europe, and will arrive here in early 2022.

  • By 2023, nearly 5 million cars globally, representing 75 brands, will have 5G capability, according to IHS Markit.

The bottom line: Consumers expect their digital lives to follow them everywhere, including into their cars. The technology is finally here for automakers to deliver.

Get smart with Axios' short course on 5G

2. Proterra hops the SPAC bus to public markets

Proterra's Greenville, S.C., assembly facility. Photo: Proterra

Proterra, the leader in electric buses, is joining a long list of EV manufacturers going public through a reverse merger with a blank-check company.

Why it matters: The difference is that unlike some of its unproven rivals, Proterra is a 10-year-old company with annual revenue of $200 million from three business units and $750 million worth of orders in the pipeline.

Details: The California-based company, which also makes battery systems and charging stations for commercial vehicles, agreed to go public through a merger with special purpose acquisition company ArcLight Clean Transition Corp.

  • The deal values Proterra at $1.6 billion and will provide the company with $648 million in fresh capital at closing.

What they're saying: CEO Jack Allen, a former Navistar executive, said Proterra's "first mover advantage" will help in an increasingly crowded field.

  • "If there is any kind of shakeout in the industry, our track record and strong foundation will allow us to stand out," he told Axios.
  • The company is projecting $2.5 billion in revenue by 2025, more than 10 times 2020's haul.

What's next: Allen says Proterra is looking to step up its battery R&D and that it wants to find a partner to produce battery cells in the U.S.

3. GM's star rises on Wall Street amid EV push

GM's EV600 electric delivery truck. Photo: GM

General Motors is finding love on Wall Street, something it hasn't experienced in a very, very long time.

What's happening: Investors are beginning to give credence to the Detroit automaker's electric vehicle strategy — or they're looking for a cheaper way to participate in the Tesla-inspired run-up in electric vehicle stocks.

Driving the news: GM was "the star of the show" at this week's virtual CES, EV bull Dan Ives, a Wedbush Securities analyst, said in a note Thursday.

  • In a keynote address, GM CEO Mary Barra said the industry had reached "an inflection point" for electric vehicles, and outlined progress on the company's Ultium battery technology and several upcoming EVs.
  • Barra also unveiled a new electric vehicle business unit, BrightDrop, focused on deliveries and logistics, with FedEx among its first customers.

What they're saying: While Tesla and other EV upstarts soared, GM stock has languished for years, despite record profits. Now analysts say that investors may have underestimated GM's potential.

  • GM's EV strategy "lays out a new path of growth for the company and makes them a major player in the EV industry for years to come," Ives said.

By the numbers: Shares of GM have gained 46% in the past 12 months, compared with gains around 16% for the S&P 500 index.

  • Shares of GM have gained 46% in the past 12 months, compared with gains around 16% for the S&P 500 index.

Yes, but: GM's $74 billion market cap is still one-tenth the size of Tesla's.

4. Driving the conversation

Courtesy: Volvo Penta

Volvo Penta just automated the skills preventing boat owners' most expensive screw-ups (Chris Davies — Slashgear)

  • My thought bubble: As a boat owner who has experienced her share of docking mishaps, I can say this joystick-controlled, assisted-docking technology seems brilliant. I can't wait to try it.

Fiat Chrysler Automobiles gets into air taxi business with Silicon Valley's Archer (Eric D. Lawrence — Detroit Free Press)

  • Why it matters: Archer will tap FCA's supply chain and engineering expertise for lightweight composite materials, but the flying taxis will be designed, built and operated by Archer.

FAA cracks down on unruly airline passengers in wake of Capitol riot (Joann Muller — Axios)

  • Why it matters: The new "zero tolerance policy," which includes fines of up to $35,000 and imprisonment, comes after the agency saw a "disturbing increase in incidents" of passengers disrupting flights with "threatening or violent behavior" stemming from their refusal to wear masks and recent violence at the U.S. Capitol.
What I'm driving

2021 GM Yukon Denali. Photo: GM

This week I'm driving the GMC Yukon Denali, which was redesigned for the 2021 model year.

The big picture: The Yukon, along with GM's other full-size SUVs (the Cadillac Escalade and Chevrolet Tahoe and Suburban), are the company's moneymakers, hauling in about $10,000 profit per vehicle, analysts estimate.

  • Without them, GM wouldn't have the capital to invest in future technologies like electric, self-driving cars.

Why it matters: The Denali is something of an automotive icon, debuting in 1998 almost as a brand unto itself, and now accounts for more than half of all Yukon sales. And it remains popular with luxury buyers who want lots of space and truck-like utility.

Details: Like the other full-size SUVs, the Yukon Denali has a new independent rear suspension that provides a better ride and, importantly, a lot more rear space for passengers and cargo.

  • Two V-8 engines are offered, plus a 3.0-liter turbo-diesel that's great for towing heavy trailers.
  • I really liked the large multicolor head-up display which is easy to read, even in sunlight, and helps minimize distractions.

The bottom line: The Denali sells for $71,400, but my test vehicle had an $11,255 "Denali Ultimate Package" that included a rear-seat entertainment system, retractable steps, a panoramic sunroof and much more.

  • The final sticker price was $83,495, a big price for a huge vehicle.