Car Suppliers Vie for Major Role in Self-Driving Boom

By Tim Higgins 

As a retrofitted self-driving SUV navigated through busy traffic in Las Vegas last week, one of its passengers was trying to position his company, auto-parts supplier Delphi Automotive PLC, at the forefront of the autonomous-vehicle craze.

"The discussion is shifting over from the hypothetical to, 'how is it actually going to be deployed?'" said Glen DeVos, Delphi's vice president of services, at last week's CES 2017 tech expo, where it demonstrated its self-driving technology including cameras, laser sensors and artificial-intelligence software.

Myriad suppliers, from longtime auto-parts powerhouses such as Delphi -- a provider of powertrains and safety systems -- to chip makers like Nvidia Corp., are vying to become sellers of something more than commodity parts.

As car companies showcase futuristic plans for their driverless cars at the North American International Auto Show in Detroit this week, they are weighing how much of the vehicles they can own themselves, and how much they will need to rely on a widening group of auto suppliers and tech companies.

"This is as transformative to the automotive space as the internal combustion engine or the electric starter," said Delphi's Mr. DeVos, whose autonomous system is slated to be available for car companies in 2019.

The rise of autonomous vehicles may create a $20 billion global market for sensors, software and systems used in such vehicles by 2020, according to AlixPartners, a consulting firm.

The opportunity is driving deals within the supplier community. Delphi last week said it would buy Movimento, a software company that specializes in over-the-air updates. Qualcomm Inc. is buying NXP Semiconductors NV , the largest maker of chips for cars, for $39 billion. And Samsung Electronics is paying $8 billion for Harman International Industries Inc. -- a maker of car-entertainment systems, car software and connected-car platforms -- a move that instantly turns it into one of the top auto suppliers.

"The value-add is shifting toward the smarts" of the car, Dinesh Paliwal, the chief executive of Harman, said, recounting a recent conversation with a senior executive of a large auto maker who said the car companies are only responsible for 20% of the value added to a vehicle.

With auto makers from Nissan Motor Co. to Ford Motor Co. aiming to put self-driving cars on roadways by 2020, they must figure out how to industrialize such technology now, given it takes several years to develop vehicles.

The debate within the industry is over which companies will control development of the car's brain. Will the auto maker develop it? Or will it come from a tech player, such as Alphabet Inc.'s Waymo, Uber Technologies Inc. or a startup like nuTonomy? Or will traditional auto suppliers, such as Delphi, with experience in buying components from other suppliers and packaging them for auto makers, have a role?

"We think it's crucial technology to own and understand and develop ourselves," said Ola Källenius, head of Daimler AG's Mercedes-Benz development. "And, in this case, assembling line code, as opposed to assembling pieces of metal."

The challenge for these companies is being nimble enough to recruit top talent and develop breakthroughs in artificial intelligence that can make a car understand the complexities of the roadway.

Auto suppliers argue they have the experience of providing automotive-grade technology to car makers. French supplier Valeo SA said last week it developed technology for an autonomous car that circled the U.S. last year, driving 13,000 miles, mostly in automated mode -- but with a human in the driver's seat at all times. "The basis of autonomous cars is sensors, and that is our world," said Chief Executive Jacques Aschenbroich in Las Vegas last week.

Valeo's miles, however, still pale in comparison to what Alphabet's Waymo has achieved. Its cars have logged more than 2 million miles of autonomous driving on public roads in the past eight years.

Waymo, which was spun off from Google into its own business unit late last year, is working to commercialize the technology. Honda Motor Co. recently said it was in talks with Waymo to test the tech company's self-driving system in its vehicles.

In a keynote speech opening the Detroit auto show on Sunday, Waymo Chief Executive John Krafcik announced the company developed a platform of sensors to run its autonomous car software.

This "will allow us to deliver products and services that make getting around safe and easy for everyone," he said. "Some of these we may do on our own; some we may work on with partners."

Write to Tim Higgins at [e-mail]

(END) Dow Jones Newswires

January 09, 2017 12:03 ET (17:03 GMT)

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