Interview Transcript

What are the different approaches to innovation you’re seeing in the auto industry?

I think the biggest differentiator is that an OEM would like the technology tomorrow, while the tier-one would like it as far away as possible because they have the liability. It’s having the technology available but in a way that is safe and can be monitored. I think this is the biggest challenge of autonomous vehicles because the technology is already there, but is it safe enough to run by itself? That’s a big question mark. Would anyone vouch for that? Would the regulatory authorities approve that? That’s the big question here. It’s not if the technology will be there and when, but is anyone willing to bet it’s safe enough? I think there is a huge difference between how OEMs and tier-ones are seeing the world. OEMs are pushing the tier-ones to be fast like an OEM.

An innovation manager at one of the biggest OEMs told me, “We don’t want to be the first, but we sure as hell don’t want to be the second.” That’s the biggest challenge for an OEM. They want to be fast enough, they want to be first in the market, but they want to make sure the technology works, that they can go to someone if something goes wrong. The tier-one, knowing they would come to them, needs to be safe, so they’re taking it very slow to make sure everything runs right.

How is the relationship between tier-one and OEM changing as we shift towards EV?

One day, OEMs found themselves not as car manufacturers but car assembly lines. When the vehicles are becoming more complicated with software integrations, adaptations, taking things and putting them into automotive, the less the OEM can be involved in that and call the shots. The tier-ones are becoming the strong players. OEMs are feeling they have less control over the process itself, so they are trying to get more involved in which start-up they pick. They don’t want to relinquish that or leave it to the tier-one to decide. They want to say, “This is the start-up I want you to work with. If you don’t want to, I’ll take it to another one. Why? Because I can’t intervene and influence the process, but I can tell you who to work with.” It’s become a challenged relationship, where OEMs are still trying to call the shots and set the tone, but they are doing it less and less.

Where does the power really lie in this new world? If the OEM is still the assembler and the customer, they still have the scale, but if a tier-one owns more of the IP and process, can they actually charge or extract the economics from that?

I think Mobileye is a great example of that. For many years, they dominated the ADAS market, and we’ve seen a lot more companies try to bite and take a chunk out of what they’re doing. Even if you have the best technology or solution out there, you can’t say, “I’ll do what the hell I want and charge the highest prices,” because eventually, someone will kick you out of the game. It’s a fine line of trying to have the best product and not letting the others step in but still not being too dogmatic, so people would not want to replace you.

Do you think it’s crucial for tier-ones to stay as close as possible to the OEMs — because they’re the customer — but also stay at the forefront of innovating, of owning that process and IP?

Sign up to test our content quality with a free sample of 50+ interviews