The Valley Can Only Juggle So Many Auto Goliaths

Tech companies, especially those that self-identify as “disruptors”, tend to build their businesses around the idea of pushing the establishment out of their own industry, portraying them as inefficient and greedy dinosaurs that make customers worse off. In many cases this is true, but there may be ways to incentivize them to work with you rather than against you. 

Most trendy tech chooses the obstinate path – confronting the establishment head on. It’s never easy, but, as Netflix and HBO will attest for their respective industry, the results are almost infinitely positive. There’s a big difference, though, between taking on Big <insert industry> and confronting Big Auto. That’s because when you try to disrupt this particular industry in the way that Tesla, Google, and others want to, you don’t just get hunted by Big Auto – you get hunted by Big Oil, Big Gas Station, Big Insurance, and Big Auto Dealer. Any of these 5 groups would be a mammoth to take on, but all 5 is pretty much suicide. They collectively have enough money and lobbying power to probably ex-communicate Tim Cook from America if they tried hard enough.

I actually love the David-and-Goliath mantra of Tesla and Google, but I also think that within this endless war between incomer and establishment, there’s an interesting and perhaps more lucrative proposition for a young auto tech company looking to try their hand.

What would happen if you came up with a solution that made at least some of the incumbents money? You would be the industry white knight that no one (or at least fewer people) was trying to constantly beat into submission.

What would it take? Well, let’s look at where the different incumbents feel cornered:

Big Oil is my number one spouse if I’m trying to get an incumbent to play ball. They’re petrified of lithium-ion batteries because they have no expertise or IP to leverage or commercialize. That’s why they’ve been enthusiastic in flooding Hyundai and Honda and Toyota with funding and R&D support in developing hydrogen fuel cells; this is still a new fuel that no one has cornered yet, and they can retrofit their existing gigantic network of pump stations (that outnumber supercharger networks by like 1000:1). What would happen if a young tech company tried to get a new type of battery funded by Big Oil that they could realistically profit from?

Big Auto is afraid that they will become simply hardware suppliers to Apple and Google like Foxconn is to the iPhone. This is probably an overblown worst scenario, but showing carmakers where they can own the driver experience above what their smartphone can do may perk some ears. 

Big Insurance is worried that their profitable auto insurance business will shrink into oblivion with the dawning of crash less vehicles. I honestly don’t have an good thought here other than people will likely not want their driving habits to be monitored 24/7 in order to determine their insurance rates. Because if everyone is like me, we enjoy getting away with semi-illegal “fuck it” U-turns when we blow past the Taco Bell going ten over on one of those laughable 25 mph main streets. 

Big Auto Dealer has a target on Mr. Musk’s back for challenging the dinosaurs of a pre-digital shopping era. Over the past several years, dealers, content with profiting mightily off of the carmakers’ actual work, failed to transition or react to consumer changes. As such, Mr. Musk takes one for the team, and the industry will be better off for it. 

Point being that perhaps a few incumbents deservedly need to be taken on, but the world of New Auto will undoubtedly still contain many of the same players in the world of Old Auto. Best to choose your battles wisely, and perhaps consider the fact that many incumbents maintain assets and capabilities that could advance new technologies faster and more efficiently than the cash-flush tech companies – gasp!


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