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The Future of Automotive is Frenemies


“Keep your friends close and your enemies closer.” With a transportation revolution well underway and ever more players jumping into the fray, this proverb will be more relevant than ever in the automotive industry.

As the automotive industry evolves into the mobility industry, I predict companies will no longer just be partners or competitors. They will be frenemies ― collaborating and clashing at the same time. This future will mark a radical shift from before, when automakers focused their attention internally and on suppliers.

As the automotive industry transitions, it is likely that the winning business model will be a network of autonomous, electric, robo-taxis. Users will be able to hail a ride at any time and be picked up within minutes by an affordable, autonomous ride. This will require the following three capabilities:

  1. Autonomous Technology: a combination of hardware and software to deliver a seamless, safe, and reliable driverless experience
  2. Vehicles: the ability to safely and affordably manufacture and service cars at scale
  3. User Relationship: understanding users, their needs, and behaviors

This “magic triangle” would enable one company to emerge as a clear winner. At first, a number of tech giants set their sights on this ambitious trifecta; however, many have narrowed their focus to one segment: Apple scaled down its Titan program, Uber announced it would never build vehicles, and Google reconfigured its plan with Waymo. It appears vertical integration is no longer the objective. For now, players show strengths in only one or two areas:

  1. Autonomous Technology: Waymo has been pinned as the runaway leader in autonomy; however, Cruise and startups such as have progressed. The Original Equipment Manufacturers (OEMs) have invested immense resources, while Uber has faced recent troubles in the form of an accident and a lawsuit.
  2. Vehicles: large automotive companies clearly dominate here. Major Tier 1’s ― who supply components to the OEMs, such as Bosch and Delphi ― are also important. The transition to electric may challenge the status quo, however.
  3. User Relationship: Uber and Lyft have an immense user base and invaluable datasets. AT&T and the wireless carriers possess important customer relationships. OnStar and other telematics companies also hold a strong understanding of user behavior. Google, with Google Maps, Waze, and its other products, has both tremendous insight and relationships with its users. Amazon and Apple are also relevant for similar reasons.

Can anyone lead in all three capabilities? It seems unlikely, although a couple juggernauts are trying. Tesla is working on all three but faces major obstacles. Autopilot has had setbacks, while Tesla’s ability to produce cars affordably and at scale remains unproven. Zoox is a wildcard; their vision is a full-stack, but it is unclear how much progress has been made.

In an automotive landscape where nobody controls all three domains, partnerships will be necessary. This is already happening: Uber and Volvo, Waymo and Fiat Chrysler, Lyft and GM, Uber and Daimler, Waymo and Lyft, and many more are collaborating. Interestingly, many of these companies have partnered on a specific project or pilot but are (or will be) competing fiercely in other areas. The most obvious example is Uber and Waymo. Google provides mapping functionality to Uber and owns a stake in the unicorn. Yet, Waymo and Uber currently find themselves in an epic lawsuit. They are the best of frenemies.

Frenemies in the automotive industry will have broader implications, changing how companies need to be run. With frenemies, one division of a company may view another firm as friend, while another views it as foe ― creating potentially major conflicts of interest. Leaders will need to consider internal politics and incentives to prioritize the broader company’s success over that of individual units. For the OEMs, in particular, the emergence of frenemies will have another big impact: as they lose parts of the value chain, they will also lose control. Losing the direct relationship with the customer is likely the biggest concern going forward. OEMs may be relegated to Foxconns ― losing brand and identity, only to become commodities and service providers to those directly engaging with the customer.

The emergence of frenemies, however, stands to benefit one group: consumers. Competition will push companies to innovate and improve their offering to customers. Furthermore, as the transportation industry redefines itself, these companies will likely be forced to focus on what they do best. While customers may only purchase one product or service, multiple parties may provide it. Partnerships could allow one company to design the in-vehicle experience, another to craft the digital interaction, and another to focus on operations. This would result in a superior customer experience, with each company focusing on what it does best and creating an even greater “sum of its parts.” The user stands to benefit from a better, affordable, and cleaner transportation experience.