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DAIMLER UPDATES MOBLITY, R&D EFFORTS: German auto giant Daimler released its Q3 2017 earnings, and reported that it grew spending on research and development (R&D) efforts to 2.3 billion euros ($2.7 billion), up from 1.9 billion euros ($2.2 billion) in Q3 2016.
The company expects its R&D spending in 2017 to be significantly higher than last year’s record of 7.9 billion euros ($9.3 billion), according to Bloomberg. That’s being driven by a number of initiatives. The company is accelerating investments in electric vehicles as demand for diesel vehicles drops in Europe. Some large European cities are considering banning diesel-powered vehicles altogether over air quality concerns. In Germany, sales of diesel vehicles fell 21% during the month of September, according to the country’s motor vehicle department.
The auto giant is also investing heavily in connected and autonomous technologies across its car and truck businesses. Last week, Daimler demonstrated its Arocs autonomous trucks that can drive autonomously in pre-defined areas, such as a college campus or airport. It also confirmed that it will be splitting up its car and truck units into separate businesses to give them more flexibility in pursuing new technologies, partnerships, and business models.
Daimler provided updates on its portfolio of mobility services, which increased their total users by 116% YoY to 15.9 million.
- Daimler’s Moovel Group, which houses all of its mobility services, counted 16.4 million transactions across its various apps in Q3, up from 10 million in Q2.
- Car-sharing service Car2Go, the largest car-sharing service in the world, grew its user base to 2.8 million in Q3, up from 2.6 million in Q2. The automaker said that it is continuing to invest in deploying new models to Car2Go’s fleet to give users more choices, as it transitions the fleet from two-seater Smart cars in favor of Mercedes sedans and SUVs.
- Additionally, Daimler’s MyTaxi ride-hailing app increased its user base from “more than 8 million” at the end of Q2 to 9.7 million by the end of September, and is testing a ride-sharing service, called MyTaxi Match, similar to UberPOOL.
- Daimler also invested in US ride-sharing service Via, and plans to bring Via’s app to Europe, starting in London.
Daimler hopes all of these mobility investments will help shield its business from shifts in car ownership rates over the coming decades, as mobility services take an increasing share of auto industry profits at the expense of new car sales to consumers. Shared mobility services will grow to account for 20% of the auto industry’s annual profits by 2030, while the share of industry profits resulting from new car sales will drop from 41% in 2015 to 29% in 2030, according to PwC and Strategy&.
BOEING INVESTS IN AUTONOMOUS FLYING STARTUP: Boeing’s HorizonX venture arm has invested an undisclosed amount in Pittsburgh-based aerospace startup Near Earth Autonomy, Bloomberg reports. HorizonX typically “makes investments that span the single millions up to the low double-digit millions, and this investment is at the higher end of that range,” a Boeing spokesperson told GeekWire. As part of the investment, Boeing VP of Research & Technology Charles Toups will join the company’s board.
Near Earth Autonomy is developing software and sensors to enable drones and other aircraft to fly themselves autonomously. The company was founded by a handful of former members of Carnegie Mellon’s robotics institute back in 2011. Shortly thereafter, it worked with the US Army to develop and trial one of the world’s first full-size, self-flying helicopters.
The investment will allow the 50-person company to move into a larger facility, make about a dozen new hires, and explore potential new products and technologies, CEO Sanjiv Singh told The Pittsburgh Tribune-Review. In addition, Singh noted that it will help the company accelerate its time frame for getting the products it’s currently working on to market.
This deal is part of Boeing’s larger multi-pronged approach to exploring the autonomous flight space. The aerospace giant purchased Aurora Flight Services, the company working with Uber to develop autonomous flying taxis, earlier this month. In addition, HorizonX invested in Zunum Aero, a startup working on electric and autonomous plane technologies, and Spark Cognition, which is building artificial intelligence (AI) solutions that could be used in such aircraft. Autonomous aircraft could open up new business opportunities for Boeing, including selling autonomous flight systems to aircraft operators and providing new transportation services like flying taxis.
OTA UPDATES WILL HURT CAR DEALERS’ BOTTOM LINES: Tesla has pioneered over-the-air (OTA) software updates in the auto industry, and other legacy automakers and suppliers are starting to incorporate them into their own software capabilities. That trend will cut into the revenue auto dealerships collect from performing software fixes, according to Bloomberg.
OTA updates that fix software bugs with a simple download will become more prevalent across the auto industry in the next few years. GM has said that it will enable OTA updates for its infotainment and electronics systems by 2020, and major auto supplier Delphi is integrating them into its own electronics products as well.
Increasing use of OTA updates will result in less visits to auto dealerships by automating software fixes. That will lead to a decline in the amount automakers pay auto dealers to cover the costs of fixes under warranty. About half of the $40-50 billion per year that auto manufacturers spend on warranty costs stems from software bugs, according to Delphi. This year, OTA updates will save automakers $7 billion, mostly from reduced labor costs associated with repairs, according to IHS Markit projections cited by Bloomberg.
However, it will take a long time for OTA updates to become prevalent throughout the industry. For now, auto OTA updates are mostly limited to infotainment systems. Eventually, a major shift will happen when OTA updates are integrated into cars’ electronic control units (ECUs) — mini-computers that control individual car components like airbags and windows. Only 0.17% of cars have OTA-enabled ECUs right now, but that figure is projected to rise to 19% by 2023, according to IHS Markit. As that percentage climbs, it will lead to steeper cuts in auto dealers’ revenue and greater warranty savings for auto manufacturers. While auto dealers will still be needed for repairs to physical car components that wear down over time — like tires and shock absorbers — adoption of OTA updates will gradually erode auto dealers’ parts and services businesses.
In other news…
- FedEx announced that it has acquired inventory research and management provider Northwest Research for an undisclosed sum. The company, which was founded in 1996 and is based in Salt Lake City, provides inventory management services to logistics companies like UPS, and had a prior relationship with FedEx. The company will integrate Northwest’s technologies and services into its own operations to improve its logistics offerings.
- Tesla has registered about 1,000 Model 3 VINs with the National Highway Traffic Safety Administration (NHTSA), hinting that it may be starting to overcome its recent production bottlenecks, according to Electrek. The automaker has received hundreds of thousands of pre-orders for the sedan, but thus far has only delivered 260 of the cars that have been ordered. While VIN registrations are an imperfect measurement of how soon vehicles will ultimately get into the hands of consumers, this may suggest that Tesla is preparing to increase Model 3 deliveries soon.
- XPO Logistics, a Connecticut-based logistics service provider that specializes in transporting heavy goods, will hire about six thousand new employees ahead of the busy US holiday shopping season, according to Reuters. This is about 20% more employees than it hired last year for the same period, which starts a day after Thanksgiving and runs through early January. The company hopes this will help it meet the expected rise in purchase volume this holiday season, which could reach $1.5 trillion in total brick-and-mortar and online retail sales, according to Deloitte.