BrazilAutomotive industry pouring billions into mobility companies
The global automotive industry has in the last 24 months alone invested $120 billion in mobility start-ups and companies as incumbent players anxiously prepare for the years to come. Investors have poured the record breaking level of financial capital into promising start-ups and scale-ups across ten technology clusters.
The automotive industry finds itself in a period of major transition. Several megatrends, including autonomous driving, connected cars, electrified vehicles and smart mobility, are leading the sector down a new path. As a result, technology-led innovation has become a key component of corporate strategies to remain competitive, and this is according to a new study by McKinsey & Company clearly showing in the merger & acquisition and corporate venturing strategies of companies in the automotive landscape.
Since 2010, tech start-ups and other new entrants have received more than $220 billion in funding, with the pace of investment accelerating in recent years. In the period between 2014 and 2018, average investments across all technologies were seven times higher than those in the period between 2010 and 2013. Further, there is a trend towards larger deal values – last year, more than half of the investment volume came from large investments with transaction values greater than $1 billion, moves described as “industry-shaping” by the researchers.
E-hailing, best known for the taxi services provided by Uber or Lyft, has seen the most significant investment – totalling $56.2 billion. Deal value was mainly driven by large investments into the scene’s top players. Major deals included Uber’s acquisition of Careem in the Middle East, and the $2 billion in new capital received by Grab, a Southeast Asian ride-hailing service. Semiconductors came in second place, with $38.1 billion in investment, with annual investment of $7.4 billion since 2014. Sensors for autonomous vehicles takes the number three spot – with total investment at almost $30 billion.
Five other segments in the automotive industry saw deal value (mergers & acquisitions and corporate venturing) pass the $10 billion barrier since 2010: connectivity, electric vehicles and charging; battery technology; autonomous vehicles software and mapping; and telematics & intelligent traffic.
McKinsey’s authors – Matthias Kässer, Benedikt Kloss, Thibaut Müller and Daniel Holland-Letz, all Europe-based – further highlight that changes are afoot regarding the dominant players in the space. Automotive industry players are facing not merely internal competition, but also from large technology firms with deep pockets. The mobility space, for instance, saw investment from non-OEM players top 90%, largely from technology firms and venture capitalists.
This is mainly because cross-segment interaction – the mix of traditional automotive skills with technological muscle – is touted to provide the best mix for successful disruption. As an example, current e-hailing models are likely to be superseded by autonomous robo-taxis or similar developments, which could shake up current e-hailing businesses as well as wider chauffeur related models.
However, while investment continues to be pumped into a variety of companies, incumbents do continue to hold strong value propositions on the innovation front. For instance, the number of patents awarded across the ten segments are heavily in favour of development from incumbents – suggesting that they may come to hold key cards for future development in the space.
McKinsey & Company's analysis found that while around only 10% of all investments were made by incumbents, they had issued about 85% of relevant patents. The most number of patents have been awarded in the fields of autonomous vehicles, electric vehicles, batteries and telematics.
According to a recent benchmark by KPMG, Europe is globally the best prepared region to adopt and roll-out autonomous driving. The Netherlands leads the firm’s ranking, followed by the Nordic countries of Norway, Sweden and Finland.
