Renault, Qualcomm & Google – More GAS.

Renault finally lets Google off the leash.

• Renault has announced its new long-term strategy and for EVs, it is deepening its partnership with Google & Qualcomm which in my opinion is the first time that Google has managed to get proper traction.
• However, this will come at a cost to Renault because letting Google run the services in its vehicles will effectively reduce its EVs to handsets on wheels.
• Renault is taking a pragmatic approach to this echoing its long-held view that 10% of something is better than 100% of nothing.
• Renault is reorganising itself into 5 business lines one of which is called Ampere which will be an OEM in its own right focusing on electric vehicles with digital experiences front and centre.
• Ampere is currently expected to IPO in H2 2023 but with the current investment climate, I suspect that this IPO will be very delayed.
• Ampere will have one model next year, 4 in 2027 and 6 in 2031 by which time it should be shipping around 1m vehicles per year.
• The big difference with Ampere is that Renault is letting Google off the leash when it comes to the software and services user experience in the vehicle.
• The IVI unit will run Android and offer a full suite of Google Automotive Services (GAS) leaving Renault pretty much as an app developer for its own vehicle.
• Ampere is also using Google for the cloud which will be used to simulate vehicles as digital twins in order to test new services and software before they are rolled out.
• This is clear in Renault’s documentation where only the auto-service-oriented software will be created by Ampere’s software factory.
• This will make life much easier for Renault, but it comes at a cost.
• RFM has long identified that the long-term opportunity for OEMs to offset the impact of lower vehicle shipments is through digital vehicle services.
• By letting Google in, Renault will be cut off from being a part of these services and will have to be content with whatever morsels Google has agreed to share.
• Looking at Android handset makers, RFM has estimated this number to be somewhere between 10% and 20% revenue share.
• However, Renault seems to have (possibly quite rightly) taken the view that it has no chance in software and that 10% of something is better than 100% of nothing.
• It will also greatly reduce the development costs and I suspect that the mess that Cariad is in also influenced Renault to move in this direction.
• The other winner here is Qualcomm as Renault appears to be taking the whole Qualcomm digital chassis offering.
• This includes the Snapdragon to run the IVI / Cockpit domain but also connectivity and advanced driving assistance systems (ADAS).
• Over the next 20 years, if Renault’s current volume migrates to Ampere as part of the EV transition, then this represents a very substantial win for both Qualcomm and Google.
• I suspect that this was part of the big backlog bump that Qualcomm announced at its automotive analyst day in September this year.
• This has not come cheap for Qualcomm as it will be making an investment in Ampere which is something I suspect Renault wanted in order to provide a cornerstone investor for the floatation.
• After four years of procrastination, Renault has finally decided that its long-term future in EVs is not to do the software itself.
• It is the first major OEM to go in this direction and it is going to need to gain some market share in order to offset the impact of ceding the customer relationship to Google.
• Given the mess that the rest are in and how important the software user experience is becoming in the vehicle, this might just work for Renault.
• The Qualcomm / Google vehicles are unlikely to make an appearance before 2026 so there is time for things to change, but the tone of this announcement is very different from the others.
• Almost everyone else who works with Google has taken a suck-it-and-see approach, but this is far more definitive.
• Hence, it looks to me like this is going ahead and if it is successful, it could represent a watershed moment for the automotive industry forcing OEMs to relinquish their dreams of being tech companies.
• Google and Qualcomm are the main winners here and look set to deepen their position in the automotive industry.