Automotive ecosystems – All in pain.

Cariad – execution or strategy?

• Cariad has reshuffled its executive team again in an attempt to get its vehicle software program back on track, but the risk remains that the new boss confuses strategy with execution.
• Cariad is on its second CEO in a year as the company is now 2 years behind on delivering a new software platform to be used across the VW group and there is now a danger that the new CEO slays the wrong villain.
• Cariad was set up in 2020 to develop a single software platform that would be used in all VW brands and into which all of the software assets of the different companies were placed.
• Cariad now employs 6,000 people and, so far, has been nothing less than a disaster with its software being so delayed that it has actually delayed the launch of some of VW’s vehicles.
• The question for the incoming CEO will be whether the strategy is wrong or is it an inability to execute.
• RFM research (see here) concludes that by far the best strategy for an OEM, that has decided not to sell its soul to Google, is to use Android as the operating system and then create a user experience that goes on top.
• This is pretty much what the Chinese smartphone and vehicle makers already do which indicates that this is a viable proposition.
• This is the route that Cariad has chosen and in my opinion, it has made the right choice in terms of strategy.
• The risk now is that the new CEO concludes that the strategy is the problem rather than the execution and completely changes direction.
• This would make matters even worse in my opinion which would probably drive the VW brands closer to doing a wide-reaching deal with Google as Renault has done before it.
• The fact that the CTO has also lost her position in the restructuring is somewhat concerning but I am waiting to see what is announced before jumping to any conclusions.

Nuro – Crunch continues

• Nuro is one of the few autonomous driving start-ups still in business but it too looks like it is getting into difficulty as the time when it can actually earn some revenues and become self-funding looks further away with each month that passes.
• Nuro has cut more of its workforce in order to eke out the cash that it has left because raising more will be both brutally expensive and very difficult.
• This follows a 20% cut made in November of 2022 and is another sign that all is still not well in the world of autonomous driving.
• The problem is simple is that vast amounts of money were raised at ludicrous valuations based on promises that autonomous vehicles would soon be coming to market.
• These promises were made with only a tenuous grip on the realities of AI which has failed to deliver a system that can reliably perceive its environment.
• Consequently, when the time came to fulfil those promises, the industry was incapable of doing so leading to disappointment, disillusionment and crashing valuations.
• I suspect that something similar will also happen with the current craze around generative AI as super-intelligent machines are once again “just around the corner” according to the visionaries (see here).
• However, for autonomous driving, it is already well and truly winter and it still could be 5 or more years before self-driving vehicles are close to becoming a reality.
• Nuro is one of the better autonomous driving companies in terms of performance, but it and the best of its peers are still not capable of producing something that can be safely let loose on the road.
• Hence, there is no real market for its products meaning that this industry is going to continue struggling for a while yet.
• Conservation of cash is now by far the most important issue for players in this industry.