Earlier this year, I asked my team to conduct a mapping study of start-ups that were focusing on the automotive industry value chain. A study that I envisaged would be a short and sweet piece of work ended up as an onerous exercise that generated some pleasantly surprising and revealing facts. Almost every week we unearthed about 10 to 20 new start-ups that ‘mushroomed’ in some part of the world. When we started the study we calculated about 500 start-ups and by the time we finished we uncovered 1700 incredibly disruptive companies.
The automotive industry has undergone massive transformation in the last five years. The traditional ecosystem of this industry has been challenged with technological developments and evolving business models. Electrification of vehicles, advancements of sensor, electrical architecture, OTA, artificial Intelligence(AI) algorithms, mobility business models, machine learning and self-driving cars, are not only disrupting the conventional ecosystem of the automotive industry, but is slowly and surely making it obsolete.
Though the automotive industry has seen exceptional technological advancements and innovation, the gestation period for its emergence has remained painfully slow. The process to adopt a new innovation typically requires considerable time (four to six years) as well as money spent on testing, qualification and certification for the new product. Moreover, the traditional mindset of the automotive industry, especially OEMs and Tier 1 suppliers combined with an inflexible research and development process, impedes ‘out of box’ thinking, further slowing down the innovation/adoption of new products.
Start-ups are thus playing a key role in bringing open innovation faster and cheaper into the market. In order to leverage this, OEMs have developed their own platform or incubating programs such as GM Ventures, BMW Start-up Garage, JLR Tech Incubator and Volvo venture, where they partner/invest or JV with interesting start-ups from as low as 100k investments to billions of dollars.
Though start-ups have emerged in every single technological vertical in the automotive space, most of them have so far been centered on mobility (car sharing, ride hailing, car pooling), electrification, and connected car technologies. However, in the last 12 months we have witnessed start-ups are addressing grey areas that were not previously concentrated on by existing ecosystem partners be it advanced human machine interactions, cybersecurity, analytics IoT platforms, driver safety, mapping solutions, eCommerce or freight aggregation platforms. Nonetheless, the mobility space has been a hotbed of most investments with more than 25 acquisitions made by OEMs in 2016, with Ford leading the pack with around seven investments and acquisitions over the past year.
Frost & Sullivan‘s analysis also identified some regional focal points that are advanced in a specific field given local market conditions and customers’ unmet needs. For example, Israel has over 300 start-ups with a core focus on cybersecurity, smart mobility, artificial intelligence, smart city and alternate fuels. Israel’s national program for alternative fuels and transportation, “The Fuel Choice Initiative,” is focused in establishing Israel as an innovative center of alternate fuel and smart mobility. The initiative’s goal to reduce Israel’s oil consumption to 60 percent by 2025 has been the main catalyst for the emergence of start-ups in Israel. The U.S., especially in Silicon Valley, is a good hub for start-ups in the connected car space. In addition, we noticed over 50 ride-hailing start-ups that have grown within the last 12 months in Africa.
Start-up companies in Israel grew from 50 to more than 300 over the last two years
In terms of valuations, the start-ups in the autonomous cars space are expected to have the highest multiples, as seen with the notable acquisition recently of Mobileye by Intel for $15 billion. Car companies, as well as technology players in Silicon Valley, are particularly interested in acquiring technology leaders in this space. The U.S. has the highest concentration of start-ups, skilled entrepreneurs, pilot project and investors supporting the gold rush in autonomous cars space.
Personally, for me, the most exciting and disruptive start-ups are in the flying cars space. Over eight start-ups such as Pal-V, Tarrfugia, Aeromobil, E-Volo, and Ehang, are ready to disrupt the market with exceptionally innovative cars of the future. Just like when a previous start-up called Tesla, proved to car companies that vehicles can be propelled with electric power, it will take another start-up to show them that cars can also be propelled to fly.
Read More : Forbes