Sunday, March 29, 2015

Ford, Mercedes, VW set up shop in Silicon Valley, creating a new nexus for the car industry

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Ford, Mercedes-Benz Set Up Shop in Silicon Valley
New nexus of car industry emerges as Apple, Uber and Google push automotive ambitions
SAN JOSE—Four decades ago, Japanese auto companies
anticipated U.S. demand for fuel efficient cars and hit the market with vehicles that caught the Detroit Three by surprise, permanently altering the ranks of the biggest auto makers. Today, the disrupters are bubbling up from California’s Silicon Valley. As software giants and startups rush to make smarter vehicles, established car makers are scrambling to avoid becoming victims of another sea change. The most common response: setting up research
offices in the technology industry’s backyard. The technical transition to a connected car is already under way. Industry researcher IHSAutomotive estimates between 10% and 25% of the cost of making cars and light trucks now is linked to software. For decades, much of a vehicle’s economic value was measured in the 1,000s of physical parts—engine blocks and camshafts—that came from a tightknit supply chain. No longer.
“What happened with the mobile industry with the smartphone is about to happen with the car,” said Jen-Hsun Huang, chief executive
of Santa Clara, Calif.-based chip maker NvidiaCorp. The one-time maker of graphics processors for personal computers is now a key auto-parts firms, supplying the tabletlike infotainment system in Tesla Motors Inc.’s Model S, and has millions of dollars in other contracts with Japanese and European auto makers. “Your car is going to be one delightful computer rolling down the street,” Mr. Huang said at a conference earlier this month.
While Tesla sells fewer than 100,000 cars a year, the Palo Alto, Calif., auto maker’s ability to make rapid, over-the-air changes to its vehicles through an Internet connection instead of a dealer service bay shows how some of his rivals have fallen behind—and how dominant of a factor car software has become.


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