In last week’s article we analysed the innovation trends that are shaping the future of the auto and mobility sector, from augmented reality to sensor fusion. This week we look at which car makers and suppliers are most active in developing these technologies, and what role start-ups play within their innovation strategies.
The automotive sector spent over $100 Billion in R&D last year, ranking third across all other sectors. Within SBD’s quarterly Innovation Guide we track over 77 technology trends being developed and deployed by 42 companies in the automotive space. The interactive chart below shows the percentage of those technology trends being actively developed or deployed by each company.
While there are various expected companies at the top of the list – namely the premium German OEMs – others like Tesla that are renowned for being innovative appear much lower down. This highlights the contrast between companies that are focussing their R&D efforts on a small number of high-impact trends, and those (often with much larger budgets) that can afford to look at innovation through a much broader lens. It also reflects how public (or secretive) different companies are when it comes to announcing R&D initiatives.
Another consideration is whether companies are achieving a high conversion rate between R&D initiatives and commercial deployments. As shown in the interactive chart below, some companies like BMW are well-oiled innovation machines, with both a strong record of deploying innovations into the marketplace (Y-Axis) as well as a healthy pipeline of yet-to-be-released innovations (X-Axis). Others have announced a significant number of innovations covering a broad spectrum of trends, but have yet to demonstrate an ability to deliver.
The way in which companies in the automotive sector innovate also varies significantly. While traditionally it was left to R&D departments, most companies now rely on a much broader range of initiatives. 71% of the companies we track hold hackathon events, 50% have start-up incubators or venture capital arms, while 31% have developer programs to attract 3rd party innovation.
Investing in start-ups is seen as an increasingly important part of any innovation strategy for many larger companies, as they grow to accept that not all innovation can come from within. While there remain valid questions about whether such large companies can effectively interact with more agile and hungry start-ups, this hasn’t deterred the industry from making a massive number of investments over the last decade. The interactive chart below highlights which established car makers have invested in the most start-ups (either as lead or partner investors).
Again – it’s worth pointing out that more does not necessarily equal better. The ability to pick a small number of winners and then cultivate a good working relationship with them is arguably just as impactful as casting a wide net, particularly if the goal is to also use the investment as a form of advanced due diligence for a later acquisition.
Regardless of the innovation strategies adopted across the automotive industry, it is clear that investing in start-ups will continue to play a vital role in helping car makers and suppliers stay ahead of the competition. What this means to the broader investment community is a growing number of trade buyers and corporate VCs that are hungry for more deals.
Join us next week when will explore what types of start-ups are emerging and which are in highest demand. In the meantime, let us know if you have any questions on the content covered in this article.