Aston Martin chief executive Andy Palmer believes many car manufacturers will be forced to merge in order to develop connected and autonomous vehicles.
During the recent Society of Motor Manufacturers and Traders’ Connected conference, Palmer said that mergers and acquisitions will become increasingly common throughout the industry.
“We’re all developing similar technology costing billions and that’s nonsense. I think it is inevitable car companies will come together through mergers and acquisitions. The requirements will be too much for many of the firms involved,” Palmer said.
“The business model of spending $1bn to develop a car and then have to pile it high and sell it cheap – discounting – in order to keep factories turning and maintain economies of scale is broken.”
The landscape is changing rapidly
Palmer foresees the industry eventually being dominated by just two or three “mega-companies”, very much like how Boeing and Airbus dominate the commercial airline industry. Most analysts cite 14 conglomerates as being at the center of the automotive industry at present, including BMW, Daimler, Ford, Toyota, General Motors, FCA, Tata and Geely, Autocar reports.
Aston Martin will also have to form partnerships despite looking to establish its own technology advances partly through the launch of the Lagonda brand. Palmer didn’t detail any hook-ups the car manufacturer is considering, but believes the brand’s small size will actually help it in the age of autonomous vehicles.
“If something becomes easy to access or create it becomes a commodity, and for mainstream car makers that is a very real risk, but for car companies that don’t have to sell one more car to help a parent firm’s bottom line, there are opportunities.
“Independent, luxury car makers like us can thrive by fighting against commoditization and focusing on adding to our mythology,” Palmer said.
Interestingly, Palmer revealed that Aston Martin and Lagonda will skip Level 3 autonomy and instead jump directly from Level 2 to Level 4. The company believes this is the best way forward, as launching Level 3 self-driving vehicles “is reckless,” according to Palmer.