We read at azom.com, that “The current global market for Automotive Manufacturing was valued at $2.9 trillion in 2022,” which is an absolutely astonishing figure, signifying that there is plenty of business as well as money to be made in the automotive industry, for those that are well positioned to do so. The thing is, though, that the way that vehicles are manufactured today, differs distinctly by which they were manufactured a couple of generations ago – in which vehicles were at that point of time, basically sophisticated mechanical devices, consisting of a drive transmission, steering, brake, electrical and engine parts, as well as a suspension system, along with a body and a chassis. That is to say, vehicles back in the day, were pretty much strictly hardware, and minimal software.
In today’s world, software performs more and more of the functions so needed, upon a given vehicle, and that trend is set to continue along that same pathway for the foreseeable feature. This is why, then, hi-technology companies, known more for their software expertise, as opposed to their actual sustained manufacturing of goods, have gotten themselves so involved in the automotive industry. Further to the point, there is a huge dividing line between what hardware so represents in vehicles as compared to software. That is to say, for those that are strictly in the hardware business of automotive manufacturing, they must deal with the threat of, or the reality of union representation, along therewith having a fairly high vulnerability to that human labor; in addition, to the fact that they have all the expenses so being incurred in order to procure materials and to subsequently manufacture such, along with the space so needed to do the actual construction of that vehicle work. In other words, those that are strictly on the hardware side of vehicle manufacturing, have to carry a lot of fixed costs as well as being exposed to large capital expenses, in order to try to make a relatively small gross margin on the work that they so do. On the other hand, those that are on the software side, while being seriously exposed to a significant amount of research & development costs, know that once they have proven software that functions reliably and well, that their pathway to good profits and therefore a good gross margin are excellent. That is to say, car manufacturers of today, that are not consolidated with the major software component so needed to produce those modern vehicles, are in severe danger, of being reduced to supplying the hardware component, and thereby the far less profitable part of a vehicle, to those that control the software, and hence the lion’s share of potential profits, instead.
So then, in essence, the reason why so many hi-technology companies have taken such a sustained interest in vehicle manufacturing, has very little to do with a desire to actually manufacture the hardware component of those vehicles, and everything to do with being the master controller of how those vehicles so operate and are sustained in good working order, from a system and software perspective. This so indicates, that today’s biggest and best known manufacturing brands of vehicles, know for a certainty, that they must either control the software so needed for their vehicles being manufactured, or own such, or else they will be stuck in the purgatory of the diminishing returns of hardware manufacturing, in which their hard work of doing such, is subservient to those that control through their software the most meaningful part of the actual vehicle.