Commentary: Auto Industry Rattled by Google’s Self Driving Car Plans

Before Google introduced the prototype of its autonomous car – aka the “self-driving toaster” – to the public last year, the search-engine giant made the rounds of the major automakers to explain the concept. At least one of the automakers was sufficiently impressed to express interest in collaborating, but was astounded to find that Google had no commercialization plans of any kind for its potentially game- changing technology.

Ever since, the auto industry has treated Google’s vehicle like an uncomfortable joke: though a source of real anxiety, the self-driving car seemed just unserious enough to laugh off. Now, however, the nervous laughter may turn to real fear.

On Monday, Google has announced the hire of one of the most respected executives in the U.S. auto industry: John Krafcik, the former chief executive officer of Hyundai Motor America and president of the auto-pricing Web site TrueCar. With the auto world’s eyes transfixed on the glitzy-yet-conservative new products being unveiled this week at the Frankfurt Auto Show, Google is sending the strongest sign yet that the real action in the industry is increasingly found in Silicon Valley.

The industry journal of record, Automotive News, is calling Krafcik’s hire “the clearest sign yet of Google’s broad commercial aspirations for the project.” Krafcik has deep experience in nearly every aspect of the auto industry, having studied lean manufacturing at MIT, worked in production engineering at the Toyota-GM joint Nummi plant in California, worked as a product planner at Ford, led Hyundai America’s leap from budget brand to mainstream player, and focused on auto retail at TrueCar.

Between Krafcik, former Ford and Boeing CEO Alan Mulally (now a Google board member) and ex-GM research and development boss Lawrence Burns (now a Google Auto consultant), Google Auto is building a Dream Team to take on the century-old industry. Just as important, Krafcik, who drives a classic Lotus-designed Caterham Seven, brings some much-needed “car-guy” credibility to Google’s program. This may help bring to bring the enthusiast- dominated auto media around on a project that – gasp! – seeks to create a permanent alternative to driving.

Meanwhile, Google seems deadly serious about doing exactly that, telling the California Public Utilities Commission that its vehicles will have no human controls beyond a “go button,” a “please slow down and stop” button and a “stop pretty quickly” button. According to Sarah Hunter, head of policy at the GoogleX innovation lab, “the intention is that the passenger gets in the vehicle, says into microphone, take me to Safeway, and the car does the entire journey.”

By removing driver input almost entirely, Google is enabled to re-imagine the car from the ground-up, potentially yielding a final product that is dramatically lighter, more efficient and yet safer than anything on the road today. And with traffic deaths ticking upward for the first time in decades, likely due to increasing driver distraction, Google’s goal cutting the more than 30,000 vehicle-related fatalities each year gives it a sense of social mission that could put the auto industry back on its heels.

As Google’s threat becomes more credible, the traditional carmakers are circling the wagons: Last week, 10 automakers announced a voluntary commitment to the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety to install automatic-braking systems as standard equipment in new cars. The manufacturers’ hope is that by offering some of Google’s promised life-saving advantages with this incremental improvement, they can create a kind of Counter- Reformation that keeps buyers firmly in the driver’s seat for years to come.

Though details for this innovation are as sketchy as most of Google’s announcements, it shows that the auto industry is as serious about defending its evolutionary approach to the future of the car as Google is about creating a revolution. And whereas the auto industry’s incremental, additive approach to layering new technology on top of the established automotive paradigm puts history on its side, that conservative strategy gives them no chance to achieve the potentially disruptive advantages of Google’s blue-sky vision. For example, while consumers will probably welcome automatic braking, early insurance data shows that the technology offers only a 15 percent reduction in crash- related claims.

With Krafcik’s hire, the industry can no longer afford to laugh off Google Auto as a mere science project. Though Google says its car program is not yet ready to become a standalone division under its new Alphabet rubric, it’s now considering making private sales of its eventual car as well as operating them as a fleet for the sharing economy, potentially an even more direct threat to the traditional makers than previously anticipated. And if Google does manufacture and sell its “cars,” it may well be in partnership with the giant auto supplier firms who control an increasing amount of the auto industry’s value chain. Most terrifying of all, newly-granted patents show that Google is working on systems that allow an onboard computer to take control of a human-driven car, potentially putting the firm in direct competition with automakers even as it works to convince drivers to forgo a steering wheel entirely.

Unable to co-opt Google’s technology, and with their supply chain and talent pool under assault, the established automakers’ only response is to rush some semi-autonomous technology to market. If that fails to win buyers, then there’s nothing left to do but hope that consumer preference for a traditional car experience wins the day. With Krafcik, Mulally and Burns behind the wheel at Google Auto, the threat from Silicon Valley has never been more real.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.