Since we already discussed the problem of innovation stagnation in the automobile industry and the reason for the problem to exist, there is only one thing left for us to clarify - the future. I’m no prophet, so whatever I say below is based on my observations of the past and some rational forward looking thinking. I see no issue with publishing my analysis now, risking being a fool later. For a couple of reasons. First, I’m relatively sure that the direction I describe is the direction this story will go. Second, it is a very good and humbling exercise to form predictions, write them down and check them later on against reality. Whatever comes, the outcome is good. If one is right, well, that is a pleasure to announce that one said so. And if one is wrong, though, there is valuable learning in it, hopefully.

Automotive industry is not all that different from some other consumer goods. It is as complex as any production chain, of course. The final product is a bit expensive for the consumer too, probably, but all the same laws of physics are working for the process of making cars, as for building any sophisticated enough aggregate. And it is natural for such a complicated area that small things in it have to consolidate into bigger things, especially when shit hits the fan and everybody is in a hurry.

The most complicated part in a combustion engine vehicle is, obviously, its power unit. In the past when car makers were evaluated against each other the first thing to look at was if the company had a reliable, cost efficient and modern engine of their own design. Building one is a tough and very expensive job, which pretty much defines the outcome of the whole enterprise. Any fan of Formula 1 knows that in 2024 there were 10 teams participating in the race, but all the power units for them were produced by only 4 suppliers: Mercedes, Ferrari, Renault and Honda. That demonstrates the effort needed to design, make and maintain a good enough engine worthy F1 track. Building one for millions of regular cars is not a joke either. So, as a result, everything else was important, but not so much. Probably, 90% of the software in a car was dedicated to internal hardware needs. What’s left was called merely an “entertainment system” and was prioritized as such. 

But electrical cars are simpler in their core basics. Most of the components are pretty straightforward and well defined. Yes, there are always details to work out. But the differences between the electrical engine of Tesla and the electrical engine of VW are not that dramatic. There are no complicated systems of gears in action and nothing blows up under your hood while you’re moving at a speed of 120 km per hour on a highway. Current calmly flows over wires without any sound and this electromagnetic energy is being converted into kinetic without too much drama. Physics of the EV can be more or less understood by anyone, but try to repeat intake, compression, combustion and exhaust cycles at home, huh! 

As a result, much more brain power in the EV design team can be dedicated to the software part of things. And from a consumer perspective picking one power unit against another is less of a serious and emotional question. Nobody would spend time passionately discussing their preferences in electric motor sounds, for example. But I knew a few people who were willing to die on that hill for their combustion engine cars. What matters for EV is experience from a software shell, driving experience, charging experience and so on.

Let’s now look into other industries with a similar profile of clear division between hardware and software. For instance, computers and laptops. In the beginning, there were a lot of companies making a lot of different operating systems targeting different platforms. Every major player on the market was building its own software. You could even create one in your garage if you really wanted. But if you look around now, you’ll notice only two winning models. The first still requires a complete end-to-end vertical approach. That is Apple’s way of building things. Walled garden. Mighty and beautifully integrated, but quite lonely. However, the majority of laptops are simply under control of Microsoft Windows. It solves general operating system problems quite well and takes care of UI / UX, memory management, battery, security, updates and other details. Hardware may vary from one product to another. But experience for the end user is more or less standardized. You don’t need to read a long manual to start working with the newest Acer if you recently switched from your previous Dell, while if you move from one car model to another transaction may be less smooth. Sometimes even finding a Bluetooth configuration or learning a way to adjust mirrors may become a challenge.

Consolidation into two philosophically opposite platforms is even more obvious in smartphones. Again, while Apple offers completely tailored yet very much protected and limiting experience of their integrated ecosystem, other companies opted out to save money on developing their own operating systems. After oddly beating Microsoft in this competition, Google took over as a player building a more open and adjustable platform which others could use for their needs - Android. There are customisations done by specific brands, but they are usually shallow and you still know as a user where system settings are and how you could install an app or adjust your wallpaper if you switch from Samsung to Sony. Migrating data between your old phone and your new phone is no brainer as well: contacts, photos, preferences, browsing history - all is stored on your Google account and has minimal attachment to the physical device and its brand.

I think, over time we are going to see the same process for cars. Gravitation is unavoidable. Since Apple failed to produce a decent vehicle, my bet is that Tesla will take a lead in being a closed and well integrated ecosystem. You can already see certain borders of the future constellation there: in-house made Superchargers and surely upcoming connectivity synergy between Tesla and Starlink, in-house RoboTaxi project, and so on. 

Others will need to compete. They’ll need a solution. Fast. Because, as Charlie Munger once said, the company that needs a new machine tool, and hasn't bought it, is already paying for it. There will be no time to scratch a head, assemble a team and give it a shot. Remember Nokia with their Symbian OS? Nobody wants to repeat that experience. I mean, to finish first you have to first finish, right? And if car makers are smart they’ll follow the lead of phone makers and opt out to the third-party providing software for their devices. They will embrace standardization and extensibility in order to survive and prosper.

I doubt that any system produced by a major car brand will be adopted by any other major car brand. Kinda hard to see Kia using software created by VW and vice versa, isn’t it? Too much power to give away. So, my guess would be that some software only option should arise from somewhere, like Android did. 

Could it be Rivian? Taking into account the latest news, probably, yes. Hard to say. But it could. They produce their own vehicles in quantities which are not dangerous for others. It serves more as a testing platform for new features, rather than significant competition so far. You see, Google also builds their own phones too, and quite successfully, but in not enough volume to be a threat for domination of Samsung and market share of others. Same is true for Microsoft with their Surface. So, Rivian, in my opinion, got a good chance.

Such is my vision of the future. I do not believe in a complicated landscape where everybody is responsible for everything at once. Hardware makers tend to be very bad at software making. Demonstrating that principle, car makers are already failing to deliver what’s needed from an operating system perspective. With time consumers will be looking for an ecosystem of services, which would allow them to keep a pretty stable user experience and avoid vendor lock preventing them from moving between brands. Good news is that fleet telemetry, sharing and personalisation for corporate fleets will be a part of the platform, since it is easy for any software driven company to see the benefit and implement what’s required. So, the future is bright - watch out for a winner!