On the Road to Success: Rivals BMW and Daimler Enter into a Joint Venture

What’s going on here?

The two rival German car manufacturers, BMW and Daimler (who own of Mercedes-Benz and Smart) have unveiled a joint venture project which aims to develop driverless vehicles, ride-hailing and pay-per-use cars.

What does this mean?

Setting their rivalry aside, the two automobile giants are jointly investing €1 billion into this project. The move has mainly been spurred by the uncertainty that the injection of technological advancements has introduced into the automobile market.  “Autonomous cars” and competition from competitor service providers, such as Uber, have proved to be the biggest challenge. In order to stay competitive, it is clear that traditional car manufacturers need to hop on the “self-driving” trend. If they fail to do so, it is unlikely that they will survive against the tech giants out there (most notably Tesla) who are at the forefront of these technological advances. BMW and Daimler have identified 5 pillars to their success: 1) car sharing, 2) taxi-hailing, 3) electric charging, 4) parking services and 5) a “smartphone-based route management and booking service”.

What’s the big picture effect?

The challenges that new technologies pose to lucrative markets has forced a change in the strategy of the more traditional companies. Industry giants, who once sought a monopoly in their respective markets, are left with no choice but to join forces with old rivals. This joint venture is a perfect example of that change. By joining forces, BMW and Daimler both maximise their chances in a new market and reduce their risk individually by sharing the financial burden of investments. In fact, Daimler's chief executive said he would go on to collaborate with other providers if need be, “including [buying] stakes in startups or established players”.

This pragmatic approach is undoubtedly a reaction to the choices that consumers are making. With consumers becoming more concerned with issues such as pollution, more and more people are shifting away from owning their own set of wheels. Sooner or later, it seems that car sales will fall and the tech giants will swoop in. BMW and Daimler are attempting to minimise any future losses by joining the game while they still can. Law firms are particularly interested in how the automobile industry is being shaped by tech. The changes draw on issues of regulation, transportation, infrastructure, insurance, data protection and many more. So as we see mainstream car manufacturers turn towards technology, is it an indication that traditional manufacturing is starting on an inevitable decline as mobility providers take pole position?

Report written by Kaush K.

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