Is the Future of Automotive Engineering in Silicon Valley? Ask This German Auto Giant

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Have you noticed a shift in automotive advertising to focus on the internet-enabled technology inside? Daimler - the parent company of Mercedes-Benz - recently teamed up with Santa Clara-based SoundHound on a new voice-controlled 'infotainment' system. (Courtesy of Daimler AG)

Germany has long been famous for its high quality engineering and manufacturing. But the future of both is all about software: automation and artificial intelligence. You want to be a player in that future? You’re going to have people working here, in the San Francisco Bay Area.

In a splashy ad that aired recently during the Super Bowl, Mercedes-Benz boasted about a new, Siri-like technology available in its entry level model.

Santa Clara-based SoundHound is the company behind the technology and Daimler, the parent company of Mercedes, has access to it because it invested in the start up last year.

It’s a textbook example of a big company buying something fresh from outside. It's also the kind of partnership Mercedes-Benz Director of Open Innovation Ben Boeser puts together from the auto giant's 300+ employee satellite in Sunnyvale.

"We have a big presence here for all of our AI and data topics, and they run like any other Silicon Valley company," Boeser explained. In a similar fashion, there's a relatively independent outpost for cloud computing in Seattle.

"The world decided that the next revolution will start here, and everybody centered people here. There's a lot of small companies that are setting up shop and bringing out new innovations. And in that sense, whatever we see here is maybe two or three years ahead of the curve. It's absolutely mandatory for automotives to be here these days, because this is where everybody is, and where everybody innovates," Boeser said.

Daimler has its own R&D people in Stuttgart, of course. But there are all kinds of reasons why that’s not good enough to ensure Daimler survives the next decade. To start with, there’s the UN’s Vienna Convention on Road Traffic, which restricts what can be tested in Europe. You can drive crazy fast on the Autobahn. But when self-driving Mercedes taxis take test drives later this year on public streets, they’ll be toodling around San Jose, not Stuttgart.

German automakers have been working in California for decades, focused on everything from consumer design trends to software. But now that software is radically changing the nature of the auto industry, Silicon Valley has grown more mission-critical to the Stuttgart-based Daimler AG.
German automakers have been working in California for decades, focused on everything from consumer design trends to software. But now that software is radically changing the nature of the auto industry, Silicon Valley has grown more mission-critical to the Stuttgart-based Daimler AG. (Photo: Courtesy of Daimler AG)

Like Americans, Germans are also worried about how AI technology is regulated. But automakers can't afford to wait on the side of the road while the public policy advances. China isn't waiting. Silicon Valley isn't waiting.

"There is a place for caution. But the best way to tame future abuses of our data is to be among the players as rule makers, not rule takers," wrote former business and technology reporter Andreas Kluth in an OP/ED for the recently defunct digital news outlet Handlesbrott Today. In the essay, called Why Germans Will Be Left Behind in Artificial Intelligence, Kluth warns, "Germans are living in a comfortable present, oblivious to an uncertain future. Sure, it’s nice to have a Mittelstand that makes the world’s best ventilators, ball bearings, and screws. And next?"


Sure enough, recent reports show the Germany auto industry struggling, and not just because of the recent scandals over collusion involving air pollution standards. Some say that's simply the most recent sign of a backwards-facing hubris built on past achievements exporting high-value engineering goods. 

Boeser explained, "If you are in the automotive industry and you've been there for decades, it’s hard to imagine that everything could be turned upside down. But even if you just look at the last 10 years and how quickly new competitors enter the market, you realize that it is easier than it ever was to build a car, easier than it ever was to reinvent certain aspects of the car."

Boeser’s getting an assist from a corporate matchmaker of sorts called Plug and Play Tech Center in Sunnyvale. With 27 locations worldwide, Plug and Play maintains a huge, global rolodex of startups. Daimler's recent deal with the London-based software startup what3words is another example of this working partnership.

Chief Operating Officer Candace Widdoes says “legacy” companies — in Germany and Japan, especially — are willing to pay big money to get hooked up with young start-ups; but also learn how to work with those little guys, so as not to crush their creativity.

"There's this cultural element, where it's kind of hard to bring change to a large corporation. This is true in every industry," Widdoes said. "Long-established companies are realizing they have to drop the typical rules to keep up, to stay alive."

Of course, when foreign companies spend time here, they quickly realize you don’t have to buy a new idea. You can also copy.

Last year, Uber’s CEO announced he wanted the company to become the “Amazon of transportation,” your go-to resource for everything from scooters to flying taxis. This year, Daimler and BMW announced a $1 billion investment to do the same thing.

"Our company has been working on autonomous since 20-something years. So it's not that it's a new topic for us. But thinking about it as a new business model, that is a learning curve for us," Boeser said.