Ford Motor Company (NYSE:F) and Mercedes-Benz U.S. International, Inc. are planning to establish their research offices in Silicon Valley, the vicinity which is said to be the tech-industry backyard. The reason for doing this is anticipated sea change that might take some of the biggest auto companies in its claws.
Where do analyst foresee upcoming resistance in F?
A sea change of technical transition
The auto industry is changing its gear and shifting towards priorities that have changed now. The process of technical transition with the connected car has already kicked off. According to IHS Inc. (NYSE:IHS) Automotive researcher, it is estimated that the cost of creating light trucks or making car is associated with software and this accounts for 10-25% of overall costs.
Gone are the times when the economic value of vehicles was analyzed on aspects like camshafts and engine blocks. Today, the monetary importance of any automobile is directly attributed to the link with technology.
Infotainment becoming a vital part of auto industry
According to Jen-Hsun Huang, the CEO of NVIDIA Corporation (NASDAQ:NVDA), auto industry will experience a sea change, just like the mobile industry faced with the sudden wave of smartphones. NVIDIA is the infotainment system supplier to the Model S of Tesla Motors Inc (NASDAQ:TSLA). Jen-Hsun Huang added that the modern vehicles and the ones to come in future, will be the delightful computers on the wheels that would roll down the roads.
Automatic driving software value
In a lot of high-end automotive companies, the major portion of costs goes to the software associated with autonomous driving technology. In future, the cheaper cars will witness the electronics like this in future. But, in order to turn this into reality, the automakers shall have to take a turn towards the tech-hub, Silicon Valley.
The attraction of Silicon Valley
Recently, Ford has shifted to a Palo Alto office, and it is planning to multiply the staff there by four times in 2015. This location will help them in getting access to some of the powerhouses of technology, i.e., Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOGL), both of which are competing to enter the automotive industry.
