2016 SAE Congress: Auto Industry Must Adopt Faster 'Clock Speed'

April 18, 2016

Terry Costlow

Nimble startup companies are racing giants Google and Apple at high speed to gain a role in the comparatively slow-moving auto industry. Automotive companies must adapt to the rapid clock speeds of these outsiders or their businesses may be hurt severely.

“The market is open for others to enter,” said Gary Silberg of KPMG. He also said OEMs must reconfigure their supply chains so that they're in the center of suppliers rather than at the top of the classic pyramid. (Terry Costlow)

“Silicon Valley is operating at incredible clock speeds,” said Gary Silberg, National Automotive Leader at KPMG LLP. “The auto industry is operating on five to seven year cycles. If you don’t solve this clock speed issue, your business is in danger.”

In his 2016 SAE World Congress keynote speech, “The Clockspeed Dilemma, what it means for automotive innovation,” Silberg urged automotive companies to change the industry’s business model. It’s no longer realistic to have OEMs sitting atop a pyramid, with Tier 1s feeding them from lower levels.

Instead, it’s more efficient to put OEMs in the center of ring of suppliers. This diverse group of suppliers, which will range from leading Tier 1s to small startups, better addresses the myriad complex issues that come as vehicle connectivity and autonomy come to the fore. Silberg cited Israeli ADAS innovator Mobileye as an example of a startup that went from a company ignored by many automotive suppliers to one with technology now used by the majority of OEMs.

“The market is open for others to enter,” Silberg said.

His cautionary message was tied to predictions that in the U.S., total miles driven will increase, helping the U.S. stay well ahead of other countries in vehicle ownership. Mobility start-ups such as Uber and Lyft will help aging baby boomers get around town. Some startups are also providing similar mobility on demand for small children, letting parents meet drivers and view children in vehicles that help time-strapped parents get kids to soccer games and play dates.

“A small increase in personal movement will increase total miles traveled by 1 billion miles per year," Silberg said. "As cars are driven more, people will need more of them.”

Silberg also suggested that increasing interaction between in-vehicle safety and security modules may alter the business structure. As safety systems work together to stop or turn the vehicle without driver input, it may be necessary to ensure that all modules are approved so they can work together seamlessly. This business model could mimic that now used by Apple.

“We could see a closed-loop supply chain. If you’re not using approved parts, the car won’t start,” Silberg said.