DETROIT -- The push to design self-driving and connected vehicles has escalated into a costly technology arms race that could leave smaller automakers with limited r&d budgets at a serious disadvantage.
Automakers will need armies of engineers to integrate the necessary array of radar, cameras and lidar -- as well as the obstacle-detection software that makes it work -- or find a mega-supplier to do it for them.
Early this year, IHS Automotive estimated that radar, cameras, lidar and obstacle-detection software will generate annual global sales of $9.3 billion by 2021, up from an estimated $5.2 billion in 2016.
The scale of the undertaking is enormous and will force some niche carmakers to find partners, according to analysts and executives last week at the TU-Automotive Detroit conference, a forum linking the auto industry with Silicon Valley-style tech companies.
"You have autonomy, connectivity and this tidal wave of software coming in," said Roger Lanctot, analyst for Strategy Analytics, on the sidelines of the conference. "They have to make key decisions: Which pieces of this should we do, and which should be outsourced? What do we need to own?"
"We need to drive economies of scale," Matt Jones, director of future technology for Jaguar Land Rover, said during a presentation at the conference. "We're not a 10-million-car Toyota or a 10-million-car GM or Ford."
Even big competitors know they can't go it alone. Self-driving cars -- or, more precisely, the technology that guides them -- won't be cheap. Hyundai-Kia, for example, expects to spend $2 billion through 2018 to develop self-driving vehicles.
By 2020, Kia expects to introduce a vehicle that can speed up, slow down and steer itself without the driver's intervention on highways, says Henry Bzeih, chief technology strategist for Kia Motors America.
The Korean automakers will need help from key suppliers, Bzeih said.
"You have to have deep pockets to do it," said Bzeih on the sidelines of the conference. "No one company can do it by themselves. We need partnerships."
Given the complexity of the technology, smaller automakers may fall behind their larger rivals, said Sam Abuelsamid, a Detroit-based analyst for Navigant Research.
"It's a very serious risk for companies like Mazda or PSA," Abuelsamid said.
Smaller automakers could ally themselves with Google, as Fiat Chrysler Automobiles has done, or form partnerships with a mega-supplier.
"Bosch, TRW, Denso and Delphi are all active in this space," Abuelsamid noted. "They can offer a complete autonomous-driving package."
Those conversations already are underway, said Mike Mansuetti, chief of North American operations for Robert Bosch GmbH.
"Some customers see the need to build [technology for self-driving cars] in-house," Mansuetti said. "And we see others that are in need of a full-service provider. We are prepared to go to either extreme."
To be sure, there are some relatively small automakers that are spending heavily to design driverless cars. For example, in 2017, Volvo will introduce a vehicle that will steer, accelerate and brake on its own on the highway, said Petter Horling, director of Volvo's U.S. r&d center.
"We are developing a lot of the technology on our own, but we also have very strong partners," Horling said.
Horling declined to confirm that Volvo is working with Autoliv, a Swedish airbag supplier with a growing portfolio of active-safety technology. But he conceded that such a collaboration would make sense.
Said Horling: "They are a strong partner, as are other suppliers."
