A Magna 'masterstroke' may signal bigger developments ahead

There's a measure of exasperation in Colin Barnden's voice as he discusses global supplier Magna International's decision to acquire auto-tech upstart Veoneer. Barnden, principal analyst at Semicast Research, believes Veoneer should have been scooped up long ago.

By Magna. By anybody. It's a company, he says, that represents nothing less than the automotive future. In his view, it has been a diamond shining in plain sight.

"This is an absolute masterstroke for Magna," he said. "The question shouldn't be 'Why did they buy Veoneer?' It's 'Why didn't Bosch buy Veoneer?' Where was everybody else?"

At first glance, the pending $3.8 billion acquisition reshapes the landscape for advanced driver-assist systems. Bosch accounts for 20 percent of the market, according to Semicast Research figures. Combined, Magna and Veoneer will hold 17 percent of the market, with Continental close behind at 16 percent.

But there's something deeper afoot than a reshuffling of the business leader board. While Wall Street and the auto industry's biggest companies remain entranced by the potential of self-driving technology, this deal signals, at least in personally owned vehicles, humans will remain behind the wheel for a long time.

"I'm not going to say autonomy will never happen," Barnden said. "Never is a long time. But if you are talking about it in a widespread way with large volume, it looks to me like two to three decades and not two to three years."

Perhaps that's jarring to anyone who believes full self-driving capabilities are an over-the-air update away. Such a forecast, it turns out, is not a radical departure from the one offered by Magna itself.

Boris Shulkin, Magna's executive vice president of technology and investment, told Automotive News the company expects both short-term volume and growth in driver assistance systems — growth driven by benchmarks set by European New Car Assessment Program standards and by motorists' appetite for convenience features.

"In terms of where we believe the volume market exists for the next two to three generations and where most of the growth is, it's in this area," he said. "And it's where Veoneer's a major player. We're a major player. If you put the two together, you get a really major player."

Someday that could lead to a foothold in the self-driving business. Shulkin spotlights Magna's work with and investments in Waymo as evidence of the company's belief in that future. But the Veoneer deal is grounded in the driver-assistance realm.

Founded in 2018, Veoneer was spun out of global supplier Autoliv and quickly established a portfolio that made it a front-runner in radar systems, perception features, cameras, night-vision technology, driver monitoring, domain controllers and software, including driving policy, which controls how automated vehicles make driving decisions.

Veoneer created its own software unit, called Arriver, in January, and underpinned its systems on Qualcomm's Snapdragon Ride chips. Together, those products have made Veoneer a pioneer in collaborative driving, a realm in which these driving-assist features are not just a jumble of components and features but optimized to help collectively ensure motorist and machine build trust in one another.

"They have good expertise and a solid platform, and Magna will be very happy for acquiring Veoneer at this point," said Angelos Lakrintis, industry analyst at Strategy Analytics.

Exactly what Magna does with this combined expertise and product lineup is a key question. Shulkin says there's little overlap between the two companies' expertise and customer bases, and the deal combines to strengthen Magna's business in China and India.

Lakrintis says companies such as Stellantis and Mazda are potential new customers for Magna. But overall, he says most OEMs have favored developing their own software and bolstering their own intellectual property libraries. Perhaps, then, more customers may come from newer entrants such as Fisker, the company for which Magna will put its contract-manufacturing expertise to use and build the Ocean SUV at its Magna Steyr factory in Graz, Austria.

Is that a sign of bigger things to come? In April, The Korea Times reported Apple was "very close" to signing a deal with Magna and LG to build electric vehicles.

Four months later, no such deal has been announced, but Magna "could be well suited for that," said Mark Fitzgerald, also an industry analyst at Strategy Analytics. "But no one really knows what goes on behind the curtains at Apple, and how important automotive is seems to wax and wane — they're all in on Project Titan one day, and then they don't know what to do with it. The margins are low. The units are low. Most of the suppliers are a pain to deal with. So why bother?"

Barnden is bullish on believing the deal portends big things for Magna.

Magna and LG established a joint venture called LG Magna e-Powertrain to work on electrification in December and announced their leadership team and more details just last week. Magna has its complete-vehicle assembly expertise. And now it has furthered its advanced driver-assistance system capabilities.

Tectonic plates have shifted into place, but much like the sensibility of a Veoneer acquisition, Barnden said few have noticed the big picture emerging from Magna's incremental steps.

"There's no barrier to entry, and if Fisker can do this with Magna, then Apple can do this with Magna," he said.

"It's a question of them doing something really unique on the cabin experience, and something really exciting with driver monitoring, maybe related to eye-gaze control. People will look at that and go, 'Wow!' … We can see these pieces coming together. The whole interface between humans and the car will change in the next few years, rather than the human in the back seat while the car drives. It's all happening, but nobody's watching."