The era of autonomous vehicles is close at hand -- and is already changing the industry in fundamental ways.
The latest and biggest example? Last week, ZF Friedrichshafen announced it would acquire TRW Automotive for $13.5 billion, one of the largest supplier acquisitions in history.
With carmakers working furiously to develop driverless vehicles, the suppliers that can produce the needed technology are starting to look like a very exclusive -- and powerful -- club.
Bosch, Continental and Denso were poised to dominate the market, but now ZF-TRW has joined them. The German supplier said the deal gives it a niche in the fast-growing market for collision-avoidance technology.
Only a handful of megasuppliers can afford such technology, and they aren't likely to be bossed around by penny-pinching automakers. Indeed, the speed at which it's all happening -- and the growth potential -- is putting these elite parts makers in the driver's seat.
"There is a race among the automakers to be first to market with automated highway driving," said Andy Whydell, TRW's head of product planning for global electronics.
How big will that market be? IHS Automotive, a suburban Detroit consulting firm, published a report last week that estimated global sales of autonomous vehicles would top 21 million units a year by 2030. With TRW's expertise, ZF expects to win a sizable chunk of that market.
"This is a big opportunity for us," said ZF CEO Stefan Sommer during a briefing on Sept. 19, in suburban Detroit. "We are playing in a new league here. This opens markets for us in a worldwide competition among two or three companies."
Last year, for example, TRW and ZF spent a combined $2.1 billion on r&d.
Those expenditures supported TRW's portfolio of cameras, radar, electric power steering and electronic brakes -- key components for collision avoidance -- while ZF invested heavily in new transmissions and drivetrains.
TRW CEO John Plant believes the sheer cost of r&d will deter smaller competitors from jumping into collision avoidance.
"The barriers to entry are so high that it is very tough for small players to afford it and take the time to develop it," said Plant, who attended the briefing with Sommer. "It's a select few that will be able to afford it in the future."