Hitachi has sold its Clarion wing to automotive OEM Faurecia, for $1.3bn, or around 5.7x earnings. Faurecia, majority owned by Peugeot, will be getting an established navigation system specialist, which it will look to use to boost its portfolio that it is trying to sell to automakers interested in making next-generation vehicles. It seems like a bargain, given that Clarion posted full year revenue of $1.58bn, even though it is paying a 31.2% share price premium.
The Japanese conglomerate, Hitachi, has been trying to streamline itself for a while now, selling off non-core assets, and there are plenty of OEMs that are interested in expanding their stacks – looking to sell more of a complete system to an automaker, rather than a handful of components.
Clarion’s navigation systems are popular with Nissan, Mazda, and Mitsubishi, and Faurecia will hope to sell into its more traditional American and European customer base. A top-ten OEM, Faurecia is acutely aware that future RFPs from automakers will increasingly feature self-driving requirements, and strong navigational systems are fundamental to those requirements.
Clarion’s in-vehicle infotainment (IVI) and ADAS systems would ‘significantly reinforce Faurecia’s offer for cockpit systems integration,’ according to the announcement. Faurecia also unveiled an agreement with Hitachi Automotive Systems, which will see the pair combine offerings to push autonomous driving solutions to automakers.
Faurecia CEO Patrick Koller said “the combined product and technology offer of Faurecia and Clarion and our complementary geographic presence and customer portfolios would create significant value for all stakeholders.” Faurecia will be launching a new business group, headquartered in Japan, to consolidate all its domain competencies.
Earlier in October, Riot spoke to Sebastien Brame, General Manager, at Clarion, about the company’s plans for the self-driving marketplace. Brame noted that the future was very unclear, that there was no reliable date on when self-driving cars would arrive – that they could appear in the next year, or in the next ten years.
Brame said that you often can’t imagine what technologies are going to emerge, and so there’s some logic to not knowing when full autonomy will truly arrive. He also said that a bigger deciding factor could be the economic balance, just as has been the case with flying cars. The technology supports those vehicles, but the business models don’t – never mind all the required supporting laws.
Brame clarified that Clarion didn’t actually have an official position on what would constitute tomorrow’s self-driving car, insofar as the technologies that comprise it. He said that Clarion has some systems already, such as the self-parking features in the Nissan Leaf and the Hitachi Park-by-Memory stack, but that it did not have an AI assets. He drew the distinction between AI and automation, and that Clarion was very much focused on the latter.
In the V2X world, Clarion is working on both the LTE-based C-V2X and the IEEE 802.11p protocol, which is comparable to WiFi. Brame said that there was a need for clear strategy on the public side of things, and that this was outside Clarion’s control entirely – stressing that if there are no smart cities, then there cannot be true V2X. That’s another chicken-or-the-egg scenario for the IoT to grapple with, and Brame thinks that in the automotive world, it will be the automakers who pressure their OEM suppliers to bring about more harmonization in the industry.
Because of Clarion’s Japanese focus, Brame had a slightly different perspective on the issue of adding features to cars and the resulting impact on price. The Japanese government has asked its domestic automakers to increase the level of automation in their cars, to meet the needs of Japan’s aging population. Compared to other markets, automation in Japan is not a luxury, but a need – and one that might actually be mandated by government regulations.
As for SAE Level 5 readiness, Brame said that societal or behavioral changes need to come to pass, and that these are likely more pressing than solving the technology problems. More practically, he said, the insurance companies are not yet ready for this change, and that this is going to take much longer that the 2-4 year time-frame that many are floating for full autonomy.
For future pipelines, the current focus is on providing valet services, in which a vehicle will transport you around like a nineteenth-century valet, and not the parking attendants that are associated more closely with the term these days. Brame notes that this is something of a luxury service, and there’s a chance that these next-gen automobiles follow in the steps of private airplanes, which began as self-owned luxury items before quickly moving into a service-based model, with chartered jets or first-class seating.
There may also be shifts in how the automotive industry buys parts, according to Brame. He said that future buying patterns could change, with less of the OEM-to-brand exclusivity than has been seen in the past. Some T1 OEMs may also start working more closely.
We asked for Brame’s view on market consolidation, specifically whether there would be fewer but larger players because of such closer collaboration. Brame said that he did not know if the OEMs would begin merging, but did stress that it was clear that the automakers preferred to buy from group-offerings – more closely integrated, and sold more as packages than standalone components.
As for the biggest risks in the market, Brame said that the fast-moving technology and R&D movement could very well fall victim to a large economic crisis, especially as companies look to cut costs in its wake. Brame recalls the 2008 impact, losing years to these sorts of problems. He also said that environmental concerns were pressing.
However, EVs offer an opportunity to completely reinvent the car, according to Brame, letting you rethink all previous practices and assumptions. He noted that the overlap between electrification and autonomous driving was perfect in terms of timing, as a way to introduce services into a much more streamlined machine – cutting the wheat from the chaff. However, he warned that EVs are not an option for all cities, as many don’t have the infrastructure to support them.