In the hunt for cutting-edge innovation, old-line truck makers and parts suppliers are using specialized venture-capital funds and direct investments to take positions in small companies developing promising technologies and digital expertise.
Daimler, Michelin and BorgWarner Inc. are among the major truck manufacturers and suppliers that have taken the plunge, with the aim of leveraging new relationships with small companies into advances that leapfrog – or at least keep up with – the competition. They are looking broadly in areas that include platooning, automated-driving fleet management and electric powertrains.
The large companies seek the entrepreneurial spirit and can-do approach that characterizes startups to infiltrate legacy organizations and cultures, broadening the horizons of senior leadership and making the entire enterprise nimble.
Nearly every truck maker recognizes the importance of technological disruption these days and is reacting to new imperatives that range from the advance of automated-driving technology to Tesla’s vow to make trucks as well as cars.
“The industry is undergoing massive disruption related to business models and new technologies,” said Quin Garcia, a managing director of Autotech Ventures, a specialist venture-capital firm based in Menlo Park, Calif. “They all want to leverage IT to streamline their business and to get less-expensive electronics.”
Much of the industry’s response has been to beef up internal R&D capabilities.
“They’re trying to figure out where they can really challenge themselves to become more innovative and try to get ahead,” said Russell Norris, national transportation and logistics practice leader for the Grant Thornton consulting firm.
Paccar Inc., for example, will open an advanced-technology center in Silicon Valley later this year. Earlier this year, Cummins Inc., the big diesel-engine manufacturer, launched a new internal organization called the Digital Accelerator to streamline innovation in areas including digital capabilities, data and analytics.
When it comes to turning to the outside for new technologies, the truck-manufacturing sector has lagged automakers such as General Motors Co. and Ford Motor Co. And activity by truck manufacturers so far largely has been overshadowed by that on the freight side, where hot digital startups such as Peloton Technology, Convoy and Omnitracs have attracted the likes of Microsoft Corp.’s Bill Gates and lots of venture capital.
“Being so much smaller than auto companies, truck manufacturers don’t have quite the resources to bring to bear in venture-capital funds and other instruments,” said Tim Denoyer, an analyst for ACT Research, a Columbus, Ind.-based truck-industry consultant and data provider.
But a few truck makers have created a vanguard. Volvo Venture Capital Group, owned by Volvo Trucks, has invested in startups for several years. Daimler Trucks North America is looking for innovators in load brokering, video safety and big data.
Its moves include the 2015 investment in Zonar Systems Inc., a telematics company that leverages data generated by engines, vehicle GPS systems and other on-board sources.
In targeting investments, Daimler looks for cutting-edge technology as well as ‘contextual awareness” possessed by the startup, Lori Heino-Royer, director of business innovation and the program-management office for Daimler Trucks North America, told Trucks.com. “We look to see if they truly understand not only their business model but also scalability in our industry and how they can differentiate.”
Michelin has supplied truck tires for decades. Jean-Dominique Senard, its chief executive, believes the company needs to also look outside its own walls for innovation, said Ralph Dimenna, chief operating officer of its Michelin Americas Truck Tires division
“What we heard from our fleets is that they were looking to us to be more than just a tire supplier. They wanted to integrate with us so that we could take on more of their fleet maintenance and management, which is a pain point for them,” Dimenna told Trucks.com.
In June, Michelin bought U.S. telematics provider NexTraq from Fleetcor Technologies Inc. That followed an earlier acquisition of Sascar Tecnologia Automotiva, a Brazilian fleet-management company and the purchase of the fleet-management business assets of Mexico-based Copiloto Satelital. Now, Michelin is looking for more startup investments, including in platooning and new powertrains.
Castrol, the U.K.-based lubricant brand owned by multinational oil and gas company BP, launched Castrol innoVentures a few years ago with the aim of investing in and partnering with businesses in smart mobility and other emerging sectors. Its investments include a 50/50 joint venture with TechSolve Inc., a Cincinnati-based manufacturing consultancy.
Now more players in truck manufacturing and supplies are stepping up. “Truck OEMs have really caught up in the last year or two and are getting more aggressive,” said Garcia of Autotech Ventures.
BorgWarner, for example, which counts on truck components for about 13 percent of revenue, recently invested in Autotech’s $120-million inaugural ground-transportation fund along with dozens of other vehicle manufacturers, parts suppliers and others.
Rather than going it alone, “We wanted to find a way to efficiently put a net around all the best and brightest ideas,” said Scott Gallett, vice president of marketing for BorgWarner. Autotech “has a deal flow that comes to them from all over the world, which makes it very efficient for us. We don’t want any surprises.”
Besides having a front-row seat when companies pitch to Autotech, BorgWarner has the right to co-invest – or even to pull a startup off to the side for a pure corporate investment – if Autotech decides the outfit isn’t right for its venture-capital portfolio.
Many companies count on another benefit from their closer encounters with startups: shaking up their own organizational status quo by copying what makes dynamic little companies tick.
“We want to continue to challenge our own people to be thinking a little differently,” BorgWarner’s Gallett said.