Tech that Drives Costs Down
Red Herring - August 7, 2006 - Global competition to cut costs is driving innovation in the notoriously sluggish auto industry, giving rise to opportunities for startups up and down the supply chain.
“A lot of VCs weren’t particularly interested in the car market because it was perceived as a slow-moving market,” says Dan Seats, chief operating officer at Broomfield, Colorado-based Oxlo Systems, a startup that makes software that helps manufacturers and dealerships share information. “But now that they have their backs up against the wall, we find that they’re more aggressively innovating,” Mr. Seats says, adding that competition will only keep heating up. “That’s a good thing for us, because it’s a change driver.”
Of course, even while drivers wait for that day to come, electronics content in cars is expected to roughly double in the next five to seven years, according to Tony Grover, a managing director at Ann Arbor, Michigan-based venture capital firm RPM Ventures. In theory, automotive electronics costs could double as semiconductors and computer processing units multiply. Mitigating that trend to a degree, one semiconductor design house (an RPM portfolio company still in stealth mode) is working to integrate more functions onto single chips, potentially allowing automakers to use fewer chips and cut costs that way.
Aside from the higher precision and upfront savings, automation reduces employee health problems associated with repetitive motion, he says. With General Motors spending some $1,500 per car on healthcare, those considerations are not to be waved aside, says Marc Weiser, managing director at RPM.
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