Google is Starting to Act Like a Bona Fide Automotive Supplier, and it’s Paying Off

The integration of the passenger vehicle into the broader digital ecosystem has been a bumpy road for automakers, driving frequent changes in strategic direction, often at a fundamental level. Even as recently as five years ago (or one model generation ago), the idea of an automaker partnering closely with Google, bringing their technology into the embedded infotainment system and making Google a key partner shaping the Original Equipment Manufacturer’s (OEM’s) own branded infotainment experience was practically unthinkable.

It was therefore a watershed moment for the industry when Mercedes-Benz announced in February 2023 a long term partnership with none other than the erstwhile automotive bogeyman, Google, integrating Google’s marketplace, IP, map content, navigation, cloud, and YouTube into the next generation of Mercedes-Benz Operating System (MB.OS)-based infotainment systems. While some of this can be attributed to a greater willingness across all OEMs to partner with the big tech companies powering consumer digital experiences, this latest partnership doubtless reflects as big a leap forward in Google’s strategic thinking in the automotive industry.

After dabbling in the shallow end of the automotive infotainment market for a number of years through the Android Auto smartphone mirroring protocol, Google made their move into the embedded automotive space in 2018 when Volvo announced that the Polestar 2 model would feature Google’s embedded OS (Android Automotive) and its suite of navigation and telematics services (Google Automotive Services [GAS]). While many expected this two pronged approach—an OS featuring useful pre-integrations to seed a market ripe for GAS deployment—to take the automotive industry by storm, the reality turned out to be more complex. While many OEMs enthusiastically adopted the transition from Android Open Source Project (AOSP) to Android Automotive Operating System (AAOS), this did not translate into widespread adoption of GAS as envisaged. Ultimately, the AAOS+GAS approach fell short as it failed to address longstanding fears held by automakers with respect to Google.

Fear One—Failing to Support the Automotive Brand: Automakers expect and require suppliers to first and foremost support their brand identity and to enable differentiation from competitive brands. Most OEMs feared that adopting Google GAS would limit opportunities for differentiation, resulting in a commoditized infotainment landscaped. Akin to the Windows and the 1990s PC market, consumers would no longer care if they were buying a Mercedes, a BMW, or a Hyundai, just so long as it delivered GAS.

Overcoming Fear One: Google has overcome this fear in the Mercedes-Benz relationship by repivoting towards a platform play, giving Mercedes-Benz access to Google’s assets such as Place Details, Google Cloud, Artificial Intelligence (AI) and Machine Learning (ML) capabilities, real time traffic and touring, etc. In place of a one-size-fits all offering, Mercedes-Benz can take advantage of Google’s capabilities to build their own, dedicated navigation and infotainment experience.

Fear Two—Not in it for the Long Haul: Automotive lifecycles are long, far longer than most of the consumer devices into which Google has integrated their navigation or YouTube services. Any supplier wanting to gain automotive business needs to demonstrate their ability to support vehicles for benchmark of at least fifteen years. Many automakers were concerned over Google’s commitment to the automotive industry, worried that a poor return for GAS might cause Google to pull support for the product mid-lifecycle.

Overcoming Fear Two: By forming a partnership that gives Google access to the core fundamentals of their business, Google can assure automotive customers of their longevity of the partnership. While certain products or services packages might have a limited shelf life, there can be little doubt that Google’s “geospatial offering”, Place Details, Cloud, and YouTube platform will be around for many years to come.

Fear Three—Google Just Wants My Driver’s Data: A common assumption among many OEMs and incumbent competitors to Google is that Google’s automotive play was purely motivated by their advertising play. Premium OEMs in particular thought their brands incompatible with an advertising-based business model, with some automakers starting to even make privacy a part of their brand identity.

Overcoming Fear Three: Google has made it clear that they expect their non-advertising revenues to grow in the coming years. The partnership announcement also emphasized a licensing-based business model. Furthermore, the announcement sets out a data component focused on empowering Mercedes-Benz to take advantage of Google’s Cloud and AI/ML capabilities, so that the automaker can make better use of their own data, rather than in exposing Mercedes-Benz data to third parties (including advertisers).

In short, by adopting a stance closer to that of a traditional automotive supplier, emphasizing the OEM’s brand, ownership of the experience, and providing tools to support customization and differentiation, Google has secured its most important automotive customer to date, and has set a blueprint for future engagements.

This deeper engagement with a premium OEM represents a significant threat to incumbent suppliers of location-based services and infotainment applications in the automotive industry. With so many suppliers having defined themselves as the “Not-Google” alternative to OEMs based on the three core fears listed above, it is vital that incumbents react quickly and significantly to the new Google automotive strategy.

The threat is made even more significant by the fact that Mercedes-Benz is a premium OEM. It was widely anticipated that Google’s first successes in the automotive embedded space would be in the mass market, as brands that have little to lose by surrendering their modest infotainment experiences to GAS seek to deliver a compelling digital experience to drive new vehicle sales. Incumbents therefore saw an opportunity to help premium brands respond to this competitive threat, building navigation and infotainment experiences on par with Google, but while emphasizing OEM system ownership, branding differentiation, and data integrity.

With Google now increasingly adopting these same three characteristics as part of their automotive strategy, it is increasingly clear that it will no longer be good enough simply to be the “not-Google” alternative. As long-held automaker fears about the technology giant wane, Google’s incumbent competitors must compete on the fundamentals—geospatial data, map content, cloud platforms, User Interface (UI) and User Experience (UX), AI and ML, routing, and other services. The scale of that challenge cannot be underestimated, so long as automakers look to imitate other consumer experiences, Google will always be well best positioned to deliver based on their wealth of experience in smartphones and other CE devices.

Therefore, the best option for automotive incumbents in the short to mid-term is to focus on the uniquely automotive-grade applications that play to their strengths, particularly active safety Advanced Driver Assistant Systems (ADAS) and Electric Vehicle (EV)-related applications that require a deeper understanding of the automotive context. In the longer term, Google will close this competitive gap.

Finally, this partnership signals the importance of having a platform play; OEMs that shunned a reskinned GAS product are unlikely to simply opt for a “look-and-feel” modified off the shelf offering from incumbent competitors. As vehicles become more software defined, and their organizations more software-savvy, the ability to offer third party mapping tools, AI and ML, routing algorithms, and data marketplaces will be essential to survive in a new world where Google is a bona fide automotive supplier.