Revving Up the Automotive Industry

Episode 751 12.21.21

Peggy and Sanjay Ravi, GM automotive, mobility, & transportation industry, Microsoft, tackle the year in review and the year ahead. Ravi discusses some of the interesting highlights in automotive—and the challenges the industry endured as a result of the COVID-19 pandemic and the semiconductor shortage. Despite all the challenges, the industry has remained very resilient, and he shares some of the industry’s most interesting partnerships.

Below is an excerpt from the interview. To listen to the conversation from The Peggy Smedley Show, click here  or to access the entire show go to https://peggysmedleyshow.com

Peggy Smedley: …I thought maybe the best place to start Sanjay…at this point, a year in review and then we can look at a year ahead because there’s so much that Microsoft been doing. I guess what I’d love to get from you at this point is, your opinion on what Microsoft has been doing this past year because it’s really been an interesting one for all of us on a global perspective. But can you share your opinion on the mobility side with Microsoft? Just get us up to speed. Maybe that’s where a good place for us to start.

Sanjay Ravi:

Thank you, Peggy. The term you used which is very important is that it’s been an interesting year for us in automotive. The pandemic and also the semiconductor shortage have created a lot of uncertainty in the overall automotive value chain. In spite of all the challenges, one thing I do want to highlight is that the industry has remained very resilient. It has been focusing on ensuring that the broader opportunities around the transformation, the digital transformation, is supported.

The investments are happening there. Some very aggressive and ambitious goals to move us on the sustainability path with electric vehicle fleets. I would say last year we saw more announcements from automotive than ever before in terms of the strategic plans to move to a net-zero environment, to move to more of supporting the EV (electric vehicle) fleets. Finally, the focus on driving new digital business models, new digital services that require connectivity and smart mobility have been top of mind.

So, from a Microsoft standpoint, this has been a year of partnerships for us in the automotive industry. We are looking at our role as being the technology partner for the mobility industry. It’s been super exciting. We had a number of key partnerships. I’ll share a few here today.

Starting off with the long-term partnership we established with General Motors and Cruise around supporting their self-driving vehicle initiatives and the broader digital of transformation at General Motors. Again, these are deep partnerships where we have an opportunity to look at supporting the innovations that are required in the industry.

Another great partnership is the work we are doing with Bosch around software-defined vehicle. Then software-defined vehicle is going to be core to a lot of the innovation opportunities here. We’ve also engaged with the open-source community with Eclipse Foundation because we believe you have to bring the broader ecosystem together and drive innovations, leveraging open-source given the complexity and the number of ecosystem partners that are involved here.

Then another partnership that we have expanded is the work we are doing with Volkswagen. We started a partnership among many things, the connected vehicle platform. We’ve recently expanded that to include the autonomous development platform initiatives as well.

Very recently I’m excited to share the announcement we made with ZF where we are working together across a number of areas as part of a broader digital transformation partnership.

Then on the travel and transportation industry, things are speeding up as well. The partnership we have with Amadeus is a great example of how Amadeus is revolutionizing travel and transportation, leveraging advanced AI and cloud computing technologies.

Smedley: So, Sanjay, some of those are really exciting for listeners who might not know. I’d like to talk just about a couple of those partnerships because I think the Bosch, one for example, is really interesting. We’ve all just witnessed just how weather can change our world in an instant. We talk about how climate change is happening but when we think about roads and how we need to know about data in an instant, what it can do so we can have driver safety and things like this, your partnership with Bosch gives us data right away.

I mean, is that part of what you want to have for road safety so that we can know and make things scalable with Azure. I mean, is that the idea that you can have things forecasting? Is it a little different? I mean, I look at that it’s like, we see things differently now?

We need to have information so that we can get things automated driving and scalable things and do things. Is that what you’re hoping to do with that relationship or no? This is completely different and it’s just an example… You’re looking at this differently. I look at it like, the sky’s the limit. I don’t know. What’s your thought with that relationship?

Ravi: Yeah Peggy. What you just articulated there, is it’s a great use case of what can be enabled by software-defined vehicle. We are getting into a world where these vehicles are all going to be connected. You are getting near realtime information and insight from the vehicles and also from the infrastructure around the vehicles. Be it the smart highways.

Now you have the opportunity not only to get information from the vehicles but also send actions back. This is where remotely updating and configuring vehicles, of course it needs to be handled very carefully to ensure all the security needs and the automotive grade requirements, but if they can be implemented taking security and automotive grade into account, now you do have an opportunity to continue to configure the experiences these vehicles can provide to the end users throughout the lifecycle of the vehicle.

So, the use case that you mentioned is a great one where you can get realtime feedback from the vehicle, from the road, from the whole traffic ahead as well and then provide insights that will help the driver be operating in a much more safe and efficient manner. So, I would say that’s one of the use cases as part of the broader software-defined vehicle set of opportunities.

Smedley: So, then your relationship with ZF takes it almost a different scale entirely because now you’re talking about logistics and containers and transit and being able to detect damage. Is that what that one is? Because now I’m seeing, we’ve been talking about the supply chain and not getting our goods and services. Now I’m seeing that this is an entirely different relationship.

I think all of us need to see that Microsoft is partnering with different partners in ways mobility and automotive and logistics that I think the average person might not know. But the tech community gets and says, look, the sky’s the limit and the way we need to be using technology and when we think about how we use it in the cloud opens up so many more possibilities.

Ravi: Absolutely Peggy. As you look into the opportunities here, what is exciting is technology is unraveling all kinds of innovation opportunities in automotive. So, if you look at ZF, we have a great partnership with them in the manufacturing and supply chain space where you do have a ton of opportunity to drive operational excellence, look at your equipment utilization, drive quality approaches better.

That’s where we are working with ZF, leveraging IoT and AI capabilities and making things more visible and available to their users in the plant floor. Also help them manage their broader supply chain. Visibility is key to managing the supply chain and then using the visibility helping, people make the right decisions.

ZF is also transforming as an organization to be a software-driven organization. That’s something you will see happening more broadly. Our partnership goes beyond the factory and the supply chain space into the digital services and the software services that ZF is bringing to the market.

Smedley: I tell you, it’s exciting to see the opportunities, let alone what you’re already doing but just what we haven’t even imagined. I always use that within innovation because there’s so many things we haven’t imagined but you are already imagining that’s out there to the next thing. That’s where we think about things that sustainability offers us. I think that we’re starting to think we have to think about resiliency, circularity, and all of these things.

Take us to that whole discussion because I think we could be talking about the partnerships because we know nothing can be done in a vacuum. We have to think about collaboration and partnerships.

How does sustainability then play into what Microsoft is doing as a whole and in the automotive and mobility space? Because I think that’s critical to this next juncture and what you need to do and what we all need to do as a global community.

Ravi: So, Peggy, as you know, our industry is one of the biggest contributors to carbon emissions and to carbon footprint. So, all of us have a huge responsibility to help moving to the net-zero environment. There are a few things I would highlight in terms of what Microsoft is doing. First of all, we ourselves are looking to minimize and reduce our carbon footprint. In fact, we are driving towards net zero by 2030, and by 2050, we are looking to absorb all the carbon we have created as a company throughout Microsoft history. And so that’s a very ambitious focus that Microsoft is putting a lot of energy and attention to. Now, in addition to that, we are partnering with many of the players in the industry to help them meet their sustainability goals and targets. And as part of that, we just recently announced the Microsoft Cloud for Sustainability. It’s a platform that will help our customers and partners across the world record, report, and reduce emissions, leveraging data from a number of disparate sources and giving people the insights that they need so not only do they get visibility to the carbon footprint, but also intelligence in terms of smarter ways to reduce the carbon footprint. So that’s another huge area of investment and focus for Microsoft.

Now, in addition to that, as you mentioned, this is an ecosystem play. You need public and private entities to come together and look for innovative ways to drive sustainability. I’m very proud of the work that WBCSD is doing in this space. So WBCSD is the World Business Council for Sustainable Development, and they have a number of initiatives focused on sustainability and circular economy. And we are engaged with them as part of the transportation and urban mobility efforts, one of the initiatives that we are engaged with them. And we just announced WBCSD recently just released a framework for sustainable EV infrastructure.

What is important there is to drive and get to our goals of sustainability, it’s also critical for us to have a better sense of demand and supply. So where are the electric fleets located and when are they consuming energy? And then how about the grid and the supply side? And in today, all that information is not readily available, and you need to be in a position to share that information so you can do a better supply-demand match and get better outcomes based on the resources we have today. And of course, these resources will have to be expanded as we go forward, but there’s an opportunity to optimize further what we have today. So, the framework for sustainable EV infrastructure that was released by WBCSD is a great framework for us to leverage across public and private entities.

Smedley: So, Sanjay, looking at that, if I’m correct, that was originally when you guys all started this. This was started like in 2019. There was a small core group of you. I think it was, if I remember it was Toyota, yourself, and Michelin, right? There was a small group, and then there was like 20 of you since then that’s become a part of this and I know, is there more now? I mean, so it’s growing. This is not a small group. I mean, this is like a significant group when you look at trying to develop a framework because I think sometimes people get lost in thinking there’s just a few companies that are a part of this. There’s quite a few of you that are really saying, “We’ve got to develop this framework and understand a sustainable EV infrastructure isn’t just something a couple companies are talking.” Significant players are a part of this saying, “We’ve got to be committed to an EV infrastructure.” Is that correct?

Ravi: That’s absolutely correct, Peggy. And in fact, in addition to a lot of the private companies, there is a deep involvement from the public sector here. And that is going to be critical because as we evolve, you do need the right regulatory frameworks and guidance frameworks for the industry to work with each other, and so we have public sector organizations from across the world engaged in this initiative and helping provide the right level of guidance and inputs as well.

Smedley: So, looking at that, we’ve had this conversation prior to the pandemic that the United Nations has made this big statement that 70% of the world’s population was going to be in cities by 2050. Is that still the number that we’re talking about, or do we have to think about rural and urban infrastructure now when we think about EVs? We can’t just say cities anymore. We’ve got to expand our thinking and the way we’re developing, because look, we’re all not running to the city anymore or is that 70% still the number and we have to think about cities, or do we have to think about everything now? We got to think about the bigger picture?

Ravi: So, the opportunity and one of the nice things that are happening, and I mentioned earlier about the rapid move to electric fleets and electric vehicles, and in some ways that is going to drive us to bring these innovations across both urban and in rural areas. And so, I would say we are looking at a much broader set than just the heavily populated city environments. Now, the problems that we are trying to solve would be different, but some of the technologies that are required, especially from a sustainable energy infrastructure and framework would be required across all categories.

Smedley: But then this opens up if you’re thinking that way to us thinking about a whole greater diversity, equity, and inclusion kind of the world then, because part of when we think about EVs, we sometimes don’t recognize that when we think cities, we’re thinking urban. When we think about rural, we now open it up to helping everyone, so I think this is exciting. I think this is saying this is going to be available to everyone, and I think that’s what Microsoft is always saying it’s, “We don’t want to limit. We want to open up our world to everyone.” Is that what we’re talking about?

Ravi: Absolutely. The inclusion is so key around this and ensuring that every community out there have access and can take full advantage of the opportunity. So that’s a core focus for us, and this is where also the public and private partnerships will play a key role.

Smedley: You also mentioned when we were talking, let’s kind of switch gears a little bit because I think we’re not really switching gears, but we’re expanding a little bit our discussion in the SDVs because as we really get deeper into the discussion of software-defined vehicles and helping our listeners understand what that means, I’d love for you to talk about what the role that’s going to play in ecosystems in the development now of SDVs. Because I’m trying to understand and help our listeners really understand what that means to them, what that acronym is shaping up to mean because it’s going to be a new acronym to everybody listening who may not really understand that’s going to play a new way of thinking differently than what they’ve thought about the marketplace to be in the past.

Ravi: Yeah. So, Peggy, maybe one framework to help understand the impact of software-defined vehicle could be just going through the transformation that is happening in the industry, where we are still in the world of connecting vehicles. Believe it or not, majority of the vehicles are not connected today. And we are getting to a place where a 100% of the vehicles will get connected, so the first step in the journey is ensuring connectivity because without connectivity, a lot of the other value streams don’t even get started. So, connectivity is phase number one. And then we get into the second phase, which is when these vehicles are connected, now you have the opportunity to update them remotely. You also have the opportunity to configure them and the opportunity for these vehicles to interact with other vehicles and other smart infrastructure.

And this is where software-defined vehicles starts becoming very important because how do you design the vehicles so you have the design factor that includes the need for the vehicle being updated on a regular basis, or even configured on a regular basis? And the technology platforms in these vehicles are evolving very rapidly, and we are getting into the world of solar architectures and having multiple type performance compute systems inside the vehicle, and we sometimes joke that the vehicles are becoming data center on wheels. That’s the kind of computing power that many of our vehicles in the future will have and some of them already have. And so now you have the opportunity to bring a broad ecosystem of partners to leverage the data that is coming from these vehicles, and this is where value sharing opportunities exist, data monetization opportunities exist.

And to allow the vehicles to do that you have to have an environment where a number of ecosystem players can come and engage and drive innovation together. So, this is the new automotive value chain or the evolving automotive value chain, and open ecosystems play an incredibly important role here because you could design some of this in Wall Gardens and come up with proprietary systems, but then you are not driving the entire innovation that is happening across the world within your proprietary for walls. And while there’s an opportunity for companies to leverage their IP and monetize that IP, there is also the opportunity for the same companies to interact with the other players in the ecosystem in an open way. So this is why we are working closely with the Eclipse Foundation, because there’s an opportunity for many players to be part of this initiative, and contribute capabilities and help each other drive innovation, and more importantly interoperate because when you have a tier one supplier interoperating with an OEM (original-equipment manufacturer), with someone who’s building content with a city that has some new infrastructure capabilities coming and constantly evolving the kind of configuration or the set of services that can be provided, you require that open ecosystem.

So that’s the initiative that we are driving, and we are happy to be part of that with our folks like Blackberry, Cruise, Porsche, Red Hat, Bosch, FEV, Volvo, and many others who are showing interest in joining that effort. And I’m sure this will lead to a great set of new innovation that the industry will get, and it also opens up opportunity for each one of the participants to drive additional value based on their unique IP as well.

Smedley: Are there other open-source type of ecosystems out there that compete with The Eclipse Foundation that see that they think a different path that we should be going down, that they don’t realize the benefits of having an open ecosystem? That they don’t recognize that this narrow thing leads to a failure of development of innovation. They don’t recognize that by being open, we’re limiting innovation. Do they not recognize the benefits? That’s where the best creativity comes from.

Ravi: Yeah. What I would say is we are still in the very early stage of this journey. And so, there are some of the players who are convinced and they’re participating and engaging, and you’ll see more folks joining in the U.S., and many others are looking at this and assessing how this could help them and their businesses. So, I don’t want to say there are any competing point of views in this area. There is, in general, a lot of interest, and we expect efforts like this to evolve and could there be additional efforts, of course, across the world. But this is one initiative that we are very deeply involved in, and we see the value already from this group of players coming together and the kind of innovation they want to bring.

Smedley: We’ve seen already when innovation comes together, creative things come out of it. One of them, I’d love for you to talk a little bit about, what you’ve been doing with the American Center for Mobility. That’s been a very creative one where you bring together government and industry and academics. You create creative things to talk about mobility. Walk us through some of the things that have been happening there.

Ravi: There’s another space, Peggy, that is ripe for innovation and there’s a lot of investment and work that is going on. And now, I’m referring to the autonomous development space and the entire value chain around that. So, we are very proud of the opportunity we have with the American Center for Mobility, ACM, based out of Detroit, where they have brought in a set of public and private entities focused on sharing information and insights around the whole autonomous development side of things. And looking at the kind of test cases that are required, they have a very large physical facility out there that companies can leverage. And it’s a huge opportunity for the broader industry to drive through a number of very interesting use cases and understand the opportunity around data, understand the issues that exist in terms of meeting or addressing the challenges of latency, and then support the development of these autonomous models across the tool chain. So that’s one area that we’ve been working with, and there’s already been a couple of years or more since we’ve started our partnership with ACM.

Smedley: So, when you look at what you’ve done with the ACM, and that’s like a 500 acre in Michigan that’s going on there, I think. And the idea of creating something unique in testing and innovation, just like with The Eclipse Foundation, all these different members, all these opportunities that you look at as Microsoft, it’s the opportunity. Again, it’s about collaboration. It’s the idea of saying, “We can work with partners here to create something to see what happens.” Because when you work on something on any of these opportunities, does Microsoft see that, “Look, it’s for the betterment of the world. Whatever those solutions are, we’re trying to develop things that are for the good of mankind.” I’d ultimately look to you to say, what is the point of joining any of these organizations if you’re not trying to figure out, how do we improve everything through technology? Is that ultimately the end result here?

Ravi: That’s absolutely one of the end results, Peggy, where there is a greater good of many of these organizations coming together. And I also mentioned the work we are doing with WBCSD that is really focused on addressing some of the core sustainability issues that we are all dealing with. So absolutely, that’s one part; there’s also multiple angles to this. There is also an angle of accelerating innovation, because we, at Microsoft, believe doing things in an open way allows us and our partners to innovate faster. Gone are the days where you keep all your innovations within the four walls. In today’s world, you have to work with your partners, in some cases, even your competitors to drive innovation.

And we believe approaches like what we are doing with The Eclipse Foundation and the ACM are ways by which we, as well as the other participants, can bring innovation faster to the market. And then there’s a last aspect, which is each of us would have an opportunity to monetize these efforts too. So, I just want to make sure this is not just charity. Any one of the folks here, they do have a business opportunity where they will make sure that they can interoperate with the broader ecosystem. But at the same time, they can monetize their own assets in a much more efficient way as part of this joint innovation.

Smedley: Well, that’s a great segue now to talk about the future as we all head into CES, because there’s a lot of monetization that goes on there. That’s the idea in talking about innovation and exponentially looking at what can come out of the future, because we see future good. We’ve seen you actually, as Microsoft, acquire technology, like HoloLens, with the idea of really bringing great new solutions to market that have been developed and come out of that development, that are brought to market there. Talk to us about the future. What do you see coming out of CES? And what do you hope will be the really neat things that you see coming in January?

Ravi: It is really exciting, Peggy, to see the automotive presence at CES. In fact, the newly dedicated West Hall, and I’ve had the chance to see few of what the various booths that are coming from many of our customers and partners. And I’m really looking forward to being there and engaging in discussions, and also getting a frontline view into the innovation many of the players in the industry are driving. At Microsoft, we have a dedicated booth as well, and we will be highlighting a number of innovations that we’ve had the opportunity to partner with. And I’ll share a few of them today. So earlier on, I talked about our partnership with General Motors, and BrightDrop is a very exciting initiative as part of the broader General Motors efforts where it’s a wholly owned subsidiary that is focused on addressing some of the last mile issues.

They have some very unique capabilities across both the large electric vehicle vans, but also the last mile delivery with smart pallets and e-pallets, and they’ll be there at our booth and highlight some of the innovations they’re driving. We would also share the work that we discussed a bit earlier, the partnership with ZF and how they are driving innovations in the smart factory area. There will be more details we’ll share about the software-defined vehicle work that we are doing with Eclipse Foundation and others. I’m also excited to share some of the realtime analytics work. So, we talk about data and real time analytics.

And while it’s not sustainable environment, we will have alpine racing, from a performance sports standpoint, be there and highlight how they use near realtime data to manage their operations and help their team win. And we believe that that technology is so important in the broader area of automotive. And so, they’ll be there sharing their experiences. We’ll have a focus discussion around data monetization. Wejo will be there, and they’ll be talking about how they’re helping companies get better monetization of the data. So those are a few of the examples. There’ll be a number of our partners there as well, and they will highlight how they are working with Microsoft to bring these innovations to the market.

Smedley: I think that’s exciting. So, you’re going to be giving out autographs, you want people to be coming with alpine racing. I don’t know, it seems like a lot of excitement going on at your booth. That’s great. I think that’s great. I think everything that happens at CES is exciting. We get to see the old, the new. Let’s move on to the future of mobility, because I know we’ve got about 10 more minutes or so to keep talking. But I think that’s where we always get excited, because I think we’ve seen what the cars can be.

But what we want to talk about is just when we think about transportation or mobility, when we think about what it can be, I think we always think about advanced driver assistance system, ADAS, being safety, but I think we forget about what it can mean. I think when we think about piloted driver systems or more than that, and I’m sure there’s so many things that you are thinking about, it being more than just what we assume it to be, there’s so much more. And I imagine that you are already thinking about the future to be. Talk to me about that, just the future, I guess, of mobility really. I just want you to tell me what you imagine it to be.

Ravi: I think we are in a place where we often talk about once in a generation opportunity in mobility, and that’s the kind of transformation we are seeing. So, as we look forward, and some of the foundational elements are already being put in place, we are going to see a future in mobility where the world of mobility will be more sustainable with electric vehicles and in electric charging infrastructure. And there’ll be more than electric. We are talking about hydrogen and a number of other sustainable options. So, sustainability is clearly part of the future of mobility. We are then getting into a more safer world, and this is something that drives me and many others at Microsoft, where with advanced technologies like assisted drive and autonomous development, we are well on our way to help reduce the number of accidents and make this world a lot more safer.

And then the last one is productivity. And I would include both productivity from an efficiency, if you are in an autonomous vehicle and how can you more productively use your time. It can also be entertainment. How can we have a much more entertainment experience while you are not actively driving in the vehicle? So those are three main areas, Peggy, that we see the future of mobility evolving to, to being more of a sustainable, safer, and productive environment. And the last thing I would highlight is we are getting into a world where there is a whole range of smart mobility services.

A whole range of smart mobility services and digital business models that will come to life, and you do require the right digital platforms to enable this. We are already seeing a number of innovations in this space, and we will continue to see the industry evolving into more of a software and digital driven industry.

Smedley: Looking at that, when you see a very digital-driven industry, we talk about this every day. Part of the thing we get nervous about at times is, how safe will that be? Do we have to be concerned about whether this is going to be a safe environment? How are we going to be able to keep up with as quickly as things happen? We’ve always got the bad guys out there and we’re always worried, is it going to be safe? As we become more connected, how do we protect ourselves? Knowing that if we’re more connected and we put ourselves out there, how do we ensure that you’re making sure that delivering these customer-centric experiences, that we as consumers are also doing the right things to make sure we’re not letting the bad guys into our cars? Everybody’s doing the right things. We’ve got to keep all up, and I assume that’s got to be foremost, as you said, safety on Microsoft’s mind as well.

Ravi: Absolutely. In some ways, Peggy, security needs to be built in as part of any of these innovations and should be a core part of the technologies. Both at the edge within the vehicles, between the knowledge sharing or the data sharing between the vehicle and the cloud, and in the cloud as well. So, security needs to be built in, and it’s a core requirement for lighting up any of these innovations. I would just highlight to your question earlier about the future of mobility. I see five fundamental areas that the industry would need to focus on. The first one is really looking at driving these new digital business models. So how do you create the digital platforms that you need to drive innovation? What is the right platform to bring commercial services, to bring very intimate and impactful consumer services to the market?

So, the first one is digital business models. The second one I would highlight is it’s critical to build out software and data competencies within organizations. This is an area that the industry is investing quite a bit and there’s a long way to go, and you do need to make sure within your organization you have the right software and data competencies built in, because they are going to help you unleash innovation and help you build the platforms that are unique to your needs. As part of that, security needs to be built in as well.

The third area would be sustainability, and that’s going to be center on everything we do, be it electric vehicle platforms, helping our organizations manage their carbon footprint across manufacturing, the entire value network. The fourth one I would say is operational efficiency. There is still a lot of cost that we can remove from the R&D manufacturing and supply chain processes, and technologies around AI, and data, and IoT. Help you get there. The last one would be the race of focus on delivering customer centric experiences because these vehicles will continue to evolve even after people buy them. So, you have to focus on continuing to innovate and provide that new customer centric experiences throughout the usage of those vehicles. So those would be the five areas, Peggy, that I would say are critical for our future, the digital business models, software data competency with security. Third one being sustainability, the operational efficiencies, and the last one around delivering customer centric experiences.