Silicon Valley Lab head Nick Sugimoto (left) and Xcelerator programme lead Dennis Clark scour the region for technology and startups that can help jazz up Hondas and Acuras
image: Timothy Archibald For Forbes
Honda Motor Co’s future is quietly being forged in a secretive lab in Mountain View, California. From this 35,000-square-foot taupe-coloured office park, Naoki ‘Nick’ Sugimoto, a 55-year-old Honda veteran, scouts for the world’s best tech partners. Two recent projects from Sugimoto’s lab—a car display enhanced with holograms and an “optical” microphone that dramatically improves speech recognition by reading a speaker’s facial vibrations—wowed crowds of auto and tech enthusiasts at the Consumer Electronics Show in Las Vegas in January.
“When it comes to creating innovations, doing everything in-house is not the right way,” says Su-gimoto, echoing a new company line. “Open collaboration is really the key.”
As if to underscore the point, the world’s eighth-largest carmaker recently announced partnership talks with Waymo, the Alphabet subsidiary formerly known as Google’s self-driving-car unit. With the exception of Fiat Chrysler, which has put Waymo’s technology into 100 minivans, automakers have treaded carefully around Google, fearful that the tech giant could someday come to dominate their business.
Times are a-changing for the maker of Baby Boomer favourites like the Civic, Accord and CR-V; the company has long been known for its obsession with solving engineering problems on its own. Since its founding in 1948, Honda has made motorcycles, cars, lawn mowers, jets, fuel cells, humanoid robots and just about everything else in-house. But in a world where cars are rapidly becoming tech gadgets on wheels, Honda’s hallmark masterful mechanical engineering is no longer sufficient. To stay competitive, Honda needs to get over its chronic case of Not Invented Here syndrome, and as Sugimoto’s lab and the Waymo talks make clear, it’s starting to make progress. “Honda is willing to pursue win-win technology cooperation so that we can openly innovate with other companies and at the same time show our individuality,” says Honda CEO Takahiro Hachigo via email.
The stakes couldn’t be higher. The auto industry has entered a new era dominated by technologies like Artificial Intelligence (AI), sensors, apps and ride-sharing. As with every other automaker, Honda’s execs are touting a “cooperative mobility ecosystem”—a distributed fleet of vehicles that communicate with their occupants, other vehicles and sensors on roads, bridges and buildings to make travel safer, less congested and more fun. Nifty, for sure, but it’s clear the company can’t get there alone. “Honda’s core competencies aren’t in these emerging areas,” says Ed Kim, an analyst at AutoPacific, an industry consultancy.
Honda sold 4.4 million vehicles in 2015, less than half as many as giants like Toyota, Volkswagen and General Motors. Sales for fiscal 2016, which ended on March 31, grew at a healthy 9.6 percent, bringing revenue to about $130 billion. But the company is forecasting a 6 percent drop in revenue for the current fiscal year at a time when other automakers are expected to be flat overall. S&P Global Ratings recently cut its outlook for the company.
Intangible signs are worrisome, too. When it comes to in-car tech, “Honda is seen at this point to be fairly average,” says Alexander Edwards, president of Strategic Vision, a San Diego research firm. Long known for making some of the most reliable vehicles, Honda ranked sixth in owner satisfaction in Consumer Reports’ most recent survey, published in December.
(This story appears in the 17 March, 2017 issue of Forbes India. To visit our Archives, click here.)