Silicon Valley rising

CHARLES Darwin once said: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."

While car companies are busy slugging it out in an increasingly challenging global car market, there is a bigger threat looming along the industry's periphery. This new threat is currently flying well below the radar of most car industry captains, simply because the new competition is not even from car companies.

Instead the new competition coming from a very unlikely source – technopreneurs from Silicon Valley, far away from industrial capitals of the world. Take electric vehicle (EV) specialist Tesla Motors for example.

The company is only 10 years old but its Model S sedan has already overtaken many big names in the industry to win the 2013 World Green Car of the Year award.

Tesla's proprietary technology is so far ahead of everyone else that Daimler and Toyota has decided that it would be better to license the technology from Tesla than to spend money to catch-up with them.

Tesla currently supplies EV components to Daimler's Smart fortwo ED and Toyota's RAV4 EV. What is more surprising is that Tesla is headed by a team with zero experience in the car industry. Prior to co-founding Tesla, CEO Elon Musk co-founded online payment company PayPal.

Tesla's Palo Alto, California headquarters is located far away from USA's automotive hub in Detroit. As such, Tesla pools its engineers from other technology companies rather than car companies.

When Tesla introduced its first model, the Roadster in 2007, General Motors' then vice-chairman Bob Lutz said "All the geniuses here at General Motors kept saying lithium-ion technology is 10 years away, and Toyota agreed with us – and boom, along comes Tesla.

So I said, 'How come some tiny little California startup, run by guys who know nothing about the car business, can do this, and we can't?'"

Despite Tesla's lack of experience, the company has shown far better financial discipline in managing high cost EV projects. Earlier in May, Tesla repaid its US$465 million (RM1.483 billion) loan from the US Department of Energy nine years ahead of schedule, making it first and only US car company to repay a government loan.

Tesla's cross-town neighbour Google, is also taking an interest in cars. The way the company sees it, the weakest link in vehicle safety and traffic control is not the cars but the driver.

Google currently operates a fleet of at least 10 driverless cars. Yes, you read that right, cars that drive themselves. Last year, Google posted a video on YouTube demonstrating how a Google modified Toyota Prius (the project is independent of Toyota) was able to help a blind California resident lead an independent life.

The driverless Prius was able to drive a 95% blind Steve Mahan across his neighbourhood, stopping by various locations including a laundry shop and a drive-through restaurant.

The car even located a parking spot and parked itself, obeyed all traffic regulations and avoided all road hazards. Many car companies have been studying driverless cars for decades but to date their prototypes are only able to operate within a narrow set of driving conditions, like on a straight highway, following a lead car or along a pre-determined route.

Google, however, developed a fleet of fully operational driverless cars that could operate in a variety of driving conditions in just five years. As of August 2012, Google says its driverless fleet has already logged 500,000 km of accident free driverless mode driving.

Throughout the test period, there were only two accidents involving Google's driverless fleet, both the result of human error rather than computer. The first accident happened when a Google engineer was driving the vehicle in manual mode.

The second incident involved a Google driverless car being hit in the rear while it was stopped at a traffic light. Currently, three states in the US allow driverless cars to operate - Nevada, Florida and California.

The first registered driverless car belongs to Google, with the number plate AU-001. Google says driverless cars allow reduce traffic congestion by allowing cars to be driven faster and closer together safely and choose better routes depending on traffic and weather conditions.

The company also suggests that city planners could better optimise parking space as driverless cars will park itself and deliver itself to the owner when required.

While Google is unlikely to produce cars like Tesla, it is positioning itself to control access to a higher value added service. If car companies are not careful, they could be relegated to merely low value producers of stamped steel. Disruptive technologies often do not originate from within, but the periphery.

When first camera-phones hit the market, companies like the now bankrupt Kodak didn't see a phone company as a competitor. Sony, too, did not think a niche computer company named Apple would make its music players redundant. Charles Darwin's words still rings true today.