Since the days of the Israeli-made Sussita, and until quite recently, it appeared that Israel was of no special interest to the global auto industry. Renault was won over by Shai Agassi, and invested in his unsuccessful Better Place electric car venture, but big names like Fiat, Toyota, and BMW stayed away from the local arena. Over the past year, however, the world's leading auto manufacturers have decided to switch gears and look for innovation in Israel. They aren't looking for innovative auto design; they want technologies that will give cars added value.
Fiat, which is behind Alpha Romeo, Jeep, and Chrysler, to name a few, is one of the leading companies showing interest in Israel. As early as the beginning of the preceding decade, reports appeared that the Italian manufacturer was considering cooperative efforts, or even the establishment of an Israeli R&D center subordinate to the company's Italian R&D center (CRF). At the beginning of this year, a Fiat team visited Israel to check out the possibility of establishing a local R&D center. The company will try to focus less on things like the Internet and high tech, and more on alternative fuels. It was reported that this visit was a continuation of an Israeli delegation's visit to Turin last year, which included Israeli government representatives, and was initiated by the Mediterranean Car Agency (MCA), Fiat's official importer in Israel, among others.
Israel Export & International Cooperation Institute director for International Projects, Target Countries, and Automotive Uri Pachter says that one of the things in which Fiat is showing interest is the use of methanol as an alternative to the gasoline. "The intention is to establish a center in Israel that will jointly develop methanol, after which it will be installed in systems and used to fuel cars in Israel," he says. "There are discussions, but no final decision on the matter has been taken yet."
At the same time, Fiat subsidiary Magenti Marelli, which develops and manufactures systems and technology components for the auto industry, plans to hold a special day in the next few months, during which it will meet a number of Israeli companies in order to consider cooperation.
Another manufacturer taking a close look at the local market is BMW. Pachter explains that the connection with the German manufacturer began in 2008, and was based on subcontracting for spare parts and sub-systems, but is now focusing more on the local high-tech scene. The turning point came last year at a major event held by the Export Institute in Munich under the auspices of the Ministry of the Economy's trade mission there, in which 30 Israeli companies took part.
"Following that technology event, several Israeli companies initiated contacts with BMW. A number of agreements were signed, and things began to move," Pachter explains. Last month, a senior BMW delegation visited Israel to meet with Israeli companies and with the Chief Scientist in order to hear from him about the plans for integrating international companies in the local market.
At the same time, at the beginning of the year, representatives from BMW i Ventures, BMW's investment fund, attended the Israel Dealmakers Summit held by Landmark Ventures in New York for the purpose of examining at close range possible investments in Israeli startups.
Two other auto manufacturers that are zeroing in on Israel are Spanish company SEAT and Czech company Skoda. Earlier this year, Ministry of the Economy director general Amit Lang visited SEAT's offices in Spain, and presented to senior executives from the company a number of Israeli technologies likely to interest the Spanish manufacturer. In addition, representatives of the Ministry of the Economy and the Export Institute visited Skoda headquarters near Prague last year, and made a presentation about 20 Israeli companies to Skoda representatives. US auto manufacturer Ford is another company whose name has been linked with the local high-tech industry, and the company held a special technology event last year at which a number of Israeli companies made presentations to senior Ford executives and representatives of Fords sub-contractors.
"Great expectations"
Toyota is the most recent auto manufacturer to express interest in Israeli innovation. The company organized a hackathon for Israeli developers today, in which it is searching for special developments in various fields. Susumu Kono, a senior researcher at Toyota's Toyota Info Tech Center subsidiary, which is looking for new technologies for the Japanese auto manufacturer, said that it was the second hackathon the company was holding outside of Japan, after a similar event in Mountain View in Silicon Valley last year.
"I heard that Israeli engineers were coming up with creative ideas, and I want to see it from close up," Kono said in explaining why he is visiting Israel. "We have no specific technologies that we're looking for, but we came to Israel because Israel is where applications like Waze are being developed, and we have great expectations from the market here. There are high-quality people here with open minds and a supportive environment in the form of venture capital funds and government support."
According to Kono, the subjects of interest to Toyota are using big data stored by the company from the use of its vehicles, such as driving speed, the road situation, temperatures inside and outside the car, etc. "We want to see how we can use these data with innovative developments," he explained.
GM's investment arm
Even before the current wave, General Motors was the first auto manufacturer to recognize the potential in Israel's development talent, and set up a development center in Israel from scratch. The center brought together scientists and researchers, who engaged mainly in developing car sensors. Since that time, the development center has hired software engineers, developers, and big data personnel, and currently has 100 employees under the management of General Motors Israel CEO Gil Golan.
General Motors has been indirectly cooperating with Israel since 1995, but only in 2007 did the company realize that it was worthwhile establishing an R&D center here, and that Israel was a critical location for exceptional technologies and innovation for the auto industry. "Some of the things we're working on have already gone into General Motors vehicles, but more substantial things will be put in later," Golan explains.
Four years ago, General Motors International, like quite a few global corporations, launched an investment fund. Its fund is called GM Ventures. The fund, which was initially allocated $100 million, uses the local development center as its Israeli investment arm, and invested $5 million in Powermat, which is developing a wireless charging surface for mobile devices, as early as 2011. The fund has also invested in four other Israeli companies.
"The auto industry has become very attractive, with a huge variety of technologies. It's possible to see how any technology you can think of can be adapted to the auto industry," Gil Golan says. "In recent years, together with the radical development of technologies that affect the auto industry, but aren't the industry's core, therehas been a change towards combining the unusual with the conventional. An opportunity has therefore been created here that is very relevant to the Israeli high-tech industry. A car company won't look for conventional things here, such as the next generation of engines, because there are better places for that. But features like sensors, vision systems, sensory systems, information security, and user experience-based interfaces are at the core of the local industry," he says.
Concerning the interest being shown by other manufacturers, such as Fiat and BMW, Golan comments, "It only goes to show how important the matter is for the auto industry, because this industry is hungry for innovation. We have no doubt that in the next five years, there will be more automotive players in Israel." At the same time, he made it clear that if other manufacturers do important things in Israel, it will be through the establishment of R&D centers from scratch, not by acquiring local companies, as technology giants like Apple and Facebook did. "In the auto industry, the practice of acquisitions is less well known. It makes the process harder - building something from scratch and relying primarily on organic growth - but the fact that there are other important players in the field and from other fields here eases the risk and gives a feeling of confidence," Golan continues.
Pachter explains that connections with the car manufacturers have already been going on for a decade, but only in the past two years has there been a change in the direction of high tech. "The manufacturers are showing interest in cyber security, communications between vehicles, navigation accessories, augmented reality, technologies that facilitate operation of systems by voice or hand movement, noise reduction during driving, weight reduction, and alternative energy," he says.
According to Pachter, one of the most popular segments is electronic entertainment and smart cars - the result of multimedia systems that have been introduced into cars in recent years on the one hand, and connectivity of cars to the Internet through cellular and WiFi networks on the other.
Clear evidence of this can be seen in the CES electronics exhibition, the largest in the world, held early this year in Las Vegas. Mercedes Benz, Tesla, Ford, and General Motors presented various developments in cooperation with technology companies. Among other things, there were car systems that combined large touch screens, use of verbal commands, cameras, and various driver interfaces.
It is hard to talk about the auto industry's interest in Israel without mentioning two names: Better Place and Mobileye(NYSE: MBLY). Better Place created a real buzz about the electric car industry in Israel, but failed in the end. On the other hand, Mobileye, a producer of systems for preventing traffic accidents, has had great success, and made its IPO in the US in August at a company value of $5.3 billion, which has since soared to $10.5 billion.
"Mobileye is a good example of the capability that exists here, but that isn't the only reason for the interest in Israeli companies. There's no doubt that these two names, combined with the reputation acquired by the Israeli high tech industry over the years, are helping the local market, and creating interest and opportunities," Pachter says.
Better Place and Mobileye have put Israel on the map," says Golan. ""Better Place created hype that made a connection between electric cars and Israel. Unfortunately, it failed, and that's a pity. At the same time, it created experience and know-how among its employees, and its CTO and other employees came to work with us and are contributing from this know-how. Every startup aiming at the auto industry, and also those whose product can be used in the auto industry, adds weight."
Published by Globes [online], Israel business news - www.globes-online.com - on October 26, 2014
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