With Auto Companies Flocking to Silicon Valley, Will the Bay Area be the Next Center of the Auto Industry?

Volkswagen, Apple, Tesla, Volvo, Sobrato, Nissan

By Meghan Hall

Last week, Volkswagen announced the foundation of Volkswagen Autonomy GmbH, the company’s autonomous vehicle division, which will be headquartered in Munich, Wolfsburg, Germany, China and one more, up-and-coming auto-loving region: Silicon Valley. The Silicon Valley campus is expected to open in 2020 and was selected due to its proximity to artificial intelligence technologies and the world’s best talent pool for the development of autonomous driving vehicles. Volkswagen’s decision to create an innovation center in Silicon Valley follows on the heels of numerous other auto companies establishing centers in the region.

“We want to establish Volkswagen Autonomy as a global technology company where we bundle expertise from the automotive and technology industries, combining the agility and creativity of a high-performance culture with process orientation and scalability,” said Volkswagen Senior Vice president for autonomous driving, Alexander Hitzinger in a statement. “We will continue to use synergies across all Group brands to reduce the cost of self-driving vehicles, high-performance computers and sensors. We plan to start commercializing autonomous driving at a large scale around the middle of the next decade.”

The announcement comes less than a year after Hitzinger jumped back to Volkswagen group in January. Prior to returning to Volkswagen, Hitzinger worked at Apple as an executive on its self-driving car program, known as Project Titan. Before Apple, Hitzinger had worked at Porsche, VW’s sports car division and at Red Bull Technology on Formula 1 racing. 

In his newest role, Hitzinger will head-up Volkswagen Group’s commercial vehicle division as its strives to bring self-driving cars and mobility-as-a-service (MaaS) programs to the market. Transportation-as-a-Service (TaaS), Special Purpose Vehicles (SPV) and robo taxis are all also part of Volkswagen’s agenda in the coming years.

“Autonomous driving presents the entire industry with major challenges: high development costs, extremely high demands on sensor technology plus a lack of regulatory systems and heterogeneous regional standards,” continued Hitzinger. “Our goal is to build an agile, high-performance development team with the know-how to realize a self-driving system ready to market.”

By the end of the year the company’s autonomous driving resources will be transferred to its VWAT GmBH division, currently in Munich and Wolfsburg, Germany. By 2020, its Silicon Valley headquarters will be open, with a fourth headquarters slated to open in China in 2021. Its Silicon Valley headquarters will include all of VW’s brands and entire car portfolio: Audi, Bentley, Bugatti, Ducati, Lamborghini, Porsche and Volkswagen. 

Currently, Volkswagen Group of America is headquartered off of 500 Clipper Drive in Belmont, Calif., not far from where Porsche Consulting opened its new office in November of 2018. It is the ninth office that Porsche Consulting had opened since its founding in 1994 and is located next to Volkswagen’s Electronics Research Laboratory. It is unclear at this point as to whether or not its Belmont resources will be incorporated into its new Silicon Valley location.

However, what is clear is Volkswagen’s desire to be at the heart of the autonomous vehicle race. Several other major car companies already have innovation centers in Silicon Valley, including Nissan, Volvo, Ford and Mercedes. Last week, VW CEO Herbert Diess stated during a press conference that Tesla is one of VW’s major competitors and not just a niche business, a statement that made major waves in the business world.

“We have a lot of respect for Tesla,” said Diess. “It’s a competitor we take very seriously.”

The carmakers are part of a flock shifting their focus away from the traditional auto industry — whose epicenter has long been in Detroit — to electric and autonomous vehicles. In September of last year, Volvo announced its plans to put its research and Development Silicon Valley Tech Center at 380 N. Pastoria Ave., taking the entire 45,000 square foot building where the department will focus on zero net energy developments. The center is right next to Mercedes’ R&D office at 340 North Pastoria in Sunnyvale and is also near the Mercedes-Benz corporate campus at 309 N. Pastoria Avenue. Nissan’s Silicon Research Center opened several years ago, and also focuses on autonomous driving technology. Its research division has been expanding steadily, and in May of 2018 it was announced that it would be taking more than 90,000 square feet on Central Expressway in Santa Clara owned by Sobrato Organization.

How Silicon Valley’s auto industry will continue to evolve remains to be seen, but for now what is clear is companies’ desire to be near one another, the Bay Area’s top talent and the tech industry that will drive the car industry forward into the future.

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