Has Sony Gone Over the Edge?

Episode Summary:

Few industries are as difficult, expensive and risky to enter than auto making. Despite decades of futile attempts by many companies to take on the majors, the success of Tesla has spurred many to start EV enterprises. Surprisingly, Sony Corporation has joined the fray, announcing a new electric crossover SUV at this year’s consumer electronics show in Las Vegas. This is the second electric vehicle that Sony has shown in prototype form, and with considerable real-world testing now complete, it looks clear that Sony is serious about entering the car business. But why? The company may have ulterior motives. Jim Anderton has a theory.

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Transcript of this week's show:

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Few global brands are as recognizable or as well-respected as Sony. 75 years ago, when Sony started, in this hemisphere consumer electronics were dominated by brands like Westinghouse, General Electric, Motorola, Philco and Zenith. The then Japanese upstart took an American invention, the transistor, and did what the then fledgling US industry wouldn’t do: make affordable, popular pocket-sized transistor radios. It seems elementary today, but the fact is that the US electronics industry had little incentive to disrupt decades of vacuum tube technology, and the experts didn’t feel that anyone need or wanted a pocket-sized radio.

Three decades later, and Sony did it again with the revolutionary Walkman, allowing cassette tapes and later CDs to make things like jogging or exercise a lot more fun. The company is clearly innovative, and more recently they have expanded into smart phones and the entertainment industry, including feature films and of course computer gaming with PlayStation.

But at the 2022 Consumer Electronics Show in Las Vegas, Sony unveiled a prototype of an electric crossover SUV, the second electric vehicle prototype that the company has revealed. The first effort, a small sedan announced in 2020, was hard for people like me with a background in the industry to take seriously. Everyone is trying to get into electric car business, with multiple brands from China, Europe, the US, even Vietnam. Apple is threatening to make an electric car. Apple’s favourite manufacturer, Foxconn, already has EV manufacturing capability. It reminds me of the automotive industry before 1920, when there were hundreds of carmakers, all with a better idea and each believing that they had the design that would revolutionize the auto industry.

Today in America, there are three majors left: GM, Ford and recently, Tesla. Making EV’s is easier than making internal combustion engine vehicles, but that doesn’t mean it’s simple. Dyson, a company with extensive experience in making battery-powered consumer goods, backed out after spending a lot of money in electric car R&D. It’s very difficult to make money in the auto business. Margins are low, capital costs are very high, supply chains are long and complex and the market is already oversupplied with product worldwide. Why would Sony possibly want to go into this industry?

Well, it looks like Sony is betting on something that automakers haven’t thought much about in the drive to self driving cars: what are the people inside the car going to do with their time if they’re not driving? Sony obviously asked themselves that question, then concluded that as a company with extensive experience in smart phones, computer gaming, and owning a huge and growing library of first-run movies, they should turn the family car into a kind of rolling entertainment pod, offering an immersive theatre like experience while you get yourself to the 7-Eleven for quart of milk.

In my opinion, this strategy is either brilliant, or it’s completely crazy. Sony appears to be betting that the real margins in the electric vehicle space are not going to be in transporting people from point A to point B, but in selling them entertainment during that drive. Could it be that the next generation of car buyers will be more interested in first-person shooters and action movies than the performance or style of the vehicle itself?

Part of me wants to say that Sony is obviously insane, but in the 1950s, it was insane to make a radio so small that it fits in your pocket. And in the 1980s, it was insane to make a stereo cassette player that you could take jogging. Betting against Sony is probably a bad idea, but I just can’t imagine going to a new car showroom, climbing into the vehicle and test driving it with the Uncharted: Legacy of Thieves Collection. You’re going to be able to play Gran Turismo Sport and feel like you’re driving a car while you are actually riding in a car.

If that won’t make you feel like you live in The Matrix nothing will.