Ford’s ex-chief economist once wrote, “I cannot think of an industry more cyclical or more dependent on the business cycle than the auto industry.”
Over two decades and an industry bailout later, auto-tech entrepreneurs are acutely aware that their pitches must be recession-proof to impress investors at this week’s massive Collision tech conference in Toronto, as the deal-making environment sours to its worst in a decade, and popular fundraising tools like SPACs are floundering.
“The sentiment around this conference is a little bit different. I’ve heard people pull out [of the event] because of their talks being irrelevant, or at least tone-deaf, given the current environment,” said Clutch CEO Dan Park.
“Companies like ourselves—Series B, Series C, Series D—are certainly feeling the impact of that. I think that continues to trickle down. … I think we’ll go through a healthy period of normalization, resetting expectations of multiples, which I think in the long term will be better. But I think it will also cause two years of pain.”
The substitute-goods pitch: Park’s startup, Clutch, deals with Canadian used-car e-commerce. With resale prices at all-time highs, they’re still the type of good that consumers are more likely to turn to when their incomes are falling, as a substitute for a newer car.
Magna International founder Frank Stronach pitched his new business as an antidote to both high car prices and high gas prices, aiming to price his SARIT one-person micro-EVs at $6,000 to $7,000 each, with an estimated 60-cent recharge per 100 kilometres’ range.
The dollar drive club: On the opposite end of the price spectrum, Automotive Parts Manufacturers’ Association president Flavio Volpe told me he’s been pitching Ferrari on Canada’s supply chain. Volpe said automakers like Ferrari are more interested in investing in systems for data, apps and software than steel and aluminum. With cars on the road for more than 11 years on average, monetizing those systems will bring recurring revenue opportunities long after the current downturn.
People are admitted into the opening night of Collision 2022 in Toronto on June 20. Photo: Christopher Katsarov Luna/The Logic
The asset-light pitch: Volpe also noted that traditional chip fabrication (often shortened to fab) is an expensive business and Canada must be strategic about supporting the industry. The Ontario semiconductor startup Blumind is fab-less. It’s focusing instead on embedding chips to support AI for battery-operated devices, including vehicles, while using less battery power and requiring less customization than traditional localized AI systems.
One caveat: It might be tough to sell a bold vision for a new chip industry, for instance, in a short-term downturn. But Blumind co-founder Niraj Mathur said a national strategy to get a semiconductor industry going—even a decade from now—would still help support the ecosystem by signalling future investments down the road.
“It’s really nice to have a bold, big vision that we can all drive toward in the long term,” he said.
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