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The real reason Google is building driverless cars

If Google wants to sell people automobiles, it’s off to an underwhelming start. Its new prototype of a driverless car looks like a cartoon contraption, goofier than the goofiest car on U.S. roads, the smart fortwo.

It’s a good bet, however, that Google doesn’t want to sell cars, despite rampant speculation about its plans to enter the auto industry. Up till now, Google has spent years strapping driverless technology onto otherwise mainstream vehicles such as the Toyota Prius. In the new prototypes, the technology is integrated throughout the machine. The autonomous, two-person pods have no steering wheel and no brake or accelerator pedal, since those are throwbacks to an ancient, mechanical era. Instead, sensors and software do all the work, while the people inside simply enjoy the ride.

“Is is brilliant PR? Brilliant technology? Or both?” Aaron Task asks in the video above. Google probably doesn’t mind the guessing game, since self-driving cars offer the kind of fantastical allure that coincides nicely with Google’s stated mission to address big problems. A self-driving car would allow commuters to get work done while sitting in traffic. Older drivers would retain their mobility even as their faculties decline. Drinkers would have a built-in designated driver.

The secret to all of this magic, however, isn’t in traditional vehicle components such as engines or transmissions. It’s in digital technology—and that’s where Google comes in.

The auto industry is mature and highly competitive, with profit margins much lower than in Google’s core business areas. But driverless systems could supercharge the industry and ultimately amount to well over $200 billion in annual sales. That’s a huge market, and one well-suited to Google’s strengths.

Another powerful trend in the auto industry is the integration of Internet connectivity, apps, entertainment features and other smartphone-style features into the car itself. Your car, in fact, will soon become a mere extension of your smartphone, and vice versa. It’s quite possible that when picking out options such as engine size and upholstery material, you’ll also have to decide whether you want your car to be compatible with Google’s Android system or Apple’s iOS—just like choosing a smartphone itself. And both Google and Apple are working hard to gain turf in this vital new frontier.

The automotive suppliers that provide digital control systems and Internet connectivity for the cars of the near future are likely to reap a windfall. Another Google advantage is its lead in digital mapping, an essential technology for self-driving cars. Since Google is a trusted and well-known brand name, car buyers may even prefer cars powered by Google technology, the way computer buyers once preferred machines with “Intel inside.”

Google doesn’t build smartphones, but its Android software is the basis for about 80% of the world’s smartphones, which are made by manufacturers such as Samsung, Nokia and HTC. It’s easy to imagine Google pursuing a similar model with vehicle technology, which could be integrated into cars made by Toyota, General Motors and any other automaker. In that way, Google could grab a big share of a huge and growing business without ever selling a single car. That’s far preferable to attempting to compete in a capital-intensive manufacturing business against established automakers that have been building cars and working out the kinks for decades.

Google may not end up nearly as dominant in the smart-car business as it is in smartphones, however. All the big carmakers and automotive suppliers are working on their own driverless technology, and they have the advantage of elaborate testing facilities and deep know-how on every aspect of automobiles. And they’re already rolling out vehicles that feature quasi-driverless technologies such as automated braking, lane-monitoring systems and 360-degree sensors.

Google, by contrast, has its driverless pods able to travel up to 25 miles per hour on California roads, while steering and braking themselves. The quest to pilot the car of the future ought to be a fascinating and unconventional race.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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