Epic Games are diversifying into automotive
Yeah, you read that right. The guys who make Fortnite now want to help General Motors make cars.
Man, I've had such an epic crack at General Motors (GM) over the past weeks. But let's be honest, it's kinda warranted. I haven't seen one skerrick of evidence that they're doing new, amazing innovative things like a century-old, global multi-trillion dollar company should be. And especially when the competition isn't just knocking on their door, they're kicking the door in like corrupt cops.
But today, I'm not going to slag off at GM. In fact, I'm going to praise them. Today they announced a partnership that wasn't a complete oversight and may actually have some practical applications. That's a stark contrast to a piece I wrote about GM's partnership with Nikola (NKLA). An electric and hydrogen vehicle manufacturer that shortly after got ousted for fraud and had their founder resign not two weeks after the announcement. Nikola's market results continue to be laughably volatile.
Today's partnership announcement was unexpected, totally left of field and fills me with a whole great deal of hope. I didn't expect to be saying that the publisher of Fortnite and long owner and developer of one of the world's most renowned video gaming engines, Unreal, is going to be diversifying into automotive. But here I am. Epic Games is partnering with General Motors to use the Unreal Engine as a base for developing the next generation of the software powering electric vehicles.
That's bloody exciting. Why is it so exciting you ask? Because vehicle manufacturers have not been known in the past for their software development. Over the past two decades, the biggest let down for all vehicles have been both the way that the software and hardware link is managed and the reliability of said electronics.
Take BMW in the early 2000s. Most enthusiasts agree that those BMWs were superb. The E46 M3 is practically a collector's item today and much loved by most of the community. Except those cars are let down by the car's computers and electronics. In fact, the issues with the electronics and computers controlling them are so bad during that era of cars that they've been known to cause expensive and in some cases unfixable mechanical issues with the cars.
Today the software which governs automotive use is much better, but it's by no means imperfect. For example, the average Tesla owner will have to bring their car back to service with an electrical or software issues twice within the first month of ownership and the software in that care is considered the most advanced on earth.
I don't think automotive manufacturers have been thinking laterally enough in that space, to be honest. When you have a highly complex mathematical or programming problem that requires a high level of scientific and technical competency you don't solve it yourself. You get someone who is properly innovative and qualified to solve it for you. Automotive has in the past exempted themselves to this rule and just pushed on anyway. The result is you have other big tech companies like Apple (AAPL) pushing into space with their Carplay software. Allowing Apple to own the big data that gets gathered by that car through the customer's phone.
The announcement of the General Motors/Epic Games partnership makes me excited to see what this next generation of automotive software may harness. Epic Games are known for their technical prowess and innovation. They are professionals and their software products are both extremely reliable and even more versatile. Those are two qualities General Motors could desperately use and I'm impressed that they've thought outside of the box to get to the partnership.
I just wanted to take a step back and look at why General Motors chose a video gaming publisher and software company to partner with in general though. Because video games and cars don't initially seem like the obvious choice for a partnership. But when you delve into it a bit deeper the partnership makes a lot of sense.
Video games normally require some sort of input peripheral to work such a controller, mouse and or keyboard. Cars are much the same, they require input to function as well and that input is nowadays mostly controlled by software and a computer. Most games, in order to be successful, also require some sort of efficacy upon release. This is because games today are bought so often and on such a large scale. It makes getting away with mistakes extremely difficult and those mistakes frequently cost publishers billions.
The other reason is the pure size of the video game industry in today's world. In 2019 the gaming industry was worth $151 billion which is a staggering number. To compare the movie industry was worth a mere $50 billion in 2019 and the computer hardware sector was word $252 billion in 2017. The computer hardware sector includes corporate and industrial computing as well which makes up a huge chunk of that $252 billion.
With that much power lying with video games it allows these publishers to attract the best talent in industry. It also allows them to spend big on the development and marketing of their products which is why the end result in most cases is so good. Compared to automotive in the past 3 years, video games have also been growing exponentially and especially since COVID19.
So a partnership between one of the biggest and most integral worldwide manufacturing sectors and one of the biggest and most reliable software development and publishing industries makes a lot of sense.
General Motors have announced that the first car they'll be developing in partnership with Epic Games is none other than the full electric Hummer. Epic Games are calling the style of software and operating system that they'll be developing for the car their HMI initiative (Human-Machine Interface).
I've gotta say, in general, I think this one is one to watch. Epic Games are big players in the video game sector and are well respected in software development. If they can create something special for the new EV Hummer than that industry is going to be blown wide open. All General Motors needs to do is come to the party with the hardware. That remains to be seen, but long term Epic Games have committed to working with other automotive manufacturers on the same initiative. So while General Motors are an exclusive partnership for the moment there's no reason that this initiative can't spill to other manufacturers down the track. With any luck this spurs on a new world of motor vehicle development well into the future. One can hope, and anyone invested in General Motors right now should be hoping that this partnership garners many many fruits of labour.
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