During a recent business event in Berlin, Audi CEO Rupert Stadler stated, "A car is one's second living room today -- that's private. The only person who needs access to the data onboard is the customer." Stadler added that Audi takes data privacy "seriously," and that it didn't want its customers to feel "exploited."
Stadler didn't call out Google by name, but it was a clear warning against the data mining potential of Google's autonomous vehicles. Fellow German automaker Daimler (NASDAQOTH:DDAIF), which owns Mercedes-Benz, also expressed similar reservations about data privacy in connected vehicles. This represents a big setback for Google, which has been trying to forge stronger relationships with German automakers over the past few months.
Does anyone still trust Google?
Audi isn't the only company to criticize Google's business practices. Back in 2011, Google launched Google Wallet, a PayPal-like service for storing debit, credit, loyalty, and gift cards. However, many major banks refused to sign up with Google, since the company requested permission to mine customer data on purchases and other behavior.
During a recent speech in Washington, D.C., Apple (NASDAQ:AAPL) CEO Tim Cook accused Google and Facebook (NASDAQ:FB) of "gobbling up everything they can learn about you and trying to monetize it" with ads.
Apple subsequently revealed plans to let developers make ad-blocking extensions for mobile Safari in iOS 9. Since Google generates about 75% of its mobile ad revenue from iOS devices, Apple's sneaky blow could seriously hurt Google's top line. Apple also blocked Google services like Google Maps on CarPlay, its dashboard mirroring platform for connected cars.
Looking ahead, other automakers could follow Audi's lead and refuse to license Google's autonomous tech, which would dash its dreams of getting driverless cars onto roads by 2020.
Google's Trojan horse strategy
The perception of "free" Google services acting as "trojan horses" for data mining has hurt the company's public image and the overall perception of mobile apps.
Last year, a survey by research company Survata found that average Americans trusted the NSA more than Google. A recent study conducted by international trade association MEF found that in 2014, 72% of worldwide respondents disliked sharing personal information while using mobile apps, compared to 65% in 2013.
Yet handing out free candy with data-mining strings attached has always been a core Google business strategy. That's how it tethered consumers and companies to services and platforms like Search, Android, Drive, and Chrome OS. But in exchange for that "free" software, Google's OEM partners do the heavy lifting and take on the overhead risks of manufacturing and selling the hardware.
That strategy worked with smartphones and tablets, since plenty of companies were eager to launch mobile devices to challenge Apple's iPhones and iPads. But it probably won't work with major automakers, which already have well-established customer bases. In my opinion, many automakers won't be willing to license free or cheap driverless tech from Google in exchange for customer data.
Who wins if Google loses?
Google's driverless car ambitions also simply aren't practical. The company must remap roads in "high detail" to be recognized by its driverless cars, the cars only have a max speed of 25 mph, and the prototypes are equipped with up to $250,000 in road scanning equipment.
Google's road scanning tech will inevitably improve, maximum speeds will rise, and costs will drop. But no matter how cheap Google's technology gets, it probably still can't compete against cheap semi-autonomous collision avoidance systems from companies like Mobileye (NYSE:MBLY).
Mobileye's system, which synchronizes basic cameras and radars to braking systems, can prevent a car from hitting other vehicles or pedestrians for just $1,000. An upcoming system can detect lane markers and cruise down any road -- not just the ones that have been digitally mapped out. That's why over 90% of leading automakers (including Audi) have already signed deals with Mobileye.
When low-tech trumps high-tech
Google hasn't stated whether or not it will track passengers in its driverless cars. But considering Google's track record with search, mobile devices, and payments, it's highly likely. If that's true, Google's long-term vision for autonomous vehicles is audacious: Users simply summon a car with their phone, hop in, and reach their intended destination. In exchange, Google retains that data and uses it to craft targeted ads across other devices.
Unfortunately for Google, automakers likely won't let it mine their customers for data. Therefore, the only way Google can possibly realize its dream is to manufacture cars on its own -- an idea that Chief Business Officer Omid Kordestani dismissed during the Code Conference in late May.
Leo Sun owns shares of Apple and Facebook. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.