BMW, Volvo, Toyota: How Auto Giants Are Reinventing Themselves Through Startups

Auto giants are writing billion-dollar checks to startups. Why? The global auto tech market is forecasted to reach $400B+ by 2030, and BMW, Volvo, Toyota aren't just watching from the sidelines - they're placing massive bets on external innovation.

What's driving this startup spending spree?

It's not just about staying current- it's about survival. Recent research shows 78% of automotive executives now consider open innovation essential to their company's future success. Even more striking? Companies using open innovation approaches hit their carbon reduction targets 30% faster than those going it alone.

This isn't casual collaboration anymore. We're watching an entire industry rewrite its playbook, and the question isn't whether traditional automakers will partner with startups- it's whether they can move fast enough to stay relevant in an electrified, software-driven future.

Why Auto Giants Are Turning to Startups

Here's the reality: a century of expertise in internal combustion engines now counts for very little in an electrified future.

"We're seeing an erosion of the traditional attributes that distinguish automakers and link to their profitability, like brand and performance," industry analysts point out1. For BMW, Volvo, and Toyota, this isn't just a competitive threat- it's an existential challenge that demands a complete strategic overhaul.

The numbers reveal just how dramatic this shift has been. Since 2010 to 2019, investors have poured $220 billion into more than 1,100 companies across ten technology clusters. The pace? Accelerating fast. The first $100 billion took six years to deploy, but the remaining $120+ billion followed in just the next few years.

What's most telling about this investment wave? Tech companies and venture capitalists account for over 90% of investments in the mobility space. Meanwhile, traditional automakers watched their market cap shrink by more than 10% since 2010, while tech players in automotive grew substantially.

Auto giants finally got the message. BMW i Ventures now focuses on e-mobility and battery technology. Alliance Ventures operates with a $200+ million fund targeting mobility innovations. These aren't just investments- they're admission tickets to the future of transportation.

The partnership logic is straightforward: automakers get access to cutting-edge technology they can't develop internally, especially in software where they've "traditionally been weak". Startups get something even more valuable- access to global manufacturing infrastructure and distribution networks that would otherwise take decades to build.

Car companies are turning to startups not by choice, but by necessity. And honestly? It's about time.

Inside the Startup Playbook of BMW, Volvo, and Toyota

Here's where it gets interesting- each auto giant has crafted its own playbook for startup engagement, and their approaches couldn't be more different.

BMW went bold with the venture client model back in 2015 through its Startup Garage. Instead of just writing checks, BMW becomes the customer first. Smart move!

This lets startups validate their tech with a premium automotive client before anyone takes equity. The results speak for themselves-  BMW has assessed over 4,700 startups and completed projects with more than 220 companies from 26 countries.

But BMW didn't stop there. They also run BMW i Ventures with over $800 million in assets under management, operating like a Silicon Valley VC firm but with deep automotive expertise. Since 2019, they've focused strategically on sustainability investments- battery tech, natural fiber alternatives, charging infrastructure.

Volvo Cars Tech Fund takes a laser-focused approach, backing startups that directly align with their safety and sustainability mission. Their investment in CorrActions caught our attention- this Israeli AI startup developed software that detects cognitive abnormalities in drivers by analyzing micro muscle movements that reflect brain activity.

Talk about next-level safety technology! They also made their first APAC investment in PowerShare, a Shanghai-based company whose Virtual Power Plant technology matches energy production with grid demand.

Toyota planted their flag in Silicon Valley with Toyota Ventures in 2017. With over $800 million in committed capital, they're hunting for frontier technologies and climate solutions.

Since launching in 2017, they've invested in more than 75 startups spanning AI, robotics, hydrogen solutions, and renewable energy. Their portfolio reads like a who's who of emerging tech- Starfish Space, Scentian Bio, and quantum computing startup Haiqu. Plus, they opened the Global Leadership Innovation Place in Tokyo to accelerate startup collaborations through co-creation.

What connects these different approaches?

They all go beyond just funding. We're talking strategic support, industry connections, and real-world validation opportunities- the kind of partnerships that actually move the needle for both sides.

What This Means for the Future of the Auto Industry

The auto industry isn't just changing- it's being completely rewritten! Strategic partnerships between established manufacturers and startups are redefining the entire mobility ecosystem for decades to come.

Here's what caught our attention: by 2030, the automotive revenue pool could grow by up to 30% to approximately USD 1.50 trillion, compared to about USD 5.20 trillion from traditional car sales and aftermarket products. But the real opportunity? It's not in the factory anymore.

"The real money in the future is going to lie downstream of the factory gate," industry experts note. Auto companies "have to look no longer at selling the car, but rather at a business model where they are generating revenue from every mile that the vehicle is utilized".

This shift is driving major manufacturers straight toward startups with expertise in software, connectivity, and data monetization.

Cars are becoming computers on wheels! The average vehicle is expected to grow from 200 million lines of code in 2020 to approximately 650 million by 2025. That's more than three times the complexity in just five years. No wonder partnerships between automakers and tech companies are becoming essential, not optional.

We're watching the emergence of collaborative innovation ecosystems that would have seemed impossible just a decade ago. Ford partnered with Google for AI and cloud computing capabilities, while BMW integrated IBM's Watson IoT platform for advanced vehicle technology. These aren't just tactical moves- they're strategic repositioning for an industry where traditional boundaries are dissolving completely.

The stakes?

Research shows that more than 45% of companies focusing on building new businesses outperform the market, compared with only 30% that don't prioritize new ventures. For traditional manufacturers, these partnerships aren't just about staying relevant- they're about surviving and thriving in the most profound industry transformation since the assembly line.

So what comes next? The companies that master these startup partnerships will likely define the next century of mobility.

Final Thoughts

Auto giants aren't just experimenting with startups- they're betting their futures on them!

BMW, Volvo, and Toyota have each carved out distinct paths forward. BMW's venture client model connects startups directly with business units. Volvo built collaborative platforms that bring multiple partners together. Toyota established dedicated venture funds targeting frontier technologies. Different approaches, same recognition: external partnerships deliver capabilities they simply can't build internally.

The implications stretch far beyond individual corporate strategies. We're watching revenue models flip from one-time vehicle sales to ongoing service relationships. Cars are becoming software-defined platforms. Companies that don't adapt through strategic partnerships? They face existential challenges in this new reality.

Here's what's particularly exciting: auto giants that successfully navigate this transition stand to thrive in an industry projected to grow its revenue pool by 30% to approximately $1.5 trillion by 2030. This future belongs to companies building robust innovation networks- not those clinging to traditional manufacturing advantages.

BMW, Volvo, and Toyota appear determined to lead this shift rather than follow it.

Will these partnerships redefine what it means to be an automotive company? We think the answer is already clear.

FAQs

Q1. Why are major automakers partnering with startups? 

Major automakers are partnering with startups to accelerate innovation, gain access to cutting-edge technologies, and adapt to the rapidly changing automotive landscape. These partnerships help them stay competitive in areas like electrification, software development, and new mobility services.

Q2. How are BMW, Volvo, and Toyota approaching startup collaborations? 

BMW uses its Startup Garage and BMW i Ventures for startup engagement. Volvo collaborates through MobilityXlab, a partnership platform connecting multiple companies with startups. Toyota operates Toyota Ventures, an early-stage VC focusing on frontier technologies and climate solutions.

Q3. What benefits do startups gain from partnering with established automakers? 

Startups benefit from crucial funding, access to global manufacturing infrastructure, and distribution networks that would otherwise take decades to build. They also get the opportunity to validate their technologies with premium automotive clients.

Q4. How is the automotive industry's revenue model changing? 

The industry is shifting from traditional one-time vehicle sales to ongoing service relationships. By 2030, the automotive revenue pool is expected to grow significantly, with a focus on software, connectivity, and data monetization rather than just manufacturing.

Q5. What role does software play in the future of automobiles? 

Software is becoming increasingly crucial in modern vehicles. The average car is expected to grow from 200 million lines of code in 2020 to approximately 650 million by 2025. This shift is transforming cars into software-defined platforms, driving automakers to seek partnerships with tech companies and startups.