The automotive world turned modern societies on their heads with the advent of propulsed mechanical transportation over 100 years ago. The very first vehicles were in fact electric, yet then morphed into internal combustion engine models as that technology developed far quicker than did battery storage. Electric could simply not compete, and thus began the first transformation in the automotive industry.
After over sixty years as the dominant method of propulsion, companies began to experiment with two important issues in the automotive world. One was the issue of gas efficiency. Struck by the oil embargo following the Arab-Israeli war, car makers were ordered to make their vehicles more efficient, in order to reduce dependency on foreign oil. Second was the issue that people were maxing out their bank accounts and living on credit. No longer willing to fully pay for a depreciating asset up front, the automotive industry again evolved into a financial model vs a manufacturing model. It outsourced much of the manufacturing to third parties while become purely a finance, marketing, design and final assembly set of companies.
Enter the resurgence of electric, as battery technology began to be the recipient of much attention and funding. A couple of false starts with EV1 by General Motors and others, led to Toyota launching its Prius and Camry lines with batteries capable of a few kilometres at a time. This was then followed by Nissan launching the very first mass-market electric vehicle, while GM answered with its range-extended Volt.
The next disruption came at the hands of a company that nobody knew before, simply because it didn’t exist…Tesla. Having visited the Tesla factory in early 2012 in Fremont, California, I was very impressed by how “non automotive” my whole visit was. For all I knew, the robots could have been building fridges instead of cars. The office was more in line with modern technology company “open office” concepts than any of the ones I had visited in 2009-2011 in Detroit during the days I worked for another start-up I had co-founded in Michigan. This felt different and I knew they were going to do incredible things.
As with everything else, disruption is not welcomed by all. This is a car which has no universal joints, ball joints, muffler, radiator, oil nor fuel required. It just is so radically different that most automotive veterans will recognize few pieces of it when its brought down to its chassis level (as one can see in many Tesla showrooms). Oh and yes, lest I forget…there are no dealerships. Tesla owns 100% of its network in most countries (with very small exceptions in smaller Asian countries where it just doesn’t pay). So not only a radically different car, but a radically different way of “selling”.
As Tesla was launching, so were new services named “car sharing”. Essentially, the millenial generation asks itself which it would rather invest in…a lease for five years or a vacation NOW and for every year! It sees cars as a service, and so reacting well, service companies such as Car2Go, DriverNow, Communauto and others launched to satisfy that market niche. Next came UBER, initially as a “people delivery service”, and now we see them naturally moving into areas of former “fedex” territory for parcel transport.
So the entire automotive world is being challenged by two factors: a move towards more environmental technologies and a definition of transport as a service rather than an asset.
We will continue to see evolution in each of these segments and at some point, energy will be brought into the mix. An electric car uses 80% of its energy to move it. A gas car, only 30% at best. The rest is spent heating, cooling or just staying still. The move towards greater efficiency isn’t only in time management, its also in how we manage energy.
As we see this move, look towards two distinct changes. For one, car companies will own their showrooms and use dealers as service centre providers. Since dealers hardly make any money selling cars, they will accept to be this so long as their territory is protected. Second, you will see energy companies partnering with car makers to be able to employ the huge amount of energy stored in vehicles for all sorts of uses to help their power grid health and thus further minimize the need for fossil fuel generation.
This is not your father’s Chevrolet (to coin the phrase in many ads). We are about to see transformation in the automotive world no less radical than when gasoline took over from electric. On a personal note, its sweet to see this happening during my living days, and I’m proud to say that by the end of June, my visits to the gas station will be fewer and far between.