I) Automobiles

Model T Ford (1908)

The Model T was the first mass-produced car that was priced so that most Americans could afford it. Every single part was made in one factory.

GM's motto: "car for every purse and purpose" (1924)

General Motors reinvented the car by injecting price differentiation, fun and fashion into the car industry

VW Beetle (1950's)

Introduction of the small, second family car as a 'shopping basket'

Toyota Land Cruiser (late1960s)

Introduction of "up-market" 4WD resulted in the increasing popularity of 4WDs for non-primary industry usage, ie leisure travel, urban "run-about", etc

Japanese fuel-efficient cars (mid-1970s)

The Japanese carmakers focused on small and reliable models in response to a global fuel crisis. Car parts made by many different firms forming an intricate relationship with suppliers

Chrysler minivan (1984)

With its minivan, Chrysler created a new class of vehicles that are easy to use as a car but have the space of a van

Environmental-friendly cars (2000)

The introduction of the hybrid motor vehicles

Driverless cars/robotics

As 90% of traffic accidents in America are due to human error (Steve Johnson, 2014), the driverless car is seen as a way to reduce these accidents. Remember: an automakers typically spend 5 to 7 years developing an automobile. An example of driverless vehicles is Rio Tinto (global miner) operating 50+ autonomous trucks at Australian mining sites.

Software makers like Google, Apple, etc are linking with automobile industry global suppliers like Bosch, Continental, Denso, Magna Steyr & Delphi; not with automobile manufacturers like Ford, Toyota, General Motors, Fiat, Chrysler, etc. These suppliers are very strong in technology that guides and controls cars; they have invested heavily in research and development on electronics and automation. For example, Google is testing a self-driving car that uses Bosch sensors (Bosch employees 34,000 engineers of which about 1/3 work in software).

By the mid-2018, 50+ firms (from traditional automakers to small start-ups) are testing self driving cars on the streets of California.

"...despite fatal crashes involving Tesla and Uber's autonomous vehicles this year, the sector continues to attract huge amounts of capital, including into Pony.ai, which is based in China and Silicon Valley and has raised more than US $ 200 m. in recent months, and GM's Cruise unit, which received a US $ 2.25 b investment from Soft-Bank's Vision Fund in May..."

Tim Bradshaw 2018

Software, electronics, automation and communications are an integral part of the new generation of vehicles, ie
"...as with computers and mobile phones, they can own technology and license software, rather than shaping metal..."
John Gapper, 2015

As automobiles turn electronic, the suppliers are building a bigger proportion of each one; the cost of electronic parts in the average vehicle will rise from 20% in 2004 to 40% in 2015; a premier class car contains 100 microprocessors and runs on 100 million lines of software code (John Gapper, 2015). To a software engineer, a car looks like a computer, ie

"...a networked device founded on software and applications that can be designed in California, built from modules made by suppliers, and put together in contract factories..."

John Gapper, 2015

NB After dominating the world car market for around 70 years, GM has losing its no. 1 spot to Toyota. Furthermore, with the economic downturn starting in late 2008 and the resultant financial difficulties of the major car producers, such as GM, Ford, Chrysler, Toyota, etc, does indicate that their business model is under significant threat, eg GM went into volunteer bankruptcy in 2009

Also, with the advent of ride sharing technology (Uber - $US 40 b., Lyft - $US 1.2 b., etc) and driverless/electronic cars (Telsa - $US 25 b.), traditional car companies like Ford, Nissan, etc are working with tech companies to connect cars to the Internet; these companies are now seeing themselves as software and technology companies. Automakers spent $US 100+ b. on R & D (2014), making them the third biggest spender behind health care and technology hardware (The Lex Column, 2015b)

With dieselgate (see more detail elsewhere), suspicions of collusion between BMW, Daimler and VW plus the threat of autonomous driving and end of combustion engine technology using gasoline and diesel engines is putting enormous pressure on the traditional business model of car manufacture, ie

"... More and more countries are planning to phase out combustion engine technology: Great Britain and France plan to ban cars with gasoline and diesel engines by 2040, while Norway plans to take the same step by 2025. China is expected to impose a minimum sales quota for electric cars starting next year. Surveys showed that 60% of Chinese car buyers could imagine buying an electric car as their next car..."

Christopher Sultan 2017

To handle the future, the auto industry needs alternative low emission engines, to offer mobility concepts like car sharing and ride services.

Also, new competitors including Tesla (founded in 2003) have built an electric car that is popular, eg around 0.5 m. have pre-ordered Tesla's new model 3 plus another 1,800 daily orders. To handle this competitor, the traditional carmakers in Germany are talking about

- "e-mobility" or "electro-mobility" and "emotionalising" their electric cars with wider tyres,

- more dynamic designs with less focus on engineering,

- consulting with future car users like young customers and retail customers directly (bypassing authorised dealers who traditionally handled the retail customers, eg drivers),

- constructing charging stations plus plans to produce cars more efficiently;

- designs are being upgraded so that every car can be outfitted either with an internal combustion engine, a plug-in hybrid or a pure electric powertrain.

All this is costing money and is causing our dilemma, ie

"...Its new business, which is losing money, is cannibalising its profitable, existing one, creating incentives to delay change..."

Christopher Sultan 2017


"...the industry spent decades resisting overly substantial changes. Anyone who talked about electromobility or car sharing in the 1990s was immediately mocked..."

Christopher Sultan 2017

For example, VW's top executive Daniel Goeudevert tried to reform things in the early 1990s, ie he predicted the demise of the diesel engine, etc

The traditional automobile industry needs to be reminded of what happened in mobile communications, ie pioneer manufacturers like Nokia and BlackBerry were undisputed market leaders before innovative competitors like Apple, Samsung, etc forced the pioneers out of the market.

In 2017 it was predicted that there are 5 major trends to watch in the automobile world:

i) new players (cashed up tech companies aiming to capitalise on self-driving cars opportunities, etc

"...Many believe the barriers to entry are lowering as cars become more about technology (battery use, self driving, interconnectivity) and value shifts from hardware to software......Morgan Stanley research suggests software will soon account for 60% of the car's total value..."

Tony Davis, 2017

"...historically when these kinds of changes developed in certain markets, in most cases the prior players were not the dominant players any more...... pointing to Nokia and Ericsson as examples..."

Dieter Zetsche has quoted by Tony Davis 2017

On the other hand, new players can struggle financially, like Tesla. While the older firms might have huge customer loyalty and vast experience in manufacturing, testing and marketing, etc. These can be worthless if there is a pronounced market/technological disruption.

Also, there is unprecedented collaboration between car and tech firms. Car firms are reluctant to launch themselves into the digital future alone; while tech firms are nervous about their lack of experience in the competitive automotive market.

There is similar collaboration with the ridesharing firms like Uber, Lyft, etc. For example,

- GM has invested in Lyft and autonomous technology start-up Cruise

- Toyota has invested in Uber

- VW has purchased European taxi service Gett

- VW and Mercedes have purchased mapping company Here

- BMW has a joint-venture with Intel and Mobileye to work on self-driving cars

- Apple and Uber have invested in Chinese ride hailing firm Didi Chuxing.

ii) design (as automobiles become more autonomous, design should grow in importance. Design is linked with the "drivers/passenger" experience and emotional appeal, ie

"...Stand by for a new age of extravagant styling, luxurious equipment and individualisation..."

Tony Davis, 2017

New techniques like 3-D printing are increasing in use. This can lead to more customisation, including spare parts.

New materials like graphene are going to be game changers. It is 200 times stronger than steel and lighter than carbon fibre.)

iii) sharing the load (cars are becoming more similar under the surface - just as computers have. With rival car makers collaborating and trading new "frenemies", eg Nissan-Renault-Infini group have 12 joint projects with Mercedes-Benz; BMW and Toyota are developing a sports coupe together, etc. One reason for this is

"...The cost of developing car platforms, electronics and safety systems to the standards demanded by customers and regulators has grown enormously..."

Tony Davis, 2017

Also, much money is needed to develop cleaner-running engines and keep up with the rush towards autonomy plus the increasingly diversified buyer tastes demanding a unprecedented array of body styles, drive options, etc.

The rush to satisfy endless variations to meet every micro-niche market is putting pressure on economies of scale.

iv) leanest deal (major improvements in the current petroleum-based engines are expected

"...petroleum-based vehicle fuel economy can be improved by as much as 75% with combustion breakthroughs focusing on maximising energy efficiency and minimising the formation of emissions within energy cylinders; exhaust after-treatment technologies that further reduce emissions; and the recovery of energy from waste heat..."

PWC as quoted by Tony Davis, 2017)

v) subscription only (similar to what has happened in other industries like music, films, taxi, accommodation, etc

"...consumers are happy to swap ownership for convenience. Some believe it will become the norm with cars..."

Tony Davis, 2017

Ridesharing/automated/driverless/electric cars, etc are expected to become the new norm

"...Each car share vehicle removes up to 10 private cars from the road..."

AECOM Technology Corporation has quoted by Tony Davis 2017

This is good news for cities, environment, etc but bad news for car makers, ie fewer cars are needed.

Some car makers are responding by designing vehicles that can be shared; developing systems that link their cars into networks that combine private vehicles, shared vehicles and public transport to improve mobility.

Two years later (2019) this is how the trends were seen in the automobile industry:

NB The automobile industry is a
"...$ 2 trillion per year industry, with up to 50 million direct and indirect jobs at stake, along with vast quantities of national pride and international trade......97 million road vehicles were sold globally last year..."
Tony Davis 2019

Some Trends (early 2019)

i) diesel automobile sales are plummeting, ie market share falling from 45% to 36% in one year (2018), owing to tougher emissions standards which are pushing consumers to petrol, hybrid and electric, plus the fallout from "dieselgate" scandal

ii) hybrids (petrol-electric)

iii) younger people are rejecting car ownership and driving in general, ie prefer the flexibility of ride sharing, eg Uber has more than 75 million customers (early 2019)

iv) development of autonomous vehicles, ie self-driving, shared, etc. Players in this field include techno-giants like Apple, Amazon and Google

v) electrification of automobiles (what both consumers and regulators want, ie handle issues around climate change like zero emission vehicles. Britain wants zero emissions by 2040; Norway by 2025. China wants 20% of car sales to be electric by 2025)

vi) fuel cell (hydrogen fuel)

vii) trade war between USA and China/Europe, eg
"...a 25% American tariff would wipe out up to 2.5 billion (Euros), or 13%, from VW's annual earnings..."
Hans van Leeuwen 2019

Possibility of imposing higher steel and aluminium tariffs will increase the cost of making cars in America.

In summary, adding to the uncertainty in the future automobile industry is the
"...Rapidly changing technology, and no one's sure which technology will prevail. Consumers' mercurial and evolving tastes, which may change in response to shifts in taxes, subsidies or technology...
Hans van Leeuwen 2019

High-tech entrants

Software organisations like Telsa & Google are competing with the traditional manufacturers like Ford, GM, Toyota, etc
"...whether high-tech entrants......can learn crankshafts and drive trains faster than......carmakers can learn software and algorithms..."
Jerry Useem 2019

"...it's tempting to see the established carmakers as lumbering industrial dinosaurs unable to weather a changing commercial and political climate, or move nimbly enough to protect their turf from new entrants..."
Hans van Leeuwen 2019

It is basically a competition on who will best
"...nail the interaction between man and machine..."

Jerry Useem 2019

"...if you look at business history, the winners are almot always those who get their user experience right..."
Jim Hackett as quoted by Jeremy Useem 2019

This means understanding the customer's experience and involves asking questions like
"...Do people want to own their own cars or share them? Drive them or have them driven?..."
Need to understand how and why people use their automobiles.
Jerry Useem 2019

Technology is making many things possible like seats that will monitor your heart rate. Need to be careful that the driver not overloaded with too many choices!!!!!

NB The mobile phone used to be an accessory in the vehicle. This is now reversed, ie the vehicle is an accessory to the phone!!!!!


Search For Answers

designed by: bluetinweb

We use cookies to provide you with a better service.
By continuing to use our site, you are agreeing to the use of cookies as set in our policy. I understand