IMAGE: Olexandr Moroz — 123RF

The automobile industry is about to take a very fast ride into the future

Following a visit to Silicon Valley, Daimler CEO Dieter Zetsche says he believes companies like Apple and Google are ahead of the automation curve and have a bigger role to play in the development of driverless cars than he previously thought.

Not only is the motor industry being galvanized by a variety of trends that are giving it a dynamism it hasn’t enjoyed in decades, but it is about to be further impacted by the entry of a series of companies that might best be described as outsiders. In the coming years, we will likely see the car shift from being a product to a service (car sharing, ride sharing, car pooling, etc), and what’s more, vehicles will no longer be powered by fossil fuels, but by electric energy or hydrogen, as well as being fully connected to the internet, and in many cases they will be self-driven.

We’re talking here principally about three companies, each with very different strategies to traditional motor industry players: Tesla, Apple, and Google.

  • Tesla: I’ve written about Elon Musk’s company many times. This is not an outsider, but an automobile manufacturer, albeit one founded this century. Tesla’s strategy is clear: to put luxury electric-powered vehicles on the market, giving it enough cash to keep working on cheaper models, while at the same time opening its patents so as to increase competition and improve technology in the electric car segment. The brand is very much a laboratory for new ideas, and has shown that electric cars can be attractive and fast, a true object of desire for the former petrol-heads out there. It has broken the rules by not using a network of distributors, and most importantly, shown that it can out perform gasoline-powered luxury vehicles and that the future is most definitely electric.
  • Alphabet: the strategy pursued by the company that could be about to overtake Apple as the world’s most valuable company has been, with few exceptions, to avoid making things. Google’s decision to develop a self-driving car. But despite the success of its trial runs in towns and cities, nobody really believes the company is about to enter the motor industry. Instead, it looks like Alphabet will repeat its Android strategy and create a technology platform that it will place at the disposal of vehicle manufacturers and thus become the industry standard. It doesn’t have to take Detroit or Stuttgart on: it will be an ally able to provide constant technological advances.
  • Apple: still the most valuable company in the world, and one that despite its secretiveness and the recent exit of Steve Zadesky as head of its electric car division, cannot be ignored. Everything suggests that the company is set to dedicate people and resources into further developing electric car technology. Whether it wants to become a car manufacturer or simply a major player in the sector, is still not entirely clear. Obviously, little is know about Apple’s plans, but the strategies available to it stretch from building a vehicle (traditionally the company has preferred to have control over all aspects of its products) using pieces acquired from different suppliers, to more radical solutions such as a connected intelligent vehicle that could be part of an overall solution, based on the idea of focusing on customers that already possess its other products, or equally by licensing out to other brands. Its experience of licensing to other companies, such as Motorola’s Rokr, have not been good. Now it is the turn of the automobile industry to deal with Apple as a possible ally or disruptor, as has already happened with the music and entertainment sectors.
  • Uber: lots of funding, key in the transition of the automobile from product to service, and understanding very clearly the need to invest in autonomous driving. Travis Kalanick definitely sees things that others are not able to see, and has been able to change deeply rooted traditions in the society…

Meanwhile, the traditional industry players are looking at their options. Companies like Daimler are pushing ahead with innovation (I will be in Stuttgart this week and will share anything I find out :-) via projects such as Car2go, which was launched in Madrid last year, and is already available in 30 cities around the world. The idea is for its fleets to be fully electric soon. Other manufacturers are catching on: BMW has a joint venture with Sixt called DriveNow, in nine cities; while GM has launched Maven, currently only available in Ann Arbor, Michigan, and that aims to take on Avis car-sharing subsidiary Zipcar.

For the moment, electric or hydrogen-powered vehicle sales represent a tiny fraction of the total, although all the big players are looking at introducing hybrids into their range, and there is particular interest in the potential of hydrogen.

The entry of these new players is going to shake up the automotive industry, forcing the traditional outfits to come up with new strategies. For many decades now, the massive changes being wrought in the industry have been about moving the time-honored variables of safety, price, and efficiency around. But we are now starting to see radical changes that will affect hitherto untouched variables and dimensions. The time for the real innovators has come at last.

(En español, aquí)

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