Background
Disruption (Transformation) is bringing seismic changes to all markets/industries. The global auto industry is no exception.
From January to October, 2017, 20 Value Innovation Subject Matter Experts used:
- Recognized tools (scenario planning, axes of certainly and uncertainty, etc.) and
- Information published on Twitter,
to develop and publish the 6 Transformation Axes bringing seismic changes to the global auto industry. The Axes (shown below) were published in November, 2017.
Evidence to Support These Axes
Since November, 2017, Value Innovations has proactively monitored social media, used bEVCurrent TMS News and Sentiment Analysis software, and published bEVCurrent reports,
Since their publication, we haven’t seen any information that suggests we should eliminate, or add, a new Axis.
The Axes:
1. Internal Combustion Engine to the Electric Motor
The primary power source in today’s cars and trucks is the internal combustion engine. The transformation to the electric motor is very much alive. The transformation is being led by Norway, Iceland and China. We do not know when the transformation will be essentially complete but it’s clear the electric motor will be the preferred power source.
Tony Seba, in his book Clean Disruption published in 2014, forecast “no legacy manufacturer will sell a new car with an ICE by the year 2030.” We believe this is unlikely, not because of lack of demand but the lack of Li-ion batteries.
Toyota, Hyundai and other OEMs continue to invest in hydrogen fuel cells and we are asked to comment on its future. Hydrogen powered drive trains are much higher cost, less efficient than electric motors, and there is only very limited infrastructure in the USA to support hydrogen powered vehicles..
2. Dealerships to Omni Channel Retail
The primary way we buy and sell new cars in the USA is through 17K +/- franchised auto dealerships. This business model is starting to change. Ordering on line, services like CarMax and Vroom, an aversion to going through the purchasing process and the success of Tesla’s marketing and sales model show we are transforming to Omni Channel Retail.
Auto dealerships must determine how they will thrive. Gross margins from parts, service and maintenance will decline. What new businesses offer opportunities for growth?
3. Unconnected to Connected Vehicles
Today’s cars and trucks are far more sophisticated than their counterparts of 20 years ago. Electronics and software are used throughout the vehicle but there are no communications with other vehicles. With the advent of driver-less vehicles, all vehicles will need to be in communication. Connected cars will reduce the number of accidents and insurance premiums will drop as a result
4. Car Ownership to a Fleet Model
We see a shift coming in vehicle ownership. Millennials, who do not want to own a vehicle that is parked 96% of the time, are more interested in models that provide service and flexibility. Paying a monthly or annual fee to be able to order whatever vehicle they need whenever and wherever they want it will move us to the “Shared Fleet” model.
5. Driver to Driverless
There are two approaches being pursued to develop L5 Autonomous Vehicles:
- Lidar (Waymo and most auto manufacturers)
- Sensors, cameras and radar (Tesla Motors)
Lidar is a higher cost solution and has challenges operating in adverse weather conditions. Several auto manufacturers have driverless taxis in operation in AZ and CA.
Tesla has accumulated >6B miles of data from their vehicles operating in AutoPilot mode.
When we will see driverless vehicles in the hands of consumers is unknown but it could be as early as 2023.
6. Driving a car to Mobility As A Service
In the US we assume the only way to travel from A to B is to drive our car. In major cities in Europe, as high as 50% of the population, commute to work on a bike.
Through using AI, machine learning and IoT, it is probable that apps will be developed where the consumer will be able to enter a destination, be provided with least cost way to get to that destination and be provided with a single ticket for the one-way or return trip.
Light rail, rail, buses, underground, bicycles and scooters enable Mobility as a Service
Transformation Axes End States:
Our team has reached the following conclusions about these End States.
- They are essentially fixed (the future has already happened)
- How and when we get to these End States are unknown.
- All stakeholders (auto companies, suppliers, dealerships, car rental companies, insurance companies, etc.) must manage through these Transformations to survive and thrive:
- Stakeholders need access to relevant information in real time to make timely, well informed decisions. bEVCurrent TMS News and bEVCurrent TMS Sentiment Analysis can provide this information
For more information:
Contact Dick Lee: dick_lee@valueinnovations.net; +1-720-291-0758
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