The Fast and the Curious. Three Factors That Will Define Tomorrow’s Car Makers

The future is here; autonomous cars are taking commuters from point A to B while making light conversations about morning traffic. Fuel stations are being geared out with power points for electric vehicles and the Google Maps lady is getting smarter by the day.

To make things more interesting, augmented reality projected from car windows and dashboards will soon come to an SUV or sedan of your liking. These fast-moving times are forcing car manufacturers to rethink traditional revenue streams and partner with industry disruptors.

In reality, intractability isn’t much of an option for existing power brokers. Startups like Uber and Lyft are giving OEMs access to markets that simply didn’t exist before. Further, ride-hailing apps that were once touted the “death of cab businesses” are in fact opening up a previously myopic industry and creating new income opportunities for drivers.

It takes a measure of unorthodoxy to keep up with the fast pace of change in an industry undergoing large-scale disruption. With electric vehicles and self-driving technologies challenging the very core of the sector, it’s fair to say that no one is immune from the dreaded Kodak Syndrome. The good news is that it seems automakers are heeding the lessons of past examples for the most part. Big-name car brands have warmed up to tech companies en masse as they try to build the experiences the future customer wants.

“Connectivity, autonomous driving, sharing and electric drive systems have the potential to turn the industry on its head.” ~ Dieter Zetsche, Daimler Benz

European car manufacturer, Volvo, is currently in partnership with Uber on an autonomous ride-hailing initiative in cities across the U.S. and has invested over $300 million in the company’s self-driving vehicle programme. Japanese giants Toyota, Honda and Nissan are also all invested in Uber and have lease agreements in place that allow drivers to own new vehicles in a variety of flexible lease agreements.

Uber rival, Lyft, is enjoying its share of flirtations with big car names. General Motors has invested $500 million in a network of on-demand, autonomous vehicles in the United States. The companies also plan to develop a national network of rental hubs for Lyft drivers to rent GM vehicles. Of its partnership with Lyft, GM CEO Dan Ammann says, “We see the future of personal mobility as connected, seamless and autonomous. With GM and Lyft working together, we believe we can successfully implement this vision more rapidly.”

Partnerships like these seem to be forging every day. Ford’s $200 million investment in Pivotal Software is expected to help develop its customer mobility services. Others include Nissan and NASA teaming up to develop autonomous vehicle technologies, Toyota and Microsoft’s joint telematics venture and national retailer Costco’s Auto Programme that sells GM vehicles at reduced, pre-arranged prices from partner dealers across the U.S.

Carmakers are even becoming regular fixtures at events like the annual Consumer Electronics Show, showcasing new collaborations with tech companies alongside the latest smart fridges and other consumer electronics. This new cross-pollination and allegiances are creating an exciting new ecosystem of players that all make very unique contributions to the changing automobile and mobility landscape.

A Voice From the Past

Interestingly, a 2003 IBM study urged automakers to make collaboration within and outside the industry a top priority to facing the then seminal digital age. The now 15-year old report identified Customer Responsiveness, Time to Market and Innovation as the three key areas OEMs must address to face the future of their industries aptly.

It asserts that “…while mergers, spin-offs, consolidations, and record sales volume over the last five years have created unprecedented size, they have not created a sustainable model for long-term shareholder value.” The report placed a high focus on collaborative design and development capabilities as a means to bring new products to market and keep up with innovations.

Citing massive global consolidation and market saturation in the coming decades, the study points out that, “Competitive advantage will not be attained by size alone. What’s required is a new model for the industry – one that is based on collaborative relationships with suppliers and others.”

“Rapidly assimilating new technology into vehicular systems.” This was another key takeaway from the study. Today this is increasingly playing out through the many partnerships being forged between carmakers, tech companies and the consumer electronics market.

“As the second automotive century begins, the road ahead looks very different from the one that automotive companies faced at the start of the last century…the combination of superior technology and past achievements is no guarantee of long term success or sustainable shareholder value…witness the literally dozens of one-time automotive leaders that have vanished into history.” ~ 2003 IBM Report

The Road Ahead

OEMs must continue to look for inspiration in every area of their vastly complex value chains. Differentiation is becoming increasingly difficult as consumers are overloaded with tech and gadgets that are all becoming practically indistinguishable from one brand to the next. Truly breaking new ground and taking the lead will take a type of approach that sees companies unafraid to go it alone.

Case in point; in the minds of consumers, the Tesla motor company will forever be associated with the revolutionary electric vehicle. Thanks to its willingness to take risks and forge ahead when the chips were down, the company will be cashing in on its reputation for building cars that resonate with people’s concern for the environment and broader values.

While incumbent players were fairly inert in the EV space – and had access to the same blueprint – it took a 15-year old newcomer to take the technology, run with it and upset the status quo in the process. It will take this kind of visionary thinking for car brands to really stand out and look beyond the Appstore for its next big breakthrough.

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