The auto industry faces a twisting ride

This column often considers the possible futures of different industries. In 2015 I wrote about the advent of driverless cars, and what that might do to carmakers and to our lives. There were many sceptics at the time; but in 2017 with a whole range of autonomous vehicles already being piloted on roads in many parts of the world, I trust you are no longer one of them.

This is perhaps a good time, then, to revisit the automobile industry. Is the crystal ball any clearer now?

A question for you. Do you ever bother to check the make of the aircraft when you take a flight? If the plane turned out to be an Airbus rather than a Boeing – would that affect your decision to fly? Most passengers couldn’t care less which aircraft they’re flying in – their key relationship is with the airline, not the plane-maker. Making aircraft is a business-to-business (B2B) venture. Their customers are airlines, who own the passenger relationship.

This is the scary prospect top automakers fear the most today: turning into a behind-the-scenes transportation utility provider, with customers relating far more to the Ubers, Lyfts and Waymos of the world. That could happen; if most cars in the world become self-driven, electric and connected to customers via their mobile phones, then the auto marque loses most of its shine. Car travel becomes a service you rent as needed; the make and model of the car you are in at a particular time fails to excite the pulse.

That is the discussion going on in every major automaker’s boardroom, everywhere in the world: how do we make the transition into this uncertain world, without killing off our own premium-brand status in the process? There are precedents: the newspaper industry went online-digital-mobile, and in the process left itself stranded without a viable business model.

There is already a visible effect. Leading car marques used to regularly feature in the world’s most valuable brands, but they have been falling for years; in 2017 Toyota is 30th, BMW 35th, Mercedes-Benz 40th in the annual BrandZ rankings. Who’s top these days? You guessed it: pretty much the entire top 10 consists of tech-related brands.

Make no mistake, though: every carmaker knows the future is autonomous, electric, connected and shared. In other words, in another decade or so we will all mostly be driven by cars, not driving them; the key propulsion will be provided by electricity, not petrol; the cars themselves will be smart, always-connected devices, as much software as hardware; and we will be buying transportation as a service, not a car as an asset.

In the auto industry, it’s quite a time to be alive. The motor vehicle has only seen incremental changes in efficiency and styling for decades; now it is about to make a leap into the unknown.

And so they are all on a race to transform themselves. They can’t have a future dominated by Tesla and Waymo, Uber and Tencent, Didi and Delphi. They must stay relevant, and stay profitable. The top brands need to keep making premium products, not just efficient fleets. And they need to ensure their brands still command presence in a world that is a far cry from the individually owned petrol car that is their heritage.

Can they pull it off? Let’s see. Every major car-maker is now plunging billions of dollars into the new technologies; they are creating ride-hailing divisions of their own, or investing in the leaders; they are trying to ensure they, not Apple or Google, create the smart-car software of tomorrow.

What is certain is that today’s top carmakers won’t make the transition by deploying traditional thinking. They all need a shakeup in the boardroom and executive suite; they all need to think ecosystem, not organization. None of them can pull this off alone.

And now, if we’re done with cars for the time being: what about your industry? The forces causing a quandary for automakers are swirling around your business too. Do you know this? No matter what you make and sell today, the next decade will bring in autonomous, connected devices that deliver it more as a service than a product. People will rent things more than they buy them; they will experience devices more than they experience people; and they will get used to much cheaper prices as a result.

Will you be ready for that world? I don’t know. Will you?

(Sunday Nation, 23 July 2017)

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