In the past decade, we’ve seen the death of General Motors divisions Oldsmobile and Pontiac, Chrysler’s division, Plymouth and Ford’s Mercury. Within those brands were iconic cars such as the Cutlass Supreme, Firebird, and Barracuda. In a world where auto sales are falling, demand for transportation is increasing. All opinion-makers want to blame Millennials for ‘killing’ yet another industry, I believe the automotive industry has not adapted to the changing world as much as it should have. Millennials are a generation that votes with their wallets. If it doesn’t make sense to do, they won’t do it.
People love cars, even the process of buying a car has improved immensely as dealerships have adapted quite nicely to the digital age and buying habits, but owning a car have become too cost-wieldy for younger consumers. When adding in insurance, fuel, and maintenance costs, it doesn’t make sense for a generation with heavy student loan debt to purchase a car that they’ll only need 5% of the time. This brings to light something Bill Gates said at Comdex years ago: “If GM had kept up with technology like the computer industry has, we would all be driving twenty-five dollar cars that got 1,000 miles per gallon.”
What wasn’t said in response to Bill Gates’ comment, but was made into a joke was “Yes, but would you want your car to crash twice a day?”
The joke goes further. We’d have to deal with the following if Microsoft built cars:
- Every time they repainted the lines on the road you would have to buy a new car.
- Occasionally your car would die on the freeway for no reason, and you would just accept this, restart and drive on.
- Occasionally, executing a maneuver would cause your car to stop and fail and you would have to re-install the engine. For some strange reason, you would accept this too.
- You could only have one person in the car at a time unless you bought Car95 or CarNT. But then you would have to buy more seats.
- Apple would make a car that was powered by the sun, was reliable, five times as fast, twice as easy to drive – but would only run on 5 percent of the roads.
- The Apple car owners would get expensive Microsoft upgrades to their cars, which would make their cars run much slower.
- The oil, gas and alternator warning lights would be replaced by a single “general car default” warning light.
- New seats would force everyone to have the same size butt.
- The airbag system would say “Are you sure?” before going off.
- If you were involved in a crash, you would have no idea what happened.
Ride-Sharing and Consolidation in the Auto Industry
Lyft and Uber recently had highly anticipated IPOs and although their share prices fell below initial expectations, don’t think these platforms are going away. There are millions of riders across the globe who depend on these ride-sharing companies. It’s only a matter of time when Lyft and Uber and the smaller platforms work out the pesky details of contractor vs employee and how to be profitable and not lose customers. Auto manufacturing companies, in the meantime, continue to be under pressure amid falling sales. As of this writing, Fiat Chrysler Automobiles is seeking to merge with France’s Renault, which would make it into the third-largest automotive manufacturing company in the world after Volkswagen, and Toyota.
Some are calling this a ‘move of desperation’, I differ to think that. I believe it’s a move to first bolster bottom lines, then be able to take advantage of economies of scale, and thereby, save money. The money saved could then be used in electric and autonomous vehicle research. In this coming world, auto dealerships could adapt to become less brand-centric and more of a transportation provider portal. This would not be much different from how retail stores operate. Target or Walmart carries a variety of brands and items which are mostly differentiated by pricing.
Auto manufacturers have a long history of collaboration and this would most likely continue. With many trends coming together in the automotive industry, we may something even more game-changing than mere collaboration and merging. What about a new manufacturing platform that would utilize more 3-D printing, one in which all brands would have access to build their vehicles. Also, automotive manufacturers might build cars using a standardized chassis. A brand would simply attach its car body to the chassis. This could especially work with electric vehicles. Manufacturers could defray costs by teaming up with third-party chassis builders, and they could focus strictly on the car body design, features, and options. This would streamline the manufacturing process and spread costs among all brands. Brands would still have the ability to customize their specific options and trims to their particular offerings.
I am no automotive manufacturer. This is just an idea. I am sure an automotive factory designer could bring up a multitude of reasons why this might not be viable or the intricate processes of manufacturing vehicles can’t be adapted to this model.