Many of you are most likely not aware that I have another blog that focuses strictly on transportation issues. If you are interested in being on that list simply email me and let me know. That said, I considered posting this message there but felt that this topic would be of a more general interest so decided to post it to my full list.
The auto industry, in fact the transportation industry, is in transition in a way like no other. The tremors of change are being felt and new trends are beginning to emerge. There is tremendous uncertainty how the future will shake out. The only thing you can count on is that it will be vastly different than what we have experienced for the last 100 years and especially since WWII and the advent of the interstate highway system and the migration to the suburbs with all its sprawl and affiliated consequences.
As this article points out, the current mainstream auto manufactures are trying to figure out how they fit into the future and what business model will survive. And even if they guess right, they are trying to figure out how they can be a part of that future…how they can successfully transition to the new reality.
General Motors CEO appears to have voiced it best when she said:
“automakers run the risk of unleashing a business model that destroys their own. At the Consumer Electronics Show in Las Vegas last month, GM’s Barra conceded that the future isn’t predictable.
“I don’t think anyone really knows the answer,” she said, before adding: “We’ll be prepared for both.””
We’ll see….
Time to get on board with urban mobility – but how?
Automotive News
February 1, 2016
DETROIT — A car company looks out at the city, senses a change in transportation habits and seizes the chance to usher in new modes of urban mobility.
That’s the short version of what happened in the 1920s, when a young but mature General Motors began amassing struggling urban streetcar systems across the country. The gradual conversion of electric streetcar lines to motorized buses allowed GM — rather than the electric utilities — to steer the course of urban mobility over the ensuing decades, even as the company’s automobiles helped fuel a flight to the suburbs.
GM and its competitors now find themselves at a similar juncture, determined to get on board with changes in technology and demographics that are bringing people back to cities and car-sharing and ride-sharing into the mainstream.
The question is how: Buy existing mobility companies or just invest in them? Strike technological and business partnerships or build services from scratch?
In recent weeks and months, GM, Ford Motor Co. and others have begun mapping out their visions. But even at this early stage, the burden of proof is heavy. Investors are scrutinizing automakers’ strategies for signs of hype and capital-sucking distractions while companies such as Google and Uber, along with developers of mobile apps, are already busy redefining how people get from point A to point B.
On modern transportation, of all things, automakers find themselves playing catch-up.
“I don’t know exactly when the light bulb went off for the automakers,” Gary Silberg, national automotive leader at consulting firm KPMG, said in an interview. “I’ve been scratching my head and asking myself: Why haven’t they adopted it sooner?”
‘It is so’
At the highest levels of Detroit’s automakers, there is at least a recognition that the economics of getting around have changed fundamentally.
At Ford, Executive Chairman Bill Ford wants to ensure that the automaker grasps the changes. “The one thing we can’t afford to do is put our head in the sand and say we wish it weren’t so,” he said in January. “It is so.”
Fields: Banking on mobility
Last year, Ford CEO Mark Fields introduced the “Ford Smart Mobility” plan, including car-sharing and autonomous driving, as a main plank of his vision for Ford.
But the company has taken heat for paying lip service to mobility. Ford has started pilots such as the GoDrive car-sharing program in London and a deal with San Francisco startup Getaround to help Ford owners rent out cars through a peer-to-peer car-sharing app, yet it hasn’t made any big bets.
“We’ve got experiments going everywhere, and the one thing about experiments is some of them will fail, for sure, and the question then is how we deal with failure,” Bill Ford told reporters. “If it’s the old model where failure means you’re going to be shut down and punished, we won’t innovate at all.”
Meanwhile, GM has opened its pocketbook wide. First it invested $500 million in Uber’s main rival, Lyft, and struck a deal to jointly develop self-driving cars. Next, it bought the failed ride-sharing company Sidecar, taking control of its software and patents — including one dating to 2002 that may cover technology used by Uber.
Finally, GM formed a car-sharing brand called Maven with an eye on short-term rentals for college students, city dwellers or others who need a car only occasionally.
Barra: “We’ll be prepared.”
“Where we can build and grow is in the urban areas,” GM CEO Mary Barra said. “We see this as a huge opportunity.”
In urban areas at least, the economic arguments for ride-sharing have become overwhelming. Americans drive 3 trillion miles a year, paying roughly $1 for every mile traveled in cars they own, according to an analysis by Deloitte.
Car-sharing services such as Uber now cost about 67 cents a mile — accounting for the added benefit of free time recovered in the back seat. If those cars could drive themselves, eliminating the cost of a driver, traveling a mile would cost 31 cents.
That cost advantage represents a huge profit opportunity, Scott Corwin, a partner at Deloitte who worked on the 2009 restructuring of GM, said in a January interview. And it remains largely up for grabs.
Investors’ obsession with mobility explains why Uber, formed in 2009, is now valued at more than $60 billion, more than many car companies.
But for automakers, there’s a risk in overemphasizing transportation as a service: The cars they have spent millions engineering, building and branding could become a commodity, a mere public conveyance, with no distinct identity.
KMPG’s Silberg said the most obvious way for them to avoid that fate is to control the “mobility ecosystem,” meaning the app that people use to hail rides and the back-end software that routes cars to users.
That is where Ford has sought to make its big splash. At the Detroit auto show last month, the company was light on fresh metal but bullish on FordPass, a smartphone-driven membership service that would help users with a range of transportation challenges, such as reserving parking or paying for things while on the go.
Yet there is another path for the auto industry: focus on the cars — that is, to design and build cars that are better suited than the competition for sharing. BMW and Daimler recognized this long ago, designing the i3 and Smart ForTwo to suit the needs of car-sharing services.
GM is taking a similar approach with the Chevrolet Bolt, the all-electric hatchback slated to go into production by the end of 2016. Features that adapt to approaching smartphones, combined with the low fueling costs of an EV, make the Bolt ideal for a high-use model such as ride-sharing, and GM’s new affiliation with Lyft gives it a ready platform for deployment.
Hyundai meeting
More opportunities for such deals are emerging.
Senior executives from Hyundai Motor Co. met with Uber executives in California last summer to discuss a deal for hundreds of thousands of built-to-order cars, Dave Zuchowski, CEO of Hyundai Motor America, told Automotive News.
“It was more than casual talk,” Zuchowski said, noting that Hyundai Vice Chairman Chung Eui-sun paid a personal visit to Uber’s headquarters in San Francisco.
According to Zuchowski, who helped to broker the meetings, Uber told Hyundai’s delegation of Korean executives that it wanted an electrified vehicle built for ride-sharing and expressed particular interest in Hyundai’s plug-in hybrid Sonata, a midsize sedan that claims 40 mpg in city driving and offers a more spacious back seat than rivals such as the Chevrolet Volt and Toyota Prius.
“We’re very interested in their model because we think mobility is going to dramatically change our business,” Zuchowski said.
Such a dramatic change bears risk for today’s giants. By aiding Uber and Lyft, automakers run the risk of unleashing a business model that destroys their own. At the Consumer Electronics Show in Las Vegas last month, GM’s Barra conceded that the future isn’t predictable.
“I don’t think anyone really knows the answer,” she said, before adding: “We’ll be prepared for both.”
Nick Bunkley and Mike Colias contributed to this report.
You can reach Gabe Nelson at gnelson@crain.com.
