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New business models as important as the vehicles themselves
publication date: Nov 14, 2009
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author/source: Dr Paul Nieuwenhuis
For much of the 20th century, the world car industry was
dominated by US manufacturers and their global networks, notably Ford
and GM, and to a lesser extent, Chrysler.
| | There was no doubt that the American model in the
automotive industry used to be dominant on the global stage. Recent
crises at the once ‘Big 3’ (GM, Ford, Chrysler) combined with the
collapse or near-collapse of many of their major suppliers have
undermined this dominance and have led to a questioning of the very
business model that underpins it. The financial sector itself has now hit a crisis of its
own making, highlighting the fact that managerial judgement has been
far from sound. At a macroeconomic level, the successes of US markets
in recent years have been bought at the expense of debt, with the
People’s Republic of China effectively America’s banker. |  |
It is quite clear that much of the increase in global
production can be attributed to the Asia-Pacific region, as well as the
fact that Russian production has boosted European figures. The dominant
position of China is a given, although all these countries have
significantly increased their production. China is now comparable with
Japan in volume terms.
The speed with which new technologies have to
be introduced stretches the product design and development capability
of many car manufacturers, thus providing opportunities for suppliers
with product development capability.
The result of these
developments is that much of the technological expertise relevant to
key strategic areas such as safety or carbon reduction is held not by
the OEMs, but by their top suppliers, smaller specialist suppliers in
pioneering technology areas, and the various engineering consultancies
to whom much of this development work is subcontracted by both OEMs and
suppliers.
The cars we drive in 10 to 20 years time could be quite
different in many ways from those of today. In 1997, the EU Commission
signed a deal with Europe’s car manufacturers, represented by ACEA, to
voluntarily reduce CO2 emissions from their products. In 2008
legislation to limit CO2 from cars was passed by the European
Parliament.
The evidence so far is that such new regulation leads
to new technologies, and creates more jobs in the more developed
countries such as the US, Japan and EU. While the technology input for
smaller cars will be relatively minimal, in order for larger cars to
comply they will have to shed weight and adopt more complex engine and
transmission technologies.
New technologies = more engineers =
more IPR. The result of EU CO2 regulation may well be that small to
medium cars will continue to be available at price levels similar to
today’s, while larger cars will become significantly more expensive.
The
growing electrification of cars in the context of hybridisation and
weight-reduction (leading to electric steering racks, braking systems,
etc.) will push the development of technologies and infrastructures
that will also make battery electric vehicles more viable.
There is
a mistaken belief among car manufacturers that their activity is the be
all and end all of automobility. In value terms this is clearly untrue.
Whilst there is no car market without somebody making a car, there is
no business without somebody making money and that is where car makers
seem to be missing a trick or two.
Manufacturers only capture a
limited slice of the total automotive value chain. New business models
for the future would need to capture more of that value chain by
integrating assembly, distribution and aftercare. This kind of thinking
could also ultimately lead to a more sustainable car industry in
economic, social and environmental terms.
The current recession
with its attendant credit crunch may well accelerate this process of
industrial transformation. Many current players have proven to be
ill-adapted to the 21st century automotive ecosystem. We may see some
radically new business models emerge within the next 10 or 20 years. | | ©
Dr Paul Nieuwenhuis | Full report, go to: www.trendtracker.co.uk |
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