Big Auto Death Watch – the clock is ticking!

The recent series of Electric Vehicle (EV) launches from big Auto companies got me thinking about the future of transport. Then I went to Madrid for a few days and saw what the future of Transport really looked like. Not including “public transport”, I counted around 10 different modes of Transport as a Service (TaaS) available there. They had two main things in common, they were electric powered and the people who used them didn’t own them. They were convenient, cheap & much faster than cars.

Big Auto is dead, long live transportation!

All this put me in mind of the article “Marketing Myopia” by Theodore Levitt, I read this article many years ago, but it has stuck with me. Theodore tells us that companies who ignore what their customers want are doomed. He illustrated the point with the US railroads, they failed not because people and goods didn’t need transported, they failed because they lost customers to new forms of transport. They died because they thought they were in the railroad business not the transportation business. The parallels with today’s big auto are clear.

All these “Auto” companies trying (and generally failing miserably) to imitate Tesla are missing the point, it’s not an electric version of their cars they need, It’s a whole new business model. Tesla’s are great to drive, but its when you engage Auto Pilot that they really shine. Even Bob Lutz gets it, its not about the “car”! Autopilot is Teslas way of introducing and learning how to improve Autonomous Vehicles (AV’s) and make money from them.

Currently private cars are used around 5% of the time, many people believe each AV will replace around 15 private cars. Ok let’s do some maths. This year the world will make and sell around 81.5m cars, if they were all AV’s then we would only need around 5m to replace all the miles driven by the 81m. Now, surely its going to take ages to change over the fleet I hear people say, after all there are maybe 1 bn cars in the world, right? Wrong, we only need 66m AV’s to cover all the miles driven by these 1bn cars, we could do it in 10 months. The transition will happen rapidly because people will stop buying cars as transport as a service takes off. Don’t imagine that you wont use AV’s either, you will because they will be much, much cheaper than owning a car.

Transportation will grow massively in the coming years with scooters, bikes and quadracycles (think Renault Twizzy) becoming ubiquitous in our urban areas, with AV’s being used for longer journeys only. The outlook for the “car” market however is bleak. In future the “car” industry might only need to produce 5m vehicles per year. There will be some big winners but many losers.