A car industry Christmas carol

‘A Christmas Carol’ tells the story of Christmas Past, Christmas Present and Christmas Future, whilst adding in a few Bah Humbugs from the tale’s leading man, Ebenezer Scrooge. Here in the UK, Christmas provides us with time to reflect on the past, to think about the present and look to the future. So let’s look at the auto industry and throw in a few Bah Humbugs of our own along the way.

Compared with the horse that was the preferred mode of transport before the car, the auto industry is relatively young, starting with our friends at Daimler AG around 140 years ago. Over that time, the industry has evolved quickly and the impact of technology has had a profound effect on the performance of cars. This is probably more so now than ever before. If you look at pivots of the industry, I think it would be fair to say that the largest pivot in those 140 years is right now as we talk about the future of the industry in terms of autonomous cars, connected cars, electric cars and ride share.

First and foremost, let’s debate the future of the car. You’ll hear plenty of naysayers suggesting we are on the eve of the demise of the car. In reality, personal transportation still has a long way to go. Let’s look at the figures. In the United States, 838 people in every 1,000 have a motor car but compare that with China and it’s just 179, which means there is an awful lot of potential growth left in the Chinese market. The same is true for other emerging markets around the world. The total industry volume (TIV) in the next 25 to 30 years will continue to grow, but the transportation pod may be looking a little different to what we expect it to look like today.

Now we have established that there is still a healthy market looking forward and almost certainly an automotive industry in the future, what about the type of car we are talking about? Will we continue to see lots of different brands? Will the car be a flying drone? Will there be autonomous pods?  Let’s examine the various technologies as they emerge.

A good place to start is with the connected car. We have to acknowledge that this is an inevitability as personal electronics make us more connected thus the car becomes a conduit between us and the internet. The car has to be more than a single conduit though. It has to be more than just a screen. The transportation has got to add value or we’re going to not want to spend so much time in the car. Inevitably, with congestion, we’ll be spending more time in the car so it has to become an accelerator to the online experience.

Now let’s talk about the trend towards zero emissions. In the first instance, we hear that by 2025 or 2030, we’re all going to be driving EVs. My concern here is that the current agenda is being run by politicians who are worried about votes and not being driven by engineers who care about the best and most efficient way of preserving the planet. Simply exchanging all cars from petrol or diesel-driven over to EVs will create its own problems. The technology of the batteries is not yet ready to serve every class of vehicle, plus one has to think about the recyclability of batteries and indeed the supply chain.

What we really need to do is look towards Darwinism, allowing the engineers to compete for the best solutions in every category. For example, maybe for small city cars the best source of power is a battery. Or perhaps its e-fuels, coupled with a petrol engine and a hybridised engine. Perhaps, it could be hydrogen or another fuel that we haven’t invented yet. The point is that we’ll never know if we singularly drop onto one technology. I trust in the engineers of the world to look at competing technologies in order to put innovation into the way forward. 

Onto ride share. I hear that the youth of today are falling out of love with the car and this is where I call ‘Bah Humbug’. Ultimately, there may be evidence behind a delay in purchase, but certainly you don’t see the TIV dropping and people will continually take their licences because at some moment in your life — whether it’s the 17-year old looking for freedom or the 30-year-old married couple with their first child — you will look for your own car and that can’t be done on a continuous basis by ride share. Whilst I have no doubt there will be a rise in the use of ride share with companies like Uber, I don’t think this is going to replace the car in general and reduce the number of cars on the road.

Finally, autonomy. Autonomous technology is marvellous, especially in its ability to reduce accidents and fatalities on the road. We can see a fast transition to Level 2 autonomy and we should as automakers pursue this route as rigorously as we can. Level 3 gets a Bah Humbug from me and should be rejected. Level 3 still has the sensation of autonomous driving, but the car can hand back control to the driver and in this way we are creating issues. I believe, and I think experts in the industry would agree, that we should move rapidly to Level 4 where the car is responsible for pulling over and stopping in case of emergency, instead of handing back control to the driver. Level 5?  It won’t exist in my lifetime and I think we can look many years into the future before we can expect cars to operate outside of a geo-fenced area.

What about the various categories of cars? I’ve heard it said that luxury cars and sports cars will disappear but if one looks back into history the same was said in the transition from horse to car that horses would die out. Far more horses exist today than when they were forms of transport. They became a hobby and in many respects the classic car, the sports car, the luxury car can become a hobby for those who can afford it.

The main evolution is going to be in the combination of the mass and the premium industry. These will probably meld into one group, with less brands where it will be important to share technology due to the high R&D costs. Generally speaking, the brands that can command higher prices are going to be the winners.

At the other end of the scale, we have to recognise that the entry level models — the low-cost cars — are increasingly important and we have to think about how we can provide low-cost, safe transportation for countries where we see an emerging and growing middle class that can afford to come off bikes and into cars. That is a huge opportunity. The stepping stone between two-wheel transportation and four-wheel transportation is in that entry zone and I think there we will see a lot of technology revolutions.

So, Christmas Past has given us a great industry; a growth industry for the last 140 years. Christmas Present is a time of pivot. A time where technology, particularly AI technology, clashes and melds with the traditional auto makers to create a new type of vehicle.

We look to Christmas Future which most definitely sees the car industry growing, embracing the technology, embracing the need to react to climate change but also reacting to new types of expectations from customers and probably with a big change in the mass and premium markets.

Whichever way you look at it, Christmas Future is an exciting place for us all to look forward to.