Four big things that will change the car industry

By Warren Brown

The Porsche AG Cayman S vehicle, sits on display during the 2016 North American International Auto Show in Detroit, United States. Photo / Bloomberg
The Porsche AG Cayman S vehicle, sits on display during the 2016 North American International Auto Show in Detroit, United States. Photo / Bloomberg

The car world is changing. Rapidly.

It is still a place of glitz and glam, highlighted by shiny, elegantly sculpted metal and lots of talk about horsepower and speed. But if you concentrate on that, the stuff of automobile shows worldwide, including the 2016 North American International Auto Show underway here at the sprawling Cobo Center, you are likely to miss the fundamentally profound changes taking place.

To understand those, you literally have to walk away from the gleaming, noisy showroom floor and visit the side offices and hospitality rooms of companies such as Germany's Continental Technical Corp, France's Valeo or Britain's Deloitte Touche Tohmatsu.

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You might also want to spend some time with the people from Apple, Google, Intel or SAP Hana, or with the serious future-studies wonks from Ford, General Motors, Toyota, Honda or Mercedes-Benz.

Only then will you get a good idea of how the automobile industry is being altered.

The people at Deloitte Touche seem to have - for me, at least - the most understandable handle on what is happening.

Craig Giffi, Deloitte's US director of automotive industry studies, puts it this way: There are four basic changes taking place, which he calls "four future change states."

1. Incremental change

In Future State 1, the auto industry operates much as it has for the past century. Dealers sell cars. People buy them and drive them themselves. This "state" assumes that mass autonomous operation of cars - driverless driving - "does not take hold anytime soon."

2. A world of car sharing

This is an inconvenient truth confronting automobile dealers and manufacturers. Simply put, new cars are becoming too expensive - the final transaction price now averages $33,566.

In this state, shared vehicle services become ubiquitous as greater scale [of shared mobility] and increased competition leads to a more expanded range of services and segmented customer experiences at lower costs.

3. The driverless revolution

In this state, Giffi said, "autonomous-drive technology becomes viable, safe, convenient and economical." But he said such progress in no way means an end to private vehicle ownership.

Individuals will continue to own cars "for many of the same reasons they owned them before the advent of autonomous drive," Giffi said. He said people will accept autonomous drive for its functionality -"safety and other potential benefits."

4. A new age of accessible autonomy

Future State 4 involves a convergence of autonomous drive and shared mobility.

Example: You tap the screen of your smartphone to order an electric Tesla or Chevrolet Bolt. The car, sans driver, arrives at your place to pick you up. You get in the Tesla or Bolt and continue preparing for your day's meetings without worrying about the steering wheel or other traffic matters.

All this, of course, will take time. But Giffi predicted that it will happen much faster than doubters expect.

There will be "tipping points" - the funding and creation of governmental infrastructures that can electronically communicate with cars and allow cars to "talk" to one another, the emergence of fleets of autonomous shared vehicles as a viable transportation option.

Giffi, echoing other future-transportation wonks here, said that car manufacturers need to get serious about considering "whether they need to evolve from a [relatively] fixed capital production, first-transaction, product-sale business into one centered on being an end-to-end mobility services provider."

The changes will be disruptive and uncomfortable for many, the wonks said. But, they added, there is no need for the disruption to lead to economic tragedy.

Car dealers, for example, will be challenged, probably within a decade. But smart, creative dealers will survive and thrive, Giffi said.

As autonomous-drive vehicles become more widely adopted, there are likely to be far fewer personally owned vehicles than the 250 million in operation in the U.S. today.

"For the moment, they continue to operate as they have for decades, selling and servicing driver-controlled, personally owned vehicles," Giffi said. But all of that is changing with changes in automotive technology, he said.

But the vehicles on the road will still need to be serviced except that, well, as already illustrated by Tesla, that servicing can be done remotely, without appointment and the need for vehicle storage, through software upgrades and electronic patches.

That necessarily means smaller dealer networks, Giffi said.

How much smaller?

According to the industry trade journal, Automotive News, as of Jan. 1, 2014, there were 17,838 dealerships (rooftops, actual stores) in the United States. Giffi believes that new automotive technology can reduce that number by 16,000 dealerships nationwide in about a decade.

The industry is changing.

- Washington Post

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