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Why car companies need to become tech companies

Rob Enderle | Jan. 26, 2017
The biggest risk any industry faces is its inability to change. In the automobile industry, if things don’t change, columnist Rob Enderele writes, there are likely to be fewer car companies left, especially U.S. car companies.

Tesla vs. Ford and GM

Tesla basically sells a computer on wheels, which is far closer to where the industry is going than where Ford and GM are. Yes, the firm has had issues learning the market and to be fair I’ve driven a Tesla X and the car sucks (it is getting better), but the Tesla S, on the other hand, remains one of the industry’s marvels.

What really makes Tesla different isn’t just that it is all electric. It is that the cars are modular, upgradable and fully connected.   This means they can be more rapidly patched, critical to avoiding the increased number of security threats coming to connected vehicles, be more able to address bugs once the car is released, and remain one of the safest vehicles on the road. Even today they have a history of breaking safety test equipment rather than breaking themselves.  

Ideally, given Ford leads the world in sales (but pickup truck sales) Ford would have an electric truck in market as a hedge against someone doing this first. Ironically, in many ways given how pickups are often used they make more sense as electrics than cars do. They aren’t used for long-distance travel much, the big electric weakness, they need a lot of torque for pulling and electrics have 100 percent torque from the start, and if you want to go off-road electric motors respond more quickly, are more powerful, and are solid state making them far more reliable climbers.   Fortunately, pickup drivers aren’t seen as very progressive, which has put the Tesla pickup truck on the back burner up until recently. Sadly, for Ford, unless it steps up, that is about to change. Though I would hope Tesla would get a new designer to work on the project that understands the existing market better.  

One other interesting difference with Tesla is it h as designed in the ability to refurbish and resell their cars. This potentially opens up the secondary market to Tesla. Right now, U.S. car companies basically compete with themselves in terms of used cars, getting some parts revenue, but being largely out of the revenue loop once the car has been initially sold. Tesla remains engaged and, once at full scale, that should give them a huge revenue advantage over their more traditional competitors.  

Anyone who looks at Tesla and sees just a car has missed the bigger point. Tesla is moving to change the industry.

An industry’s inability to change can be its demise

What struck me the most when I spoke to Cauchy at AGL was just how aggressively the Japanese car makers are when it comes to getting ready for the new world and how painfully slow the U.S., and most of the European brands are in adapting to the coming changes. Even fast rising Tata seems more engaged in the present than in anticipating the future. That doesn’t bode well for the coming changes in autonomous cars, which will effectively be rolling computers, and likely on the way to becoming human carrying drones.   We may be seeing the last days of the U.S. car companies and, unless something changes, we may only see Ford and GM in history books or, like Chrysler, a brand that belongs to an overseas firm.  


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