For the automotive manufacturing industry, the next couple of decades are going to be make or break for most of the well known brand names we’re familiar with today.
With the near term prospect of “self-driving” cars and city-level smart traffic routing (and monitoring) infrastructure fundamentally changing the way in which we drive, and the shift in city demographics that promotes a growing move away from wanting (or being able to afford) a personal vehicle, it should be clear to all that the motoring practices of the last century are on a trajectory to disappear pretty quickly.
As self-driving cars eventually negate the “love of driving” and city traffic routing and control systems begin to rigorously enforce variable speed limits, congestion charging, and overall traffic management, the personal car becomes more and more just another impersonal transport system. If that’s likely the case (or even partially the case), then what does the future hold for the manufacturers of luxury cars?
Earlier this month I spent a week in Bavaria, Germany, visiting customers and prospects. The economies of cities like Stuttgart and Munich fundamentally revolve around the luxury automotive industry. Companies like BMW, Audi, and Porsche define the standard in personal vehicle luxury and generally lead the world in technical innovation (especially in safety features). Speaking with locals around Bavaria there is a very real fear that the next two decades could see the fall and eventual demise of these brands.
If the act of “driving” is completely replaced with computer control systems and the vehicle itself eventually becomes a commodity (because every vehicle performs the same way, travels at the same speeds, and is carefully governed by city traffic management systems), luxury vehicle “performance” is no longer a perceived value. As the mandated vehicle safety designs are achieved by all manufacturers and there’s only a small percentage difference between the best and the worst (yet all getting “five stars”), advanced safety innovation no longer becomes a distinguishing factor. Finally, as Millennials (and the majority of city-bound Generation X and Y) give up the love, desire, and financial capability to own a personal vehicle – and instead seek “on-demand” public transport systems the likes that Uber and its kin will spawn – then “luxury” becomes a style choice without a premium.
Like those Bavarians I spoke with, these luxury car manufacturers are going to have to change dramatically if they are to continue to be the brands they are today. Despite all the technical innovation they’ve been renowned for over the last century, it does appear that they are late to the party and need to dramatically change their businesses in pretty short order.
As a BMW owner myself, I’m surprised at how far the company appears to be behind the global changes. I’d have thought that such a technically innovative company would have grasped the social and economic affects on luxury vehicle sales to city dwellers for the coming decade or two. While BMW (and other luxury car brands) have doubled down on vehicle performance, emission controls, renewable energy, and environmentally friendly design, it feels like they’ve been caught flat-footed in the innovation and desires of people (and city planners) to remove themselves from being the weakness behind the steering wheel… and the implication on all luxury vehicle brands.
I’m positive that the engineers at BMW and other traditionally innovative vehicle manufacturers have many relevant technologies tested and maybe shelved in their laboratories and around test tracks.
While I doubt that “luxury” will form less of a vehicles buying decision in the future – especially when the trend is towards fleet management of such vehicles (e.g. taxis, delivery, etc.) – I think that, for these companies to survive, they’re going to have to become “technology companies”.
Although late to the party, present-day luxury vehicle manufacturers can transform in to strong technology companies. For example, some opportunities could include:
- With several decades of technical safety R&D innovation (e.g. collision avoidance, LADAR, automated parking, route guidance systems, land management, sleepy driver recognition, etc.) they already have the credentials and respect in the industry (and with consumers) as being the research leaders… so why not bundle up these safety features and license them under their brands. For example, the future Google self-driving car… music by Bose, safety by BMW.
- As designers of engines (combustion, hybrid, and electric) they have decades of experience in design and performance. That could translate in to innovating city-wide refueling management platforms and systems.
- “Smart Cities” are still mostly a desire rather than a reality. There is huge opportunity for proven technology companies to come in and define the rules, criteria, monitoring, and management of city-wide traffic control systems. Detailed knowledge of vehicle performance, capabilities, and safety controls whole be an ideal platform for building upon.
- Regardless of just how many driver-less cars come to market over the coming decades, there are still going to be hundreds of millions of cars that were never built or designed to be “driver-less”. There is an obvious requirement for supplemental or conversion kits for older vehicles – not just their own models.
The list above could be expanded considerably and I doubt that similar thoughts haven’t also been discussed at various points in the last half-decade by the luxury brands themselves. However it would seem to me that now is a time of action.
It’ll be very interesting to see how these luxury vehicle manufacturers reinvent themselves. If they have the funds now, then not only should they continue to innovate down safety technology paths, but they should probably be looking down the acquisition path… bringing into the fold new tech companies specializing in fleet and city vehicle management, taxi and courier management and control systems, city traffic monitoring and control systems, and maybe even a new generation of refueling station.