Jan 28 2014
When you decide to buy a car and open an Excel sheet to start doing the math you soon realize cars are a horrible investment. The minute you drive off the parking lot the car has already depreciated by 30%…WTF. However, one thing that Excel can’t capture is the experience of sitting in a new car and inhaling that “new car smell” or driving a Ferrari and getting pushed into your seat as the car sprints forward. Ask any car lover and that’s what you will hear them poetically speak about, ask anyone else and they will spit out those facts that cars are a horrible use of money.
The automotive industry is like many other industries, there is the glitzy side and the not so glitzy side. In the fashion industry, you have fashionista’s walking around with their $100,000 Birkin’s and then you have clothes being made by 7 year old kids in a run down factory in Bangladesh. For the automotive industry it’s pretty clear cut, the glitz and glamour is everything up until you buy the car – the car shows, the magazine review, the test drive, the jovial banter with the sales rep at the dealer, etc… The not so glitzy side is everything after you buy the car – car servicing issues, dealer not responding, insurance for the car, gas prices going through the roof, etc…
I love everything about cars, but hate stepping into a dealer because it just goes downhill for me. In fact, last week I visited a Mercedes-Benz dealer in Bombay to see the new A Class. I mistakenly gave my phone number and now I’m getting an SMS almost every other day to buy the A180 because “the prices are going up as we speak”. My other pet peeve is when a salesperson tells you how reliable and awesome their cars are, then when you are about to sign on the dotted line they will start talking about an extended warranty. A sales practice that puts most people off, but is a huge revenue generator for the dealership. (This American Life podcast has a great episode about what happens among a sales team at a car dealership – a highly recommended listen.)
For car makers I believe it’s a case of innovator’s dilemma, they don’t want to try new things that might hurt their existing product lines and revenue stream. Over the past 4-5 years there has been an increased interest in shaking things up in the automotive industry from companies based in Silicon Valley. Tesla which is a manufacturer of electric vehicles has not only innovated on the technology used in the car but the entire car user experience – the dealership experience, servicing the car, over-the-air updates, fixed pricing, etc… Google X which is an top secret group within Google is pouring money into self-driving car technologies, this from a company that made its mark in online advertising.
Car servicing is usually the biggest pain and most frustrating experience for a consumer since they are at the mercy of what the mechanic or service advisor tells them. My interest in cars is also in the not so glitzy side, I’ve been advising a company in India called MotorExpert.in which is changing the way people get their cars serviced in India. The team is looking at many angles of the workshop experience and the consumer website to compare facilities is the first and the most visible product from the team.
Everything I have mentioned so far is around ownership of a car, another area that is being innovated is short term usage of vehicles. Uber with its easy to use iPhone app to “hail a taxi” has quickly rolled to markets all over the world. Uber has been very successful simply because people hate the current system of getting a taxi or paying for a taxi. Because of its popularity, Uber has had to fight the taxi union in many of the cities it has launched its service. Another company, Getaround allows you to rent your personal car to others – peer to peer car sharing. In India, I can see this working for people that have a car and a driver where the car is sitting idle for many hours of the day. You can instantly and safely monetize your car by turning it into a “taxi” on the Getaround platform.
Another area ripe for innovation is car parts with 3D printing of certain car parts. Imagine how great that would be for the spare parts market, it would require much smaller warehouses and reduce the overall time to deliver those parts.
As you can see, I love cars but hate the old school car industry. Much of the innovation for the car industry is coming from outsiders which is not surprising, since no car insider wants to kill the golden goose for their old school car company.