Automotive Disruption Just Around the Corner

When did the world wake up and take notice of the automotive industry?

5 years ago General Motors (GM) filed for chapter 11 bankruptcy and no one seemed to care, today it’s a completely different story. GM recently announced one of their best quarters ever and has about $25 billion in the bank, yes that’s a “B” for billion. Now everyone is talking about the automotive industry, so much so that the press is speculating that Apple is working on an electric vehicle. The current automotive trends people are talking about are highlighted below and some of the companies involved:

– Self-driving cars (Google X)
– Electric cars (Tesla)
– Ride-sharing (Uber)
– 3D printed cars (Local Motors)

I assume the sudden interest in the car is because it’s such a large industry and when you talk about disruption this is one market that needs it. However, let’s rewind a bit.

The automotive age really kicked off with the introduction of the Ford Model T in 1908 as an affordable car for the middle class. It had 4 wheels and an internal combustion engine. You know what the car still 4 wheels and an internal combustion and that’s the problem. Yes, cars from 1908 look very different from the 2014 models but at the heart of the car is still the fossil fuel gulping internal combustion engine.

The automotive industry’s innovation for the past 10 years has been selling vehicles with more and more horsepower. I can’t for the life of me understand why you need a 400+ horsepower SUV to lug people around. I love cars, but when I speak to most normal humans they view their cars as a way to get from point a to point b. The industry really should have spent their R&D budget on engineering cars that would go further on a tank of gas/petrol instead of focusing on how fast it could drain that tank.

Self-driving cars and ride-sharing services like Uber show that people don’t want to drive. If people could afford a driver/chauffeur they would but most can’t and hence these other options are flourishing.

The aura of the electric car has been elevated 100x with Tesla in the game. Previously, electrics cars were ugly looking and something only a tree hugger could love. But, Tesla changed the game and is quickly moving towards its eventual goal of having an electric 4 door car costing around $40,000. In addition, there are many people working on the ultimate technology that would detach the car from the fossil fuel grid…solar power. Fisker Automotive which recently was bought out of bankruptcy by a Chinese company had a solar panel roof on their cars to power the accessories in the car. As solar cell technology gets more efficient it truly will allow the car to cut the cord to the fossil fuel grid.

For me the most innovative area is 3D printing, imagine you get into an accident and you take your car to the bodyshop to get it fixed. Instead of ordering the fender and having it delivered the next day, they print the rear-quarter panel overnight. Back in the day when GM launched Saturn one of the selling points of the car were the dent resistant body panels. The plastic pellets used to create the body panels were sold by GE Plastics (now called SABIC). In a country like India, all body panels should be made out of these plastic pellets since people get their doors dented and dinged almost on a daily basis. 3D printing of body panels is one thing but Local Motors recently unveiled their fully 3D printed vehicle. The implications of the open source project are far and wide, people can take the Local Motors designs and improve upon it. Who would have guessed that open source would hit the automotive industry.

It’s exciting times ahead for the automotive industry, the question is whether the big automotive companies can quickly capture these trends or continue the status quo. It’s the typical innovator’s dilemma, get with the times or get left behind.