11 Apr 2019Blog

History repeating itself – and taking the knowledgeable by surprise

I’ve been following EV (electric-vehicle) market development, and I’ve recognised a pattern that leads me to compare it with the disruption in the mobile phone market. The similarities that are now emerging are quite visible once you’ve noticed them: the core seems to be a battery platform optimised with software and the physical car as one.

This will be a digital service called car, or it will be easy transportation instead of what it is today – an industrial product. Of course, an industrial process for manufacturing cars will also be needed in the future, but manufacturing will be a support function, not the core it used to be. This will be a game of service platforms once again.

Change by new design: Tesla is very similar to IOS

  • A crazy visionary in charge: Elon Musk is very much like Steve Jobs. He comes up with a vision, drives towards it with manic force and ends up building the necessary ecosystem and solutions. It’s a completely different development culture than that of the traditional car manufacturers.
  • A closed environment, including the battery, car, charging network and service platform, just like the iPhone & App Store & iOS.
  • Over the air app uploads: Apple opened the ecosystem for developers. Tesla is producing its own new feature apps – not just infotainment but the actual hardware!
  • Entertainment: one of the first entertainment apps for iPhone was iFart. With Tesla, the fart cushion is one of the first popular entertainment solutions! ????
  • Both brands boast a huge, committed and enthusiastic fanbase and comparable sales figures.
  • Tesla ID is very similar to Apple ID, containing both customer data and transactions enabling customer lifetime ownership over communications and transactions. There’s no middleman.
  • Optimising the physical product and software as one introduces an opportunity for totally new and unexpected functionalities like autopilot. The ecosystemic opportunities around MaaS (Mobility-as-a-Service) and logistics are largely untapped.

Today’s kings – petrol and diesel car manufacturers are very similar to Symbian

  • A development model based on physical and software components, relying on the dominance of the industrial production value-chain.
  • A feature-driven development, where the maximum number of features is produced extremely efficiently in minimal time. Years of industrial optimisation at its best.
  • A reliance on a reselling network: these products are sold by importers and resellers, and repaired by them or local repair shops.
  • A local reseller owns the customer much in the same way as operators owned customers with Symbian phones.
  • Electric cars built by traditional manufacturers are very similar to Symbian phones with touch screens. With electricity, the set of components is a little different, but it is essentially the same as before – from design, production and ownership to discarding.
  • The user experience of Symbian phones was very good, as it is with Audi or BMW. However, it just couldn’t compete with a seamless ecosystem that was conceived differently.
  • The traditional car manufacturers are heavily dependent on sales of petrol- and diesel-powered cars, and won’t risk cannibalising their own turnover with a competitive electric car offering – just like Nokia, even when it was clear that touchscreen-based ecosystems would dominate the market.

China- and Korea-based battery manufacturers are the potential foundation of a future Android of electric cars

  • They produce most of the batteries used in electric cars and have the negotiation power to shift from being component manufacturers to providing solutions – and even the whole platform. The latest example of this is the discussion between Volkswagen and LG.
  • The Chinese EV market is the largest in the world, and they are learning faster than any traditional car manufacturer about optimising the car, the battery and services.
  • As early as next year, we’ll see electric cars with a respectable range and features – offered at a surprisingly low price point and with interesting features like biometric recognition.

How long will it be before there is an offering of a car platform with batteries, motors and a service platform from China or Korea – where traditional industrial companies or new players build only the chassis?

At first, it seems the race is all about who can manufacture the best touchscreen phone or electric car. In reality, the electric motor and the battery are just the discontinuity point in development that is big enough for the ecosystems game to start – just as the touchscreen was for the mobile phone market. At the same time, phenomena like MaaS and self-driving car development require functional ecosystems to really develop. Volkswagen has said it’s investing billions in developing EVs, but has said nothing about developing the winning ecosystem. If this doesn’t call for a “Kodak-moment”, what does?

We will again witness an ecosystems game, where today’s industrial stars will play the subcontractor’s part or vanish into obscurity like Nokia. Even if it’s true that we tend to overestimate change in a short timeframe and underestimate long-term change, the signs are clear: the change in the auto market will be faster and more radical than expected.

The key question for the currently dominant auto manufacturers is this: can they let go of component-based manufacturing optimisation and start building customer experience-centric service platforms that are competitive with Tesla or the developments in Asia?

There are a few challenges in the way.

  1. The industrial optimisation culture is strong and dominant. It is also producing good results at the moment. It’s not culturally easy to start developing things completely differently.
  2. They lack the knowledge, capacity and experience to produce the most challenging part of the electric car – the battery
  3. They are industrial companies, not digital development companies. Software and infotainment services are developed as components by subcontractors.

Learning from our past?

Just a reminder – this is the way it all went in the last ecosystems race.

It seems very clear to me that history will repeat itself. The only real question is: when will the new Q3 2010 hit us, and who will still have a part to play after the perfect storm?

Impact of AI