Lately I’ve been asked (once again) why I hate the automotive industry. Especially the German “premium manufacturers”.
This impression seems to arise if you follow my comments, articles and keynotes on topics such as the future of mobility or innovation.
First I want to clarify that “I don’t hate the automotives“, I see this industry critically and disapprove its profit model.
It is not as innovative as their CEOs, marketing, PR and lobbyists make you believe. The automobile was a disruptive invention … over 100 years ago. But the engines have been fully developed for about 20 years and now they are doing little things. Always guided to generate maximum profit for the shareholders. And that’s where the problems start. Their interest is not in the customers and the commitment to them. It’s just about the shares.
The manufacturers weave in emotions as messages, making driving the last bulwark of freedom and emotional masculinity. The brainwashing simulates an alleged “Progress through Technology” (Vorsprung durch Technik), “Innovation through technology”, “Truth in Engineering”, or very simple “Joy of Driving” (Freude am Fahren), but the main thing is that the business “runs and runs and runs“.
How does a car assembler make his money? Yes, I called the manufacturers assemblers, because the individual parts come from the suppliers. In very few cases, the manufacturer really builds a car. One of the reasons why callbacks are increasing. At this point I like to compare them with IKEA, only difference is that the driver does not need to fold the tin by himself. But who knows in future…
So back to moneymaking: By building and selling cars (mostly through authorized dealers) and leasing or loans (through their own banks). These are the two first € pillars.
The German premium are much more maintenance-intensive, because the german engineers plan and design differently. Some call it over engineering. Usage of proprietary tools or spare parts (hey a 1980ies car could have been repaired from the junkyard…) are an important way for a lock-in. This maintenance (Scheckheftgepflegt) is factored into profit planning as a third € pillar. And this is very needed, the quality declines because the groups are run by accountants and controllers.
BTW these are the same people who are obsessed with gap dimensions when criticizing Tesla.
Whatever the engineer thinks up, is shattered by savings targets. So €2.50 is not spent in production, even if this investment saves €250 in five years. Per car … Because the targets have to be met now and not in the future. This short-sightedness leads to the massive recalls we are currently seeing or to the 2015 scam.
The fourth mainstay is the sale of used cars, leasing returns and fleet vehicles.
The fifth mainstay is car rental, including car sharing. In the future there will also be mobility services. And again, did anyone talked to the customers who pay for this?
If you buy in (near) future a “premium” car, you will be able to “pay per use” or per subscription some features. Let’s say, you need the PDC or rear camera: pay for it. In winter seat heating and in summer cooling: pay for it.
But what they miss with this “innovation”, is the fact that a car is NOT a smartphone, where you just download an app. Software just unlocks potential. This is how Tesla deals with it.
You have all the gadgets built into the car without ordering, maybe unwanted? They make the car heavier and more complex. Sure, you don’t need to pay for it when you don’t use it. BUT these complex toys on wheels need sometimes a service. Remember the third € pillar and over engineering? So if one of these unwanted gadgets get broken, who pays for it?
Originally published on LinkedIn