The automotive industry is now well into the most sweeping period of change since mass production, and the transition is even bigger and more complicated than anticipated.
Consider just three of the many major trends colliding in the transportation industry:
• Engineers and scientists are making rapid strides in how a car senses its environment. Autonomous driving, long a fantasy, seems increasingly likely.
• Consumers have a greater choice of fuels than ever before. Most manufacturers now offer internal combustion gasoline or diesel vehicles plus hybrid gasoline-battery vehicles and plug-in hybrids. Consumers also can choose all-electrics from Tesla, Nissan and others, and even hydrogen fuel cell vehicles such as Toyota’s Mirai.
• Younger drivers, having sampled ride-hailing services, increasingly want someone else to own the vehicle and make it available for them to drive as needed – a trend known as ride sharing, car sharing or car clubs. Nobody knows yet who will own the vehicles, and it is unclear how this trend will disrupt dealer networks.
“The applications of technology such as ride sharing, autonomous and electric vehicles – all those things are changing where the auto industry is going,” said Brian Krinock, senior vice president for Toyota Motor Engineering and Manufacturing North America. “I don’t think anyone has a complete road map to where we’re going.”
AS CHOICES GROW, SO DOES COMPLEXITY
These three trends are converging to create two major challenges for the industry: what mix of vehicles to make, and how to simultaneously manufacture an increasingly diverse set of vehicles in a smaller number of factories.
Driverless vehicles, for example, will require even more high-capacity computing, which affects how much power and cooling a vehicle needs. High-tech components may arrive as preassembled modules, but installation will require assembly line workers with increasingly sophisticated skills.
Shared vehicles also will be made differently than individually owned cars. Analysts estimate that the average consumer uses a car about 5% of the time. Shared vehicles, however, will be in use an estimated 95% of the time by multiple users with different driving styles.
To withstand annual use of 50,000 to 100,000 miles (80,000 to 160,000 kilometers) per year, instead of today’s 10,000 to 15,000 miles (16,000 to 24,000 kilometers), specifications for shared vehicles will need to be significantly more rugged, creating more manufacturing complexity.
“Where it gets fuzzy in terms of how the industry responds is vehicles that could be autonomous, or be able to be operated regularly, or that could be used in ride-sharing,” said David Andrea, executive vice president of research at the Center for Automotive Research (CAR) in Ann Arbor, Michigan. “You might not really know how a vehicle is going to be used.”
DIFFERENT PRODUCTS FROM A SINGLE FACTORY?
What to manufacture and how to market it is only the beginning of the automakers’ challenge, however. As consumer options proliferate, the manufacturing line must make a quantum leap in sophistication.
“We are going to try to find a way to look at the different platforms and engine types and vehicle structures,” Toyota’s Krinock said. “We will need systems in our plants that are more flexible.”
One piece of the solution, Krinock said, will be to increase the use of automatic guided vehicles (AGVs) on the factory floor, allowing parts and components, as well as workers and partially assembled vehicles, to move more fluidly.
CAR’s Andrea believes that subassembly lines, which he calls “spurs,” will feed into the main assembly lines. Those spurs could be located inside the auto assembly plant or could be off-site – for example, at a Tier One supplier’s facility. The spurs could assemble a greater number of subsystems and then sequence their arrival at the main factory.
“WHERE IT GETS FUZZY IN TERMS OF HOW THE INDUSTRY RESPONDS IS VEHICLES THAT COULD BE AUTONOMOUS … OR THAT COULD BE USED IN RIDE-SHARING.”DAVID ANDREA
EXECUTIVE VICE PRESIDENT OF RESEARCH, CENTER FOR AUTOMOTIVE RESEARCH
This vision has big implications for the relationship between assemblers and their many tiers of suppliers, however. Relationships will need to become more varied and flexible, depending on which vehicles will be assembled on a given day.
“The holy grail is mass customization,” Andrea said.
The industry can currently assemble more than one type of vehicle on a single assembly line and can change trim levels and other accessories to suit a particular buyer’s tastes. Coping with the proliferation of completely different vehicle types, however, will require much more flexibility.
Increased use of manufacturing modeling and simulation is one critical piece of the puzzle. Toyota, for example, knows at the design stage which parts a car will require and how the assembly line must be configured. It can even use virtual reality to predict how a consumer will respond to the vehicle – all before it builds anything.
CUSTOMER RELATIONSHIPS ARE UP FOR GRABS
Manufacturing is not the only major function headed for a shake-up. Evolving ownership patterns are threatening a seismic change in manufacturers’ relationships with consumers.
In most of the world, manufacturers ship cars to dealers, who then manage the consumer relationship. But who can own a dealership is legally restricted in some jurisdictions. In the United States, for example, a variety of state laws ban manufacturers from owning dealerships. In Japan, however, dealerships are directly owned by manufacturers.
As new technologies emerge, manufacturers will need to update the software in privately owned vehicles via wireless communication links, just as Tesla does today. Once manufacturers start dealing with owners directly, however, who owns the customer relationship to the manufacturer or the dealer? And will ride-sharing services step between users and manufacturers or users and dealers?
“I DON’T THINK ANYONE HAS A COMPLETE ROAD MAP TO WHERE WE’RE GOING.”BRIAN KRINOCK
SENIOR VICE PRESIDENT, TOYOTA MOTOR ENGINEERING AND MANUFACTURING, NORTH AMERICA
In hopes of controlling the dynamics, all of the major automakers have invested in ride-sharing services and have studied models, such as Zipcar, that make cars available for easy rental. As they study, however, other emerging models could further disrupt the customer relationship.
One interesting test case is the “BOOK by Cadillac” program announced in January 2017, beginning in New York City. In exchange for a flat monthly fee of US$1,500 customers can have the Cadillac of their choice delivered to their doorstep with what BOOK promises will be “whiteglove” concierge service. If they want to enjoy a robust drive in the country, they might request a high-performance Cadillac sedan. If their plans call for skiing, they could trade the hot rod for an Escalade sport utility vehicle.
Maintenance, insurance and all other aspects of owning a vehicle are handled by Cadillac. Vehicles are reserved through a mobile app, and mileage is unlimited. “We realized there was an opportunity to give customers [or members, in the case of BOOK by Cadillac] an option beyond the traditional vehicle ownership models,” BOOK’s marketing communications manager, Eneuri Acosta, said. “The white space we saw was in elevating and simplifying vehicle ownership so that BOOK members have all their vehicle needs under one hub.”
If the program works in New York, Cadillac plans to expand it to other cities. Which means that, for the first time, General Motors’ premium brand is directly interacting with end users – and bypassing dealerships – in a systematic way.
Will BOOK disrupt the disruptive ride-sharing services, or merely displace GM’s dealers? The future face of mobility is at stake, and the rapidly shifting landscape will continue to create logistical challenges for makers, suppliers and dealers while offering consumers more choices than ever before.
For more information on the Future of Mobility, visit: http://3ds.one/MobilityFuture