Auto Industry 2040?

Auto Industry Circa 2040. where will it be?

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WOW! MMG! DISCO! These could be names of some of the leading auto component industries in the year 2040! Why have I selected the year 2040? Simply because everyone is talking of this year for introduction of electric cars in a big way; from this year onwards, the real downward trend in manufacture and use of IC engines in the cars, as we know them today, will begin. I am simply assuming that the cars will be available, similar to the cars of today. Masses of cars will be driven by humans, they will have a steering wheel and a power plant/train to give them. They will have some form of braking, electrical system handling various functions, wheels and body with fuel storage area, air conditioning and so on! Things inside could be fancier with more and more entertainment, superior navigation abilities, drivers may become more stress free as cars systems will be able to understand many things and may take over some functions from humans. Internet of things (IOT) will allow things that are not even thought of today.

This is part of evolution of human race but this could be culmination of major change that is taking place currently. The “new” car industry is putting its toddler’s steps today. Evolution is nature as everything in this world is always evolving! Basic driver for these changes is computers and computer chips. The car industry will be using different chips and will capture lots of data data generated by various systems. This data will be in endless loop and will allow cars to function more and more efficiently.

What will be the difference in the cars of today and those in 2040? Today’s power plant, the Engine & Drive train will be replaced by Batteries and Motors. Today’s drive train, gear boxes etc will be just be not there. The exhaust system as is known today will be simply not be needed because there will be no IC engine, both Petrol and Diesel. Gear box and the whole system is really not needed because their function can easily be handled by Electric Motors. Even today, in electric cars, there is a single gear which reduces the RPM to what is needed to drive the car at allowed speeds!

There are many companies that are manufacturing the components that are discussed above. These components may become redundant over a period of time due to introduction of electric cars. Bosch, Denso, Continental, Valeo, Aisin Seiki are some of the major players that manufacture the cluster of these components. These companies together manufacture products worth US $200/ billions every year.  These products may comprise of 40% to 70% of their current turnover. The giants must be already studying the questions that have come to my mind. How are they handling these questions? I am sure it’s a tough call to all of them though they have the where withal and deep pockets to handle difficult situations. Some have started making navigation products, some are making parking assist, camera -related systems. But suddenly new names are being heard in these discussions as vendors. CISCO, NVIDIA are some of them. Some are direct vendors to car makers and some are vendors to components manufacturers.  Where is the real scope for new development and business? Battery packs, battery charging technology to increase per charge distance that the cars can travel today! All other developments that are computer related can also happen in IC engine cars too! TESLA is already building a giga factory for their Battery Packs! So will the “new” component business be taken over by Car Manufacturers? Suzuki, Toyota and Toshiba are coming together in India for big battery plant! What happens to smaller manufacturers of these components? Will they survive the major change? Will “WOW! MMG! DISCO!” replace them? Only time can tell.

In car making, after a long time, new name TESLA, started coming into prominence. TESLA came mainly for the new product offering. It appears that technology like fashion goes round! Till first two decades of last century, IC engine based transportation was not very popular. Trains used steam, cars used electric power plants; but battery technology could not catch with the then needs. Hence IC engine cars and trains became popular. From the existing car manufacturers, some are already manufacturing electric cars more than what TESLA is producing. On top of that they have a running profitable business producing IC engine cars. But one thing is for sure they have the humility and know where they lack. Look at what Volkswagen Brand CEO Deiss has to say about TESLA! 

VOLKSWAGEN brand CEO Diess has said that VW which manufactured 5,987,800 cars last year has to catch up with Tesla which produced 83922 cars last year. “Tesla belongs among the competitors which has abilities that we currently do not have,” Diess said in the interview with “Inside”, a publication for VW employees. Around half of Tesla’s engineers are software experts, while at VW’s core brand it is a much lower proportion, Diess said. Tesla has good electric motors, a fast charging network, autonomous driving technology, internet connectivity, and a new approach toward vehicle distribution. “This shows that we need to significantly improve. We can do this. We measure ourselves against Tesla quite deliberately. Our goal: Using our abilities not just to catch up, but even to overtake,” Diess drives an electric VW Golf.

 Current giants have ready infrastructure and eco system to make and sell millions of cars. They of course lack Electric car eco system as mentioned by Diess above. Their main struggle will be recharging stations for electric cars; but TESLA is also going face the same problem! The question arises if TESLA, a loss making company, a start-up, survive? Let’s look at the startups from the Silicon Valley and the west coast, who really made it big in computer industry sunrise era. Google, Facebook, Microsoft, Apple they all became very big with the products/services that never existed before. TESLA is pitted against the giants for making existing products where the main “driver” is only a different technology! That’s a huge disadvantage. Fighting against giants, who have woken up a bit late, like Mercedes, Honda BMW, Toyota, GM, Ford, Fiat, Hyundai is going to be very very tough for TESLA! Some of these giants are also going to suffer or may merge! My take,Continental TESLA may cease to exist  by 2040 or even earlier as it is known today! Takeover? Maybe! 

 

I am getting a Toyota Prius!

One of the most important aspect of human civilization is that nobody can stop the technological advancements. Technology, the right one, is simply unstoppable. Humans do not change and they most of the time feel that so and so technology cannot become popular. There are very few visionaries who can guess, predict what can happen after a couple of decades. Initially when any technology comes the cost of its implementation as well as usage is always very high. This cost does come down with increased volume.

Let us consider the scenario in solar energy globally. Germany recently on a particular day produced, 85% of its total electricity produced, by Solar. The energy market in Germany runs like a trade market and the rate at which power is bought by distribution companies is based on demand and supply. On that particular day the rate went below zero! California on one day recently produced 67% of its electricity by Solar. US being a very large country will take a long time to reach Germany’s level as a country but it will happen in pockets. India & China are galloping fast towards solar energy in a big way.

If we think about steam engines and trains, initially people were just curious and felt that trains cannot compete with carts pulled by animals. Once the fear in people’s mind reduced, time of travel decreased and more and more people started travelling in trains and rest as they say is history. My first travel to USA was in 1981 and I had paid US $ 1076/ for return journey. Even today we pay hardly more than that in Dollar terms, for return ticket to USA. Why this happened? Because of safer, faster, larger airplanes increased the volume.

Cell phone is another classic example of technology that made it a disruptive device! When I first got my cell in late 90’s the cell phone was quite heavy, almost ugly, and it cost Rs.16/ minute to receive and make calls! In twenty years Cell phones have become sleek, they are much more powerful than computers specs ten years ago! Ten years ago GB was a word very rarely used even in computers. On top of that making calls is now free! Technologically in 20 years cell phones have gone places! Who would have thought of these changes? In the initial phase cell phone was the so called rich person’s toy. The beauty is that land line telephones have been there for more than 100 years doing same basic work that cell phones do, talking to each other. But other than becoming sleeker, land line phones did not change much in technology. Hence the landline phone population is on the wane world over.

Next classic battle that I visualize is between IC engine cars and Electric/Hybrid cars. The usual naysayers are saying that the current car companies are so powerful that they will just not allow this to happen. What are the parameters that will come into picture? Current volume of Electric/Hybrid cars is miniscule and their yearly volumes are nothing to write home about. So what is it that is needed for the picture to reverse, if it does! Fuel costs is one important parameter. Petrol/Diesel costs have come down from highs of US$ 150/ per barrel and have stabilized around US $50/. The original cartel led by Arab countries is finding it difficult to keep high rates due to new people coming in, huge American & Canadian reserves which were not known even ten years back, have suddenly become available. Their cost of production of extracting oil is also coming down. The fear of Petroleum products simply getting exhausted from the world has gone. So fuel cost may not be THE thing that will trouble current cars. But on the other hand, the cost of producing electricity is definitely going down fast. As more and more countries including India go strongly after solar energy, this cost will come down further. The countries which have lot sunlight round the year can become major players in producing next “Petroleum” for cars. Along with this wind energy is also playing a major role. One thing is for sure compared to petroleum products “Sunlight & Wind” are definitely never going to get exhausted. What all this will also do is pollution levels caused by burning Petroleum products will also come down. On top of this when more and more Electric/Hybrid cars get into use pollution levels will further go down.

Largest component of Electric/Hybrid cars is battery pack. Tesla is already building a Giga battery factory in Nevada where they will be able produce battery packs for five hundred thousand cars a year, at naturally very low cost. Already, Tesla is talking of producing cars that will be only slightly more expensive than sedans. Another limitation currently is the distance the car can travel with one charge. In cell phones  already fast charging systems have come, so I am sure it will happen in Electric cars too! So maybe when you have coffee break or wash room break, you can recharge your batteries. Once these cars are reasonably priced people may use such cars the way we use scooters in India, to travel smaller distances. For last hundred years there has been not much improvement in battery storage technology, compared to other fields and same is the case with IC engine cars. I am sure in batteries the break through is just round the corner! If automotive technology had improved as much as electronics, a car would have travelled round the globe in one liter of fuel!

If we summarize this battle, cost of production of fuel (electricity) to charge the electric cars is going down, cost of battery packs is going down ( it is like engine price going down), battery pack capacity will slowly start going up like some Tesla cars go beyond 350 km per charge, pollution improvement is a bonus. On the other side Volvo has already declared that they will not produce diesel cars from 2023 because cost of using technology for pollution compliance will go up exponentially. Volkswagen has already claimed that they will not produce IC engine cars beyond 2030. In India Suzuki & Toyota have joined hands to manufacture hybrid cars for Indian market. Suzuki and Toshiba have joined hands in India to build Lithium Ion battery mega plant. In USA GM and Ford also have big plans for electric cars. BMW i3 model electric car was quite visible when I last travelled to USA. Along with that a lot work is being done by Google and Apple in driverless car. I feel that controlling an electric car with computers will be much easier than IC engine cars! Will humanity be able to stop Electric/Hybrid car technology? Only time will tell. But in the end right technology will win!

So my next car is definitely going to be a Toyota Hybrid Prius! There is small issue of money in the bank but I will generously accept it, if someone wants to gift me a Prius! I will put big donor name sticker on the car! Happy (electric) motoring!

Et Tu VW? You Too VW?

CarSketches

Human nature is an extremely complex thing to understand and this has been proven so many times but it always comes up with something most unexpected. Here I am talking of human thought in the business scenario. We have seen companies like Apple, from almost going down to coming up with something brilliant that has taken them to the top of the world, in a matter of a decade. We have seen brilliant thinking like totally new way of doing things in the market place. Look at Amazon. All these changes happen these days, in a very short duration. In both these example we see brilliance shown by minds of individuals.

But there are businesses which are long haul businesses like Steel making, Car making, Aero planes. These are businesses where companies have been around for decades, coming up with incrementally better and better products. Of course there is natural survival of the fittest process, closing certain organizations. These long haul companies achieve their name and fame over decades. They achieve the glory in such a way that in India when someone wants to buy a Chocolate, she will say go and ask for a Cadbury! When you want to drink a soft drink she will say let’s have a Coke! (Variants thereof) Company names become synonymous with products they make. Such achievements are real long-term. In such a scenario the VW issue that has suddenly cropped last week, at least to me was a big shock. How they got into such a big mess! What made them do what they did?

I remember from childhood days in Mumbai, there was a restaurant famous for its thick Lassi. (It’s a sweet thick shake like drink made out of yogurt, where thickness is achieved by adding thick milk cream topping) One fine day there was story in newspapers that these guys were adding thick ink blotting paper in place of the milk cream. This made Lassi look original & thick but it was cheating. Luckily the paper was not harmful to health. WHY was this done? Motive was to make a few Rupees more on each Lassi served! What was the harm? Honestly I don’t know but hopefully nothing serious!!

These days I hear of snack vendors adding thinly cut Cabbage in place of Onion in the snack, as the Onion prices have hit the roof. These are usually added to stuff like Batata wada (Potato Patti with some mixes of vegetables) or in Bhel, an Indian fast food, which is made by adding assortment of stuff! WHY this is done? Motive was to retain profits to reasonable level by replacing Onion by Cabbage. What was the harm, there was no real harm!

There was a case of a Theatre owner who rented out some areas in his theatre for people to use as a warehouse. These areas came in the way of emergency exits, which are used well, only in emergencies. The emergency did arise, as there was a fire during one show. The emergency exits could not be opened due to the stuff stored; end result 50 to 70 people died in the fire. WHY was this done? Motive was to make additional money by selling non-existent place for a warehouse and of course make money! What was the harm; a great harm there were deaths!

But the Lassiwala was a small restaurant, Snack vendors are small time businessmen, theatre guy was a big businessman and they all cheated for money! But what about these giants like GM &VW??

A few years back GM in India fudged their records for their SUV while offering vehicles to Government agencies for emission testing. What could have been their motive? Why did they do it? It was definitely not for money but what could be the motive to cheat? This act was restricted to only India operations and did not cover many vehicles. End result many senior people were thrown out possibly with one suicide! Harm, of course there was harm as additional NO was pumped out in the atmosphere.

But what about VW? 11 million vehicles are affected world over as already accepted by VW. What’s going on? Who ordered this cheating? What was achieved? Could this have happened without clearance from Senior Management Group? It’s embarrassing to compare Laasiwala, Wadawalla with VW!! Small timers, all cheated for money and the Giants cheated for God Knows What!! But from what has come out till date VW & GM are the worst culprits. When GM issue occurred GM was the world’s largest vehicle manufacture of cars and so is VW when the cheating issue broke out. Do such companies become so large by cheating? I don’t think so! They do it by sheer hard work, perseverance, and passion. They are here for long haul stay in the market. Their products have been known for both quality and performance. So why they did what they did? What was the motive? Were they never worried that this cheating is bound to come out at some stage? What effect will this have on their name in the global market? Did they think that public memory is very short and companies will easily override the ripple effect? Can one of the waves become a tsunami?  Is VW prepared for a Tsunami? I don’t think so.

How will VW matter close? It’s anybody’s guess as on today. There will be action from Governments leading to large fines, there will be costs of replacements of components on the car or there will be hit on the performance. There will be class action suits in America and these can be really expensive! VW says they have already set aside US $ 7/ billion to handle the matter. As I understand this amount can only handle public relation costs; what about cost of VW’s tarnished name?

I started the blog with discussion on human mind. What sort of mind created this problem? In this world there are people like Bill Gates who have given Billions of Dollars for charity and are encouraging others to do the same. How does this successful mind think differently from VW mind-set? How is the human DNA created? If it is created by circumstances what better example can there be than German nation. What event changed this superb mind-set in Germany to cheat so blatantly! It is a classic case for psychologists. I as an engineer cannot fathom the reasons for such change in the mind. I could have also accepted some cheating, though not justified it, if it were done for a small duration because the launch of that specific product got delayed! Then cheat and launch so-called good product and then switch over to really good products after a small delay, good products has been VW specialty anyway.

Germans are proud about their quality products and German mind focuses on work, work and work in the good sense. Results are seen in Germany’s phoenix like rise post World War II. How current events will affect German psyche? How will German mind overcome this blatant cheating? I am sure they will do it by more work and more focus!

For those who want to read about this issue here is the link.

http://www.greencarreports.com/news/1100125_vw-diesel-emissions-recall-what-you-need-to-know-in-10-questions/page-2