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EVs. Mobility as a Service. Tesla. Autonomous. Millennials. Rivian. The future of NAIAS.
These were just a few of the topics hit upon by John McElroy at a recent joint meeting of the Original Equipment Suppliers Association (OESA) Communications Executive and Automotive Public Relations Councils.
A top auto journalist, lecturer, commentator, entrepreneur and influential thought leader in the automotive industry, John offered his perspective and insights on the key trends driving the auto industry and Detroit.
Here are some of the highlights from his 45-minute extemporaneous talk:
The auto industry
• This is the most exciting time in the automotive industry in the last 100 years. You literally have got to go back 100 years ago to find the kind of excitement and innovation and change and disruption that we’re just starting to get into right now.
• Electrification and mobility are really what it’s (the auto industry) all about; I include autonomy as part of mobility. It’s transformation.
• I think we’re seeing millennials saying “Whoa. Whoa. Whoa. This is an industry that can actually be on the leading edge, that can transform society, and it can transform it for the better” … and that appeals to them.
• We’re seeing the (auto) industry becoming sexy again. And it’s because of electrification. And it is because of autonomy. And it goes beyond that, as well. It even spills over into manufacturing, where, instead of visions of the Rouge Plant in 1928, now the vision is with 3D printing, new and different materials coming into existence.
• We’ve got boomers retiring by the thousands every single day, we have people coming in from other industries, believe it or not even from the tech industry, and we’ve got a new generation that’s coming in …i.e. we have a lot more people in this industry who really don’t know a whole lot about the industry.
• If I talk a little bit about what we do at Autoline, our viewership absolutely exploded in the last year. In fact our viewership was up 77 percent year over year. And what I find fascinating is, most of that growth came from millennials.
• Now everywhere I’ve gone in the industry I hear “millennials don’t care about cars, they’re not interested in getting a driver’s license, they especially don’t care about the auto industry at all.” And I look at our viewership data and I go, well, I don’t think the facts bear that out.
• When I look for what kind of stories can we (Autoline) do, it’s not only looking at those categories (electrification and mobility) I just talked about, it’s also looking for stories that explain how the automotive industry works, that explain not just how vehicles operate … what’s all this manufacturing stuff and what does it mean? Because we have so many new people coming into the industry, not just millennials coming in, but people coming in from other industries …
• What we, at Autoline, like to get from suppliers is video that explains their latest technology, shows how it works, even if it’s a component and it shows where it goes in a car and the role that it play in a vehicle. They love seeing, our viewers do, videos and or CAD animations, sometimes really good photographs work, too, to explain what’s going on.
• My advice to any of you, from a supplier company or has clients that are suppliers, is, man, anything that really shows how technology works, shows how a process works, and just can be a 20 second video or CAD animation, we love to get it.
• We love to get raw video, raw animation. We don’t need music, we don’t need editing, we don’t need voice over … send us the text that explains what it’s about or give us a person to talk to that can explain what it’s all about … virtually everything that I do at Autoline is video-based.
• What our viewers really want is our insight on what’s going to happen … (and) the why of what’s going to happen.
Electrification and EVs
• The move to electrification … so much of our competence, our installed infrastructure as an industry, is based on the ICE (internal combustion engine). That’s going to go away. And so we have … this great period where the auto industry is sexy again. Everybody wants to get into it. Apple wants to get into it. Waymo’s already into it. All kinds of new EV startups have come – Tesla, Faraday, Lucid, NIO, Byton and more, are going to be coming.
• I love electric cars. Electric cars are the future … but in the short term, I think we’re heading for an EV disaster. And I think it’s going to hit around 2022 or 2023. The reason I say that is, electric car sales are miserable, with the exception of Tesla. All of the growth in electric car sales, at least in the US market last year, came from tesla. Take Tesla out of the equation and electric car sales actually went down.
• I’ve driven virtually every electric car that’s available in the US market and I’ve really enjoyed driving them, but I got to tell you when I talk to the public, there’s massive skepticism, in many cases even outright hostility against electric vehicles.
• There are 12 EV models on the market (today), three of which are Tesla. By 2020, if we believe what all the OEMs have announced, there’s going to be, depending on how you’re counting, anywhere from 80 to 120 BEVs that are going to hit the showrooms in 2022 and 2023. I don’t see the market demand for them. Europe is a little bit different … (and) in China it’s being mandated, you don’t have much of a choice … but in the U.S., I think we’re headed for an absolute disaster …
• This industry knows how to grind it out. This industry knows how to deal with disasters. And it WILL work its way through this (EV) problem, but I don’t see the problem being solved until the late 2020’s.
• At this point in time, none of the OEMs seem to be able to make a profit on an electric car, unless they the MSRP is at least $50,000. Any EV you see priced below $50,000, not including incentives, is a money-loser.
• (But EV) Costs will come down, this will get solved, like I say, but in the near term, it’s a disaster.
Mobility as a Service
• As far as mobility goes, I’m really concerned about it. I think it’s going to catch on like crazy … the cost issue changes dramatically, as we pointed out, once you get the driver out of the equation. So right now today, studies show that Uber and Lyft’s costs are $2-$3 per mile … to buy and own a new car for three to five years, and this is by AAA’s numbers, it costs roughly 60 cents per mile … I’m guessing owning a used car is probably in the 30 cents a mile area. But autonomous shared, according to Larry Burns, who’s done a real deep dive on this and is the former head of General Motors R&D, it could get down as low as 20 cents a mile, maybe even cheaper.
• I’m a hard-core car enthusiast. I’m not going to give up owning a car. I can afford to own one. Many people who have all kinds of things in their cars – like people with small children … anybody who has gear or tools in their pickup truck … they’re not going to give up owning that truck.
• But I’ve got to tell you, millions upon millions upon millions of people will readily give up their car if they learn that they can save $1000 or $2000 a year by no longer owning one. And this is where I start to worry about the auto industry as we know it.
Tesla, Detroit & Silicon Valley Differences
• Man, do they (Tesla) do things way faster than we do in this town. I mean, look at the over-the-air updates that Tesla’s had since 2011. Tesla’s able to send signals through the air so that when your car is parked in your garage overnight and you come out in the morning and you fire it up, the screen is different. They’ve changed it. They’ve made things better. (You think) I’ve got a little more range, the car is faster, in one over-the-air update, they even improved the sound system. Not one traditional automaker can do that.
• We, the traditional (auto) industry does things in a very methodical, careful way. And that’s been good – as long as everybody else did that. And we do it, why? For quality, and safety, and cost. We go through these gates and we don’t go through the next one until we know that we solved this problem, in the product development process. The (Silicon) Valley does not work that way. They are far faster than we are.
• Talk to anybody who has gone from Detroit to the Valley and came back, they come back with a different mindset. But I will say this too, people from the Valley who come to Detroit and go back to the Valley, also learn stuff here … it IS a two-way street. But at this snapshot in time, from a product development process, I think we (the traditional auto industry) have more to learn from them (Silicon Valley) than they from us.
• The Valley didn’t get to be what it is (today) by accident. There’s a (different) mindset there. There’s a lot of good stuff here … and there are reasons why we do things the way we do … and that was fine as long as every player played by those rules. They’re (Silicon Valley companies) not playing by those rules. I think they can introduce new technologies far more quickly than traditional OEMs.
• Now, we hear people talking about …(that) the car companies have got to recognize they’re in the MOBILITY business. I’m not convinced they’re going to make that transition. Uber and Lyft are in the mobility business. They really understand it. The airlines are in the mobility business. I think they’re better suited for this than the car companies are. The car companies are really good at making cars. And so that’s the fear that I have for this industry, that the car companies as we know them … they’re really good car companies. They’re NOT mobility companies.
• When I look at what GM is doing with Cruise Automation is smart. It’s a Silicon Valley company, and it’s way far away from the mother ship in Detroit. To me, that’s the model. The model is not what Ford’s trying to do, of growing a mobility company in Detroit, a short stone’s throw from Dearborn, unless they can really keep a wall and really keep those operations totally, completely separate, I just don’t see them competing.
Detroit and its Mobility Future
• Detroit’s become a hot place again. It’s become a center for artistic expression, a center for creativity and so, it’s kind of great for me to see …
• All these outsiders, I’ll call them, want a part of this industry. We are going to have to fight to keep what we’ve got. And when I say fight, I don’t mean protests and letter-writing campaigns, and that sort of thing, as a region, as a traditional industry – because I’m talking beyond Detroit in this case, I’m talking beyond the united states, we’ve got to raise the bar, but specific to this (Detroit) region, we’ve got to really got to raise the bar.
• Amazon did this search all over the country where should it put its headquarters. Detroit was rejected. Why? Because we couldn’t grow our own talent in the numbers that are needed. Why? Our K – 12 schools are not competitive. We have to bring in people from the outside.
• We have some big hiccups in front of us in terms of electrification. We have this massive threat in front of the traditional industry in this move to mobility, and we here in SE Michigan have a huge hurdle to overcome in being able to be competitive and keep what we’ve got.
• I think there is some revolution going on in this business right now, in this traditional industry, that if I’m right, bodes well for the future, bodes well for us (Detroit) to be able to compete at Silicon Valley clock speed … I think this (Ford implementing EPLM – enterprise product line management – to move more quickly) could be revolutionary … absolutely revolutionary.
New automotive players
• My observation has been that if you’re going to break into this auto industry and survive, you’ve got to bring something new to the party… for example, how did Toyota get to be where it is, and knock off all these other companies? Because it brought the Toyota Production System to the party. A different way of approaching manufacturing that gave it a massive cost advantage.
• If I look at Karma, what has it brought that’s new to the party? Absolutely nothing. If I look at Tesla, lots of new things. A battery that nobody else in the industry uses, at all … the battery management system they developed enabled them to use cylindrical batteries. The fact that they can do over-the-air updates. The fact that they’ve got this big screen. The fact that they don’t even use dealers …
• Bring something new to the party. Execute on that. Create public demand for your vehicle … that’s how you break into the business … that would apply to suppliers as well. If all you’re going to do is what everybody else is doing, and they’ve been at it 100 years, lotsa luck.
• The mobility companies are bringing new stuff. The electrification companies are bringing new stuff. There’s still plenty of traditional old stuff that can benefit from all kinds of innovation, new materials, new processes, new ways of thinking things through. Making consumers desire it … that’s the biggest challenge of all.
• Rivian is interesting. I love the fact that we have an EV startup right here in Michigan. I’ve seen the vehicle and it looks good … they’ve raised a half-billion dollars … they bought the old Mitsubishi Plant in Illinois for nothing. They’re doing a lot of things right. My own read of the situation is they’re going public (with product plans) right now … they’re probably getting to the end of that half-billion dollars and they’re going to have to raise a couple billion more to really take it to the next level.
• Their electric design is interesting. Nobody’s got an electric pickup (truck) right now, nobody’s got an electric SUV. First to the market is going to account for a lot. Their vision though is not so much to retail trucks and SUVs, their vision is to retain adventure, vacation adventures. They want to be the North Face. They want to be the Patagonia of vehicles … that’s their new-to-the-party-ness kind of approach to the market. Because even RJ (Scaringe, CEO of Rivian) recognizes if all he is going to do is an electric pickup, well, Ford is going to do an electric pickup, Chevy’s going to do an electric pickup …
• I’ve been to their (Rivian’s) operation … It’s cool. I’d go work there, man. It’s a cool place. But, like I said, they’ll only make it if they’re able to raise significant amounts of money.
• If Tesla were to go bankrupt, there would be a feeding frenzy. Automakers, VC (venture capital) companies, tech companies, maybe even suppliers … The question would be: Can Tesla be as cool as it is right now if Elon isn’t running it?
• The public is scared of autonomous vehicles. They’re absolutely petrified of them. For two reasons: they don’t trust a robot driving and they’re terrified that hackers are going to drive them over a cliff. They don’t trust the technology, which is not surprising, because the vast majority of people have never seen an AV. None of them really know how the technology, even the people in the auto industry, don’t know how the technology works. And they’ve never been in one.
• SAE did a very interesting experiment last year. SAE did a pre and post survey. And the pre-survey showed what all the other surveys showed – people are leery of the technology … so they take people out (in AVs) on the road …and after their experience in it, they did a post-survey. 85 percent said: “I love this technology. I feel so safe in it now that I’d even put my kids in this car.” So all it’s going to take for most people is to experience this stuff.
• The problem is, we’ve seen two companies – Tesla and Uber – try to cut corners in racing their development forward, and so we’ve seen a number of crashed and several fatalities, only with Tesla and Uber. Cruise, Waymo, ArgoAI, Aurora, many many of the other one, that are approaching it from a safety-first standpoint have not had one fatality. They’ve not had one accident that their technology caused.
• Getting people in (AVs) and experiencing this is the fastest thing that will change minds … there are going to be early adopters … there are going be a vast majority of people who will wait until they see it’s safe and they will be onboard. And there are going to be people who are going to be like Aretha Franklin, famously, who never flew, never trusted getting on an airplane.
The Future of the North American International Auto Show
• This (providing a safe place to experience AVs) is where the Detroit auto show could play a huge role, in providing members of the public first-hand experience in an autonomous vehicle. And the more we can get people through that, the better — it’s not just for the people and the car companies – but for this region. Instead of Detroit being the Motor City, it should become the Mobility City.
• Any region that develops public support for what’s going on (with AVs) is going to have an advantage in recruiting talent and companies to operate in that region. And this is where the Detroit show could play a massive role.
• Now, simply moving the date to June and putting butts in seats is not enough. It’s got to go way, way, way beyond that. The vision of the Detroit show is to be more like South by Southwest … more like the Goodwood Festival of Speed in England, where it becomes this massive happening … if the DADA is able to pull that off, it’s going to be phenomenal.
• I’m not going to judge it on Year One. I don’t expect next June to be a roaring success. South by Southwest took years to build up, same with Goodwood Festival. It’s going to take three to five years, I think, before we can legitimately say thumbs up or thumbs down. So we shouldn’t be too hasty to pile on if the first year is sort of a meh. We’ve got to give this thing a chance to grow.
For more of John McElroy’s insights, visit http://www.autoline.tv/.
About John McElroy
A veteran automotive journalists and analyst, John created “Autoline Daily,” the first industry webcast of industry news and analysis. He is also the host of the television program “Autoline This Week,” an Emmy Award-winning, weekly half-hour discussion program featuring top automotive executives and journalists.
He co-hosts “Autoline After Hours,” a weekly live webcast that focuses on new cars and technology. The show can be seen online at www.Autoline.tv.
John also broadcasts three Automotive Insight segments daily (subscribe at https://itunes.apple.com/us/podcast/automotive-insight/id809063917) on WWJ-AM Newsradio 950, the CBS affiliate in Detroit. And he writes a blog for Autoblog.com and a monthly op-ed article for WardsAuto.