How to build fewer cars for more profit
As we march towards a bright future of autonomous vehicles, car sharing and, most likely, a massive shift in our very concept of car ownership, what’s the future for the global car industry?
After all, if cars can drive themselves and can therefore share themselves between a number of us during the day, won’t this mean the industry will be making and selling far fewer of them?
If there’s one thing that car companies like, it’s profit. So the industry is way ahead of us on this one. Believe it or not, some are seeing a bright future – just not one that will see them churning out millions of cars per year.
How does one of the oldest and most traditional car manufacturers balance this sweeping future mobility vision with its current business model of making cars and, more importantly, its profitability?
We recently put that question to three of Ford’s big planners of that future: manager of global consumer trends and futuring, Sheryl Connelly, the CEO of Ford Smart Mobility, Raj Rao, and executive director of strategy for Asia-Pacific, Jeff Jones.
‘‘We know that automotive manufacturing is a multi-billion dollar business – and we’ve done pretty well in that business,’’ says Connelly.
‘‘We have a nice share of the pie, but we always want more.
‘‘The mobility service industry has the potential to be a trillion dollar industry and if we don’t change the way we do business, we aren’t going to get any of that business.
The massive shift in the concept of ownership we have seen in the digital age is something that Connelly thinks will soon affect the way we look at cars too. The way music subscription services have overtaken the place of physical media is a good example.
‘‘Look at the young people of the world today; they don’t really care if they own stuff as long as they have access to it. That is a seismic shift for a baby boomer who used to think of his car as the most expensive suit he owned.
‘‘So how do we hold on to what the boomers want, but also make sure that the millennial generation has what it needs?
‘‘We think that multi-modal transportation is going to be a really compelling proposition in the future.
‘‘You will have many different ways getting from A to B, and we hope to be the provider of some of those platforms.’’
While Connelly’s job is all about the future, Rao and Jones also have to consider the present and how it will blend into that future.
‘‘Our view is that we have built an organisation that is excellent at designing, manufacturing and deploying vehicles, and that core competence needs to be sustained and invested in going forward,’’ says Rao.
‘‘What we are adding to that is the ownership experience and the ridership experience. So when somebody gets access to a vehicle they can do more things with that vehicle, they will use the vehicle more flexibly, achieve more outcomes and be able to share the vehicle.
‘‘These are all natural extensions of our business model, but it is an area where we haven’t really built the organisational scale yet.’’ Like the others, Jones doesn’t think the concept of making less cars is something that should worry a company like Ford, as it’s all a natural evolution.
‘‘You think about the city of tomorrow and it includes some type of transport. It includes vehicles,’’ he says.
‘‘So when we think about what motivates us, it is to have business models that are profitable and sustainable, but also make the world a better place.
‘‘When you think about the overlap between mobility and the need for vehicles, whether they be autonomous vehicles or shared vehicles or a combination – and we believe it is likely to be a combination – the two can sit together.’’