FORD RANGER RAPTOR / Divide and conquer
In Stuttgart, things are not looking much better for the Mercedes EQC, with a shortage of batteries causing serious delays in Europe. Last year Mercedes-Benz also announced that EQC deliveries to the U.S. will be delayed until 2021 at the earliest. According to Ark Invest, Mercedes-Benz missed their target of producing 25,000 EQCs in 2019 as battery shortages limited production of only 7,000 units. According to Manager Magazin, MercedesBenz has slashed its production target for this year from 60,000 to 30,000, again because of a shortage of batteries, an allegation that Mercedes-Benz denies, stating that the production target has been adjusted to 50,000 units for 2020.
Clearly, the ramp to EV production is proving to be a daunting task for legacy automakers, and in the case of the laggards, those who have yet to produce a compelling all-electric vehicle, the switch to all-electric vehicles may even prove to be a bridge too far.
The question then is two-fold. Are legacy automakers simply sandbagging, or are they truly that far behind Tesla?
The answer is probably a bit of both. We believe that most of the legacy automakers, the German manufacturers, in particular, are sandbagging when it comes to range, mainly by restricting the battery to only about 90% of its full capacity. And although Mercedes-Benz, Audi and Porsche pan it off as a measure to protect the battery and ensure longevity, it is much more likely to be the first piece of evidence that these manufacturers are well aware of the Osborne Effect, and are already taking steps to counter it. The Osborne Effect refers to the consequence of releasing a new product, vastly superior to any existing product, which then causes customers to forego the existing product and instead purchase, or wait for the new product only.
All companies have to deal with the Osborne Effect when releasing new products, which explains the secrecy surrounding any new product release, but in the case of EVs that are vastly superior and already slightly cheaper (in terms of total cost of ownership) than fossil fuel cars, the effect could be devastating for existing product lines.
To answer the question then, no, we do not think that legacy automakers are that far behind Tesla in regards to battery technology, charging, range, and performance. Legacy automakers simply can’t afford to launch a Tesla Killer because, at best it will only be on par with Tesla, and at worst it may well kill demand for its existing internal combustion engine cars.
However, in the case of legacy automakers, this is just the beginning of the Osborne Effect, and it will become more pronounced once they produce bigger volumes of EVs. Then it becomes a real Catch 22. On the one, they can’t allow Tesla too much runway without proper competition, and on the other hand, they can’t make cars that are so compelling that people will stop buying internal combustion engine cars. As one author stated, the CEOs of the leading legacy automakers are faced with the choice of jumping off a cliff or jumping into a volcano. Jumping off a cliff implies a 180-degree turnaround by shifting all company resources to the manufacturing of EVs, with immediate effect. Jumping into a volcano implies waiting until EVs comprise 50% of total units produced, and then deal
with a price burn on the balance of stock, which by then will be considered antiquated when compared to autonomous, connected, data-driven EVs.
This is how technological disruption works, and what lies in store for the automotive industry is no different from what happened when the automobile replaced the horse, colour TV replaced black & white TV, the PC replaced the typewriter, the mobile phone replaced the “landline”, the digital camera replaced the celluloid film camera, and smartphones replaced a whole host of things, from analogue phones to point-and-shoot cameras, and VCRs to GPS devices.
LAST WORD
The next ten years will see the complete disruption of the automobile industry, from internal combustion engine cars to autonomous-connectedelectric vehicles that will represent nothing less than a data-driven computer on wheels. The internal combustion engine car is dead. Long live the computer on wheels.