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Entries in Auto Industry (104)


Costs and Savings

Every manufacturer on the planet is on a cost saving "holy grail" mission. They will look at every component in any vehicle and see how they can save costs in one fashion or another.

Its a reality of the current global auto business, saving costs while making room for increased technology.

Back in the days of mechanical vehicles we all knew who was putting more "substance" in a vehicle, and who was skimping. The trick was to make components that lasted beyond the duration of the warranty. The substance was "how much longer" would they last.

At one point The Colonel made the following observation about a specific manufacturer "They shortened the license plate screws what else have they measured and cut?"

In the auto industry at times it made better economic sense for a manufacturer to pay out claims, than re engineer specific components which would have been more costly. Reflect on this for a moment...

Back in the day the spread between MSRP and cost was 15% and on some models a touch more, and the usual holdback amount. When you finished doing a deal the gross was 8-10% of cost plus the holdback. Obvious back then customers concluded that dealers were making 30-40-50% gross.

Today the spread between MSRP and cost is 8-10%, then there are the monthly incentives from the manufacturers, so much cash back, or such a rate, or a combination of both. In addition to volume bonuses for dealers if they reach specific targets. Its dynamic and changing on an as needed basis to move iron.

Better yet customers expect this dynamic pricing on a monthly basis to incite them to finalise a decision. The customer got a great deal with a compelling promotion, while the dealer hit the volume bonus with that vehicle.

If you have a "feeling " that current dynamic pricing incites manufacturers to increase their cost saving efforts, you might be correct.

If you have the feeling that "strong" components still cost money, you might be correct.

Between cost savings, less platforms, increased common components, the product is better than back in the day. While the components will outlast the warranty on the vehicle.

Some manufacturers are more aggressive in their cost saving efforts than others, components come from the other side of the planet to save the last fraction of a penny.

Every manufacturer benchmarks the competition, everyone is learning from everybody.

There are a gazillion cost saving decisions made around the planet on a daily basis, its perhaps naive to think that all these decisions have been thought out, and reflected. Although they should, we have seen that with common components, be it air bags, to software code. When the shit hits the fan its in the million of units.

While the technology content of any vehicle increases its disposability, and although the mechanical components might endure for decades with proper maintenance, the technology has a best before date.

What do you think?





Autonomous Vehicles

An informative and thought provoking discussion on AV's

Autonomous Vehicles ("AVs" - sometimes referred to as “self-driving” or “driverless” cars) are developing rapidly and we are getting an increasing number of questions from investors about what they will mean for the auto industry. The excitement around AVs is understandable – 'newcomers' like Google are making bold claims for their AVs, existing OEMs are demonstrating fast-improving prototypes and suppliers are arguing that they can exploit this new opportunity. People are beginning to ask if AVs are going to fundamentally disrupt the conventional auto industry.




Driverless Vehicles - 2

It seems that our Dog Days of Summer are taking a "driverless" vector. An informative article from McKinsey on what they call AV (Autonomous Vehicles) and how they see the driverless landscape develop.



Automotive Perspective 2015

An insightful overview from Strategy+Business




Confessions of a Capital Junkie

By now you have probably read that Sergio Marchionne of FCA has been knocking on a few auto industry CEO doors seeking at minimum collaboration deals.

Below is the presentation that is spurring the door knocking.

If you have an interest in the auto industry the presentation provides insight on the platforms that all manufacturers use in their quest to save costs.




2015 Canada Digital Future

If you are conducting business in Canada its a must read.

From comScore...

This annual landmark report explores how the prevailing trends in in web usage, multi-platform engagement, online video, and digital advertising are shaping the Canadian marketplace and what these trends mean for the year ahead.




Leadership Reality

Back in the golden days of the auto business when personalities and egos were expected, and often delivered. Do we really need to mention names?

These guys back then, right or wrong had an innate understanding and knowledge base of the auto industry and business. Compared to today there was a minuscule media bubble around the auto industry. At the time the social autosphere did not exist.

Fast forward to today, the individuals in the auto business have subdued public personas, while the social autosphere is constantly expanding and evolving.

Here is the deal:

There remains a lack of leadership, accountability, populated by sidestepping, supported by reasoning that often defies gravity. This often captures the attention of the autosphere for a few fleeting moments, before its lost or superseded by another story which is more timely and might capture a few additional eyeballs.

In the autosphere its the superficial opinion often supported by a catchy headline (you need the headline for the eyeballs). When the opinion is discussed or questioned, the ensuing discussion is often deflected, since there is little "real" knowledge to corroborate and support the opinion.

In the business arena its the project that goes forward at a glacial pace, speeds up to a snails pace, while never getting into real time. It begs the question "Who owns this sh&t?"...which often is deflected with a seemingly rational explanation of various stakeholders, acronyms, and teams. While never answering "who owns the sh&t" or who is going to make it work.

Leadership, teams, teamwork, contributions, knowledge workers, the "thing" gets bogged down, and its easy to double back and distribute the ownership of the sh&t. To the point of "this broke while the team member was in the bathroom"

Think about this...who in his right mind is going to step up (lead) and own the sh&t while potentially jeopardising their mortgage payments?

Yes...we agree the Peter Principle remains enduring.




What's Behind The Connected Car

An informative and fascinating article on the connected car.





How Many Models Is Enough?

If you have been in the auto business long enough you hopefully remember from a few decades ago the movement to rationalise the number of models that were offered by a make. At the time the rationale was the Europeans and Japanese have less models.

Back in the day, Chevrolet as an example had a myriad of models and body styles, the same for Ford, and Chrysler. The thinking was to cut back on the number of models, to stop trying to fill every minute segment of the market, while selling more vehicles, and improving profitability.

The  Japanese had dramatically less models, and were inexorably gaining ground.

Once the models were rationalised, the focus shifted to decreasing the number of platforms. When you hear that a manufacturer has gone from 15 to 5 platforms. You can conclude that they are saving money while increasing profitability.

You also remember when models had an actual name, and not an alpha numeric (alphabet soup) nomenclature. Today the names are still around, Impala, Taurus, Camry, Accord, Elantra, to name a few. While the alphanumeric also thrives and seems to gain in disciples. A few examples, 3 Series, X5, CLA250, RX300, CTS, A3 to name a few.

From a manufacturer identification most vehicles have a body/platform identification; its a B Body, a W222, and a model designator its a 7BL57, 1BP67.

If you get the feeling that the model designators are creeping as "marketing" model names that are used to identify the vehicles in the market, we agree with you.

If you get the feeling that some manufacturers are establishing a parallel model line up with even more alpha numeric identifiers, we again agree with you.

Not only do the additional alpha numeric names confuse, you have to ask if they do not also dilute.

This business that constantly pushes the envelope, 1 is good, 2 is better, and 3 might be too much; with a fine line between 2 and 3.

If you think that some manufacturers are close to, or even past the 3, be patient it will be clearer in the following months. Its the classic case of sell 10 with 3 models, sell 12 with 6 models, sell 13.5 with 8 models. The sales are increasing along the the complexity, confusion, dilution, and perhaps even values.



Global Sales 2014

When a chart tells the entire story...

Click on chart to enlarge