Can car-loving Los Angeles be the model for driving lower carbon?

189440-049-A9F1124DEarlier this month I was a guest of the UK’s Department of International Trade on a low-carbon vehicle trade mission to California and Mexico.

With several days in LA to start the trip, the city of dreams inevitably set the tone. It’s hard not be smacked around the face by this extraordinary place. The real positivity, the relentless politeness, the universally terrible coffee, the ubiquitous fast food, the homelessness, the vast wealth spilling over the Hollywood hills. But most of all the traffic. The extraordinary levels of it, spread uniformly across the expanse of this vast urban sprawl.

la-me-traffic-los-angeles-20170220This is a city with no centre. Arteries don’t run into and out of a metropolitan heart as they do in older cities. LA is a giant grid which people criss-cross 24/7: more than in probably any other western city the population works around the clock, servicing everything from the entertainment business to the fast food industry. Property prices and wealth inequality mean that people often live a very long way from where they work – even for relatively low-paid jobs they commute, say, 30 miles, and they drive it, which can take a couple of hours. Hardly anyone uses what public transport there is. The nearest anyone from the professional classes gets to public transport is Uber. It’s a default option which only adds to the traffic: effectively a single-occupant car, usually with a large internal combustion engine. Uber and Lyft are simply increasing the car dependency.

So in spite of California’s environmental commitments LA is very definitely not the cool low-carbon city of electric vehicle advocates it’s sometimes painted as. Yes, there are plenty of Tesla’s Model S around (although few Model Xs, and I saw just one Model 3) and a good sprinkling of Chevvy Bolts. But pure EVs and hybrids like Toyota’s Prius are vastly outnumbered by giant gasoline-driven SUVs, ancient V8s, V12-touting Lamborghinis and Rolls-Royces, let alone the humdrum everyday transport of ordinary folk: if you want to spot Hyundais, this is the place to come. LA is a city in love with the motor car. Any car.

IMG_6168It’s simply not realistic to change this mindset. This isn’t Silicon Valley, where utopian business ideas are dreamt up in people’s garages and grow into multi-billion-dollar global disruptives. Currently LA is really the old model, a glittering outpost of Detroit. We visited the LA motor show and its eco off-shoot, Automobility LA, and they echoed echoed this: the latter was, at best, work in progress, the former much like any other motor show (but with more old-school gas-guzzling models). Where were the disruptors? Lucid? Faraday? Nio? Fisker?

The major car manufacturers don’t want the mindset changed – yet. They know that their existing business model is approaching the end of its life, but it’s fine while it still works and until legislation necessitates the change; mass market demand only ever comes into the equation late on. Meantime the carmakers don’t provide attractive low-carbon options. Why should they? EVs are expensive to engineer, mean disruption to manufacturing and retail processes, and offer reduced margins.

2017-11-29-PHOTO-00000023It’s in this context that those involved in the low-carbon trade mission can be a factor – smaller companies and start-ups, technologists and innovators, suppliers and integrators. While the major carmakers have a vested interest in slowing things down, these other businesses can be catalysts, forcing change from the bottom up.

Los Angeles can play a big part in this. It’s a bridge straddling the lets-change-the-world optimism of Silicon Valley, San Diego’s low-carbon commitment and the pragmatic ability of Baja Mexico to productionise low-carbon tech. And it’s got a huge potential customer base, vast wealth and international influence.

los-angeles-mobility-planLA is also quite possibly the model for a major modern city struggling to eschew old ways and acquire new, more sustainable habits. Yes, it’s more extreme than New York, Paris or London, but most of the problems are the basically the same: too much road traffic, unattractive public transport, very little low-carbon choice. If LA can do it then so can others. We should all keep watching.

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Dyson’s ambitious British EV project relies on Asia – and the US for now

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Sir James Dyson’s announcement of his electric vehicle ambitions has been news across the world.

There’s been a surprising amount of antipathy among the public, mostly in his UK homeland. Perhaps that’s because his name is associated with vacuum cleaners.

Elsewhere, especially in the USA – which likes a start-up, preferably from a California garage – it’s being seen as a credible venture. Especially as it’s being supported by a £2bn war chest. That’s 80% of the £2.5bn investment plan already announced – a huge commitment. Forbes, the Wall Street Journal and Bloomberg have all covered the story in a positive light. So has the FT.

Nevertheless, bringing a car to market by 2020 or even 2021 is extremely ambitious – that’s why Dyson has been keen to stress that the company has been at work on the project for years, and that it’s been in his mind for two decades. But this is a time for ambition, and once he has a product he can unleash a big advantage: growth in demand for Dyson’s consumer products, especially in Asia, which will drive the global EV market, has quadrupled group turnover in the past decade. If that brand traction can be coupled with product containing unique and relevant features – Sir James is betting on solid-state batteries for a start – Dyson has the capability of market success even if turning a profit will take many years.

image001-3Asia is key, so expect to see the vehicles being manufactured there. That may mean partnerships with Chinese businesses, which would reduce the huge financial risk. What that in turn means for the brand – British, daring, challenging, idiosyncratic, innovative – is another question.

But this news adds to the rapidly swelling tide of EV commitment and interest. It’s good for all of us in the EV business. We wish Sir James and his venture the best of British luck.

Why BMW should look at Volvo to shape its future

Screen Shot 2017-09-23 at 13.20.29The furore over the looks of the BMW X7 concept car revealed at the Frankfurt motor show this month, which triggered criticism of the company’s entire presence at the show, was not, at its heart, about design or product.

The X7 betrays a BMW brand which has gradually been losing its sense of purpose. And now it appears to be forgetting what its values are, just when it needs to evolve them into a relevant proposition for a market undergoing massive change. There’s a cultural confusion infecting how it develops products which need to resonate with a changing marketplace yet still articulate the brand. This, then, is a brand issue.

tvh8tjgkxqplakwxhr28The current trajectory can be traced back to the early 2000s when BMW commoditised itself by selling the 3-Series heavily into the world of discounted business fleets and aggressively targeting the less brand-conscious private customer with cheap leasing deals. The 3-Series became the new Ford Mondeo. Its appeal was a prestigious badge but the trigger was affordability. The badge began to stand for driveway bragging rights, not engineering, and the ubiquity made it, well, common. And meantime BMW was becoming more a bank that sells cars than a car company. This was a big cultural shift.

More recently the company has, like its rivals, thrown itself onto the altar of the SUV. The problem for BMW was that it had no brand heritage in four-wheel drive vehicles. It bought Land Rover, absorbed the technical knowledge and promptly sold it off. But technical know-how is not the same as brand equity or fit; Mercedes-Benz and Audi, on the other hand, had history in proper off-roaders and performance-oriented 4WD systems respectively.

BMW merged its new-found 4WD knowledge with the chassis engineering for which it is rightly renowned to create the X5, the first SUV you could corner like a conventional car. An impressive engineering achievement, but one which summed up the coming confusion: the brand whose strapline was ‘The Ultimate Driving Machine’ was engaging its engineers in trying to make a car with a high ride-height, high centre of gravity and excessive weight from the 4WD system do things which a conventional car would do much more easily. The 4WD would probably never be used off-road and was not there to improve handling dynamics. It was work of inherent engineering compromise. And it compromised the brand.

BMW_X4_xDrive35d_M-Sportpaket_(F26)_–_Frontansicht,_11._April_2015,_DüsseldorfPorsche did the same with the Cayenne of course, but Porsche needed saving; BMW didn’t. Every third car made today by BMW is an SUV, and the production X7 will book-end the line-up with an X2 model to be launched in early 2018, both additions to the range. With the lust for SUV volumes came a dip in quality. And the compulsion to proliferate, to find niches nobody has asked for, led to cars like the dumpy and universally disliked 5-Series GT and, more recently, the X4 – a visibly confused creation which is neither fish nor fowl. Or perhaps it’s both.

BMW then brilliantly took the initiative on the first of the big new challenges facing the car industry – low carbon. It stole the electric vehicle high ground when it launched the i3 and i8, making EVs desirable and cool overnight. Yet one is an urban-centric EV solution, the other a £100k sports car halo product, with nothing in between and no longer-term narrative. And that was four years ago. Only in the past couple of weeks has it indicated its next move, in the form of the iVision concept, expected to go into production as the i5 – but not until 2021. Mercedes, Audi and VW have all articulated more coherent strategies and have already started to occupy the premium EV territory.

And now, of course, the low-carbon imperative has been joined in the list of key challenges by automation and the sharing economy. Automation squarely challenges BMW’s indelible mantra of ‘The Ultimate Driving Machine’ – how is this sustained when cars not only drive us, but when integrated mobility dictates that commoditised pods shuttle us around our cities in bland efficiency. Does BMW become merely the hardware provider? And car sharing is, by definition, a cultural shift where not only ownership but brand allegiance are secondary to the ideology, service and efficiencies on offer.

These challenges are the same for all carmakers of course. But they’re greater when your fundamental brand tenet has been about the pleasure of taking the wheel.

bmw_joyThis is why BMW shifted its emphasis away from ‘The Ultimate Driving Machine’ to ‘Joy’ a few years ago. Joy was still the core theme in a presentation given this summer at the Automotive News Congress in by BMW’s brand boss Hildegaard Wortmann. But it means nothing. It’s feel-good lifestyle marketing-speak which could be applied equally to SEAT. It’s not a principle or a solution.

The vision of the brand she gave was strapline-centric – one where it’s hoped that customers will somehow absorb generic messaging and convert it subliminally into something meaningful, rather than one where the business’s culture, products and services define the brand, and where straplines are a consequence of demonstrable values and real assets.

There was little substance on how BMW would achieve relevance among an audience which does not want to own or lease a single car, and the impression given was that the company feels a need to outsource its brand articulation to Millenial-derived content generated by social media campaigns.

For BMW or any major carmaker to truly flourish in the new automotive market, they need clarity of vision and the courage to use their brand values as the foundations for addressing changing market needs.

volvo-xc40-care-by-volvo-13BMW doesn’t appear to be doing so. To see how to use existing brand values to reinvent a brand for the age of EVs, automation and sharing, it need only look at Volvo. If safety, practicality and family-friendliness can become cool, what can the can The Ultimate Driving Machine become?

There are no easy answers but BMW, surely, can find them. Meantime they can be confident about that Joy isn’t one of them.

Automotive News Europe Congress: why brand, Barcelona and Amazon matter

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The big issues facing the automotive industry were all there at last week’s 20th Automotive News Europe Congress Barcelona. But the order of importance is shifting.

Connectivity was the headline act. LYNK & CO’s Alain Visser made sure of that with a punchy presentation to open the event (see previous blog piece, LYNK & CO goes back to the future). Integrated mobility, and how connectivity can facilitate its provision, was a strong support act. Electrification in the form of plug-in vehicles was pushed from centre stage though: as Luca de Meo, President of event host SEAT said, EVs won’t take over until the range is better, charging takes the same time as filling a fuel tank, and the cost of ownership is reduced. And autonomy? That was just a cameo. Toyota’s Executive VP Didier Leroy, the most senior non-Japanese in Toyota Motor Corporation, said autonomous vehicles will become a norm only when an accident-free society has been achieved.

But above all these came the overriding matter of brand. Why? As everyone agreed, the carmakers are under threat. They don’t want to become merely the hardware supplier in a society where the experience and the service are what consumers engage with and what creates affinity and loyalty. If they do, cars will be reduced to mere commodities.

So brands are more important than ever. Luca de Meo said as much in his event-closing presentation, declaring, “Brands have not disappeared – they are levers to respond to different customer demands and needs.”

This was fitting – he made a powerful and effective figurehead for the SEAT brand. He’s an appealing character, with a relaxed, modern delivery and a smartly pragmatic approach. He recognises SEAT’s weaknesses and limitations, acknowledging that if it were not for VW Group parentage the Spanish company wouldn’t have a future. Even with that ownership SEAT is anchored insecurely, positioned somewhere adrift Skoda and acting as a feeder for the other group brands.

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So, to give SEAT relevance, as well as pushing the inevitable SUVs he’s investing in the brand by understanding where its roots are and strengthening them. And not just its national roots. Where others are developing homogenised brands – Skoda isn’t Czech any more, and LYNK & CO emanates not from China or Sweden so much as cyberspace – de Meo is going in the other direction, reconnecting SEAT to its home city of Barcelona.

This is smart thinking, and not just because Barcelona is emerging as one of the world’s leading smart cities. A strong brand has to reflect a company’s culture, and Barcelona – a city renowned for independent thinking, creativity and a life-affirming sense of well-being – lends an authenticity the company has lacked in recent years, when it’s aspired to being a “fun” brand, an antidote to the rest of the VW Group, without substance.

Didier Leroy shared top billing with de Meo at the Congress. He was the only other speaker given slots on both days, and although he’s from a very different background and operates within a polar opposite culture he was a deeply impressive conduit for the Toyota brand. He gave persuasively different perspectives on Toyota’s perceived weaknesses – a corporate reticence, a go-it-alone mentality, a stubborn adherence to hybrid technology – and did it with humility, humour and effortless authority.

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Leroy didn’t understate the challenges facing the industry: he compared the extent to which Toyota is having to reinvent itself to what it faced when it went from making looms to producing cars in the 1930s. But he left the listener feeling that the business is as focused on the challenges, the real issues and the real way forward as any can be. He’s the public face the brand has never had.

In spite of the way Hyundai and Kia have been transformed by a car designer, Peter Schreyer, the appointment of Volvo designer Thomas Ingenlath as CEO of its newly reoriented Polestar EV offshoot and the ongoing use of Land Rover/Range Rover design boss Gerry McGovern as its brand face (“I am the custodian of the brand”, he said in his Congress presentation), this may be a moment when the executive-as-articulator-of-the-brand role swings back from car designer to boardroom leader.

Leroy made an interesting point that, contrary to the assertion that OEMs must not become just the hardware providers, in reality some may well have to. It’s just that Toyota won’t be one of them. So what are the non-carmaker business models he and his OEM counterparts are studying as they look out to the nearing horizon? Uber? Google? No – it’s Amazon.

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For OEMs that ecosystem has to have the provision of services at its heart, which requires a brand extension job. When consumers rent a car they choose a category and, possibly, a rental company. So if the OEMs want customers to choose their products in an emerging landscape where short-term use and sharing are the norm they will have to build and offer the service direct as well as through partners.

And that means investing in technical services and connectivity, which is why the latter is currently a bigger issue than electrification and automation. Customer engagement and ultimately profitability could well be defined by it, and strong brands will be the foundation of it.

Lynk & Co goes back to the future

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The best-received presentation at last week’s Automotive News Europe Congress in Barcelona was by Alain Visser, Senior VP of LYNK & CO, Volvo’s sister brand conceived to meet new customer needs. It was rightly scheduled to kick off the event, underpinning the ongoing theme of inevitable change facing the industry, and was delivered with a delicious non-corporate directness.

The car industry business model is, as Visser commented, essentially the same as it was 100 years ago – build cars, sell them, build more. For all their technical wizardry, the carmakers are not innovative. They’re driven by volumes, legislation and necessity. As Visser also said, there’s plenty of discussion about new business models at events like the Congress, “But boardroom talk is only about tech – not services, customers, brands.”

When Volvo’s parent, Geely, asked him to set up LYNK he rightly questioned whether the world needs yet another car brand, and said he’d get on board only if he could do things differently: the customer of today has nothing to do with the customer a century ago.

The LYNK business model is driven by several key changes in consumer behavior. There’s the move away from ownership, not just to leasing but to sharing. Young people are engaging with and shaping trends, and spending their money on social experiences, not cars. And customers expect services to come to them and to be able to transact online. Visser claimed that research shows that people would rather visit the dentist than a car dealer.

So the philosophy behind LYNK’s offering is to start with the customer experience and work back. Three values therefore lie at the heart of the brand, positioning it as lifestyle rather than automotive. Connectivity is to LYNK what safety is to Volvo – think gigabytes, not bhp. Sharing – if people share their homes as on Airbnb model, why not their cars? A subscription model – LYNK sees itself as the Netflix of the car industry.

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To deliver these the business will have wholly-owned outlets located where people are and will allow end-to-end online purchasing. There will be a single set of prices, and no haggling. There will be a lean product range. LYNK will “kill traditional marketing”.

Yet this brave new world is essentially the same as one launched over 20 years ago, only without the benefit of an online world. I was part of the team which launched Daewoo in the UK in 1995. Like Visser, we knew there was no point launching just another car company. Like him we agreed to do it only if we could do it differently, focusing on the service rather than the vehicles. Like LYNK we tore up the distribution rulebook and set up direct outlets where people went – retail parks, supermarkets. Customers were advised, not sold to, and their kids could use play areas while they had a free coffee and got the information they needed from interactive touch-screen pods. There was no haggling and no commission. The result? Daewoo achieved record share for a new entrant in the UK market and became a benchmark for service across all retail sectors.

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The fact that, over two decades later, the LYNK pitch is seen as revolutionary, when it’s merely addressing inevitable shifts in customer dynamics, tells us how conservative the automotive industry is. It’s also ironic that tech, identified by Visser as a stale driver of boardroom decision-making, should now in its digital form in vabe the driver of change: connectivity, social media, virtual showrooms and sharing platforms. So the LYNK proposition is perhaps more interesting for the issues it raises about the industry.

LYNK illustrates the need to not only change but to hedge – no one knows precisely how the complex matrix of connectivity, mobility, electrification, urbanization and environmental imperatives will play out. But Geely – with Volvo as the traditional core brand, LYNK as the first-move disruptor and now Polestar as an EV-only brand – has a hedging model other OEMs might note. Yes, Geely has the advantage of being smaller, more agile. But, as Visser said, the likes of General Motors have a massive advantage in spite of their bulk – it’s far easier for a GM to add connectivity than it is for an Apple to become a carmaker.

LYNK’s lean product offer is another issue. If this helps makes LYNK a profitable success then it threatens to take the car retail business in the opposite direction from the premiumisation model where vast product ranges with endless specification options promise a near-personalised product with dramatic up-sell margins. Great brands are simple, and if simplicity becomes a driver of consumer engagement then LYNK can play a bigger part in setting the new paradigm.

Will it succeed? Some say LYNK’s first car, the 01, could and should look more interesting. The fact is that it’s neither fish nor foul – LYNK’s own hedge is to launch with a car which was conceived to take either an internal combustion engine or an electric/hybrid powertrain. So it hasn’t been able to reinvent the form of the traditional car around batteries and motors in the same as it’s trying to reinvent its consumption.

0_lynkco_shanghaiBut that, as the LYNK & CO website says, is “Almost beside the point.” The service is the product.

Armed with the power of an internet-enabled world and a customer base nurtured by Apple – unlike the fax and Nokia world of the 1990s Daewoo inhabited – LYNK can certainly make a mark. It has the remarkable opportunity to be a first-mover while being far from ahead of its time. We won’t all be driving LYNK cars – customer inertia and passive loyalty to existing, conservative but powerfully crafted brands will see to that.

But one of those brands is Volvo, and success for the LYNK will surely be serving as a bellwether and feeder for its well-established and relatively agile stablemate. If it does that, and grabs a good share of online voice and a slice of China’s growing aspirational middle class market it will have served Geely – and the automotive industry – very well indeed.

Automotive News Europe Congress – how are the industry’s leaders facing up to unprecedented change?

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Four weeks today I’ll be at the Automotive News Europe Congress in Barcelona. It always attracts senior executives from across an ever-broadening industry, and now is a better time than ever to be part of it – the industry is on the cusp of dramatic structural and cultural upheaval.

POSCO_main_1300x550_170407The excellent speaker line-up reflects those changes. With SEAT, Lamborghini and Italdesign all on the speaker’s podium, VW Group is somewhat over-represented – that’s because SEAT’s the Host Sponsor, but it also means we get to hang out in Barcelona. And the line-up does reflect many of the changes facing the industry.

This is what I want to hear from them.

Luca de Meo – President, SEAT:

How is he intending to give Spain’s national brand sustainable relevance? They tried to become an Alfa-Romeo-esque sport-driven brand, and now they’re committing heavily to SUVs, but so has most of the competition already. Aren’t SEAT’s differentiators of small/compact cars and a weighting towards southern Europe also its weaknesses? How will SEAT integrate the VW brand’s surging EV technology into its own offering? And what’s the dynamic within the bulging VW group brand portfolio, especially the no-longer budget Skoda brand? As keynote speaker, de Meo’s positive claims for SEAT will be under close scrutiny.

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Brigitte Courtehoux – Head of Mobility Services, PSA:

More than one OEM has now publicly stated that they’re transitioning from manufacturer and retailer to mobility provider, but what’s the substance behind this? Nissan and Volvo have extensive ongoing consumer trials of autonomous vehicles; what is PSA doing? How is it approaching the potentially seismic consumer shift from purchase and conventional leasing to flexible and ultra short-term leasing, on-demand usage, and personal mobility platforms encompassing public transport, Uber and growing non-driver urban populations? And where does the Opel brand fit into this scenario?

Jim Farley – Executive Vice President, Global Markets, Ford:

With Mark Fields having vacated the top seat at Ford Motor Co this is interesting timing. Ford has lacked focus globally since Alan Mulally departed in 2014. In Europe the company has made money when others haven’t, and GM Europe has thrown in the towel. But Ford is still part of that squeezed middle – mainstream brands which cannot become premium but are not value brands or challengers. What is the global vision? The company could – should – be leading the world in mobility, just as it did with the Model T a century ago. And what is its future in a fracturing Europe? With profits in the region down could it even follow GM to the exit door? Farley, newly promoted to a global role but with European oversight, is touted as a future global Ford chief so his view will be fascinating.

Didier Leroy – Executive VP, Chief Competitive Officer & President, Business Planning & Operation, Toyota Motor:

Toyota’s first foreign executive VP, Leroy provides a uniquely European focus for the Japanese giant. From a European point of view Toyota is nowhere near its global standing – 10th in volume terms, behind Skoda – and Lexus has simply never taken off. Globally it has never owned the EV and hybrid territory the way it should have done as the pioneer, which has clouded its brand purpose and allowed the likes of Skoda, Hyundai and Kia to steal hard-earned European market share, and the current uncertain next-generation technology strategy isn’t helping. Now there’s a global profits crisis, so how will this affect Europe operations? The man with the longest job title in the industry in uniquely placed to make the company’s case.

Hakan Samuelsson – President & CEO, Volvo Car:

As a challenger brand Volvo has the agility to reinvent itself and shift to meet changing market needs. And, sure enough, it has just announced that it will stop making diesels altogether, admitting that meeting emissions targets is too expensive. Other than VW’s virtue-out-of-necessity move to EVs, the bigger players have too much invested in existing technologies to be as bold, but Volvo’s move to EV and hybrid power brings the tipping point into view. The company is also at the forefront of automation, with its brand imperative of safety meaning that Volvo automation systems will effectively become the industry benchmark. Can this small OEM be the catalyst to both the demise of the internal combustion engine and the mass adoption of automated cars?

Alain Visser – Senior VP, LYNK & CO:

As the face of LYNK & CO, Alain Visser is fronting a company embodying many of the challengers facing existing OEMs. It’s not only offering cars designed for electric powertrains and connectivity, it’s challenging the whole existing business model by designing one around emerging market expectations. Direct, online sales, fixed pricing, home delivery and a subscription model for the app generation. “The word doesn’t need another car brand,”, Visser said. No existing OEM would establish itself now using the archaic distribution models they’re tied to, but LYNK & CO is part of Geely and was dreamed up at Volvo labs, so can the company make it work and head off the Teslas, Ubers and as-yet-unknown disruptors who come in totally fresh, with no automotive background?

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Hildegard Wortmann – Senior VP, Brand, BMW:

For me BMW is in some ways the most interesting OEM represented in the speaker line-up. Recently replaced by a resurgent Mercedes as the number one premium brand globally, it has lost its way a little: a commoditised 3-Series, bland and questionable styling, not enough true SUVs, an i-Series low-emissions sub-brand which has stagnated with just two, polarised products book-ending a product void. And now it faces a fundamental challenge to its very purpose – the Ultimate Driving Machine – in the shape of automated mobility. What will BMW’s place be in the future automotive landscape, and how will it get there? As the brand chief, Wortmann should provide a clear insight.

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I’m a little biased as I worked with ANE for several years in the 2000s, partly on this event, but for me the Congress is the best automotive trade event in Europe. Readers wanting to register can get a €100 discount by visiting the link below and quoting the code LONGSHORE. It can be used for either the Congress/Rising Stars combo or the Congress only.

Hope to see you there.

https://www.regonline.com/registration/Checkin.aspx?EventID=1934274 

Geneva motor show – designers, driftwood, elephants and pods

gims17_poster_eng_1200A few days on from press days at the Geneva motor show the consensus is that essentially it’s been more of the same: yet more SUVs, some hyper-expensive hypercars, but little to shift things much further along the road to a future mobility landscape. That the Range Rover Velar and Volvo XC90 premium SUVs have been probably the most talked-about cars at the show says much about the industry right now. SUVs and premium-isation are where the volumes and money are.

But that misses the point: cars aren’t necessarily the stars at motor shows – even at Geneva, which uniquely among the major shows celebrates the car as fantastic beast rather than mere corporate cash cow or monthly registration fodder. The real story is what’s behind the cars on show, and even what’s not there.

Designers take centre stage

Car designers are the new focal points for the automotive brands. Ever since Peter Schreyer, originator of the original Audi TT, was poached from the German company by Hyundai-Kia and effected a transformation of the Koreans’ products, the stock of design bosses has risen sharply. The best designers are now part brand alchemist, part corporate talisman; they double as marketing tools, and are the ones who articulate the product philosophy.

Nowhere is this clearer at than at JLR and Volvo, whose stands always sit side-by-side at Geneva. Jaguar and Land Rover have their own internal design-chief arm wrestling match, Jaguar’s Ian Callum locking hands with Land Rover’s Gerry McGovern. Each led their respective brand’s press conference, Callum in a Brit-slick film showing him at the wheel of an F-Type on an ice circuit before driving onto the stand to finish the piece in person; JLR CEO Ralf Speth was merely a support act.

If Callum’s piece was a little over-produced it was to compensate for the fact that he had less to say than his Land Rover counterpart, Jaguar’s big news being that its previously-seen I-Pace EV concept has been painted a different colour.

gAtzr7KreKocCKwSfPqm08R3G5Ny495k_IV_Gerry_Mcgovern_Chief_Design_Officer_JLR_Geneva_Motor_Show_2017_mp4McGovern by contrast had the Range Rover Velar to launch. It’s curiously named after the very first 1960s Range Rover prototypes, which were go-anywhere, hose-down workhorses. The new car stretches the Range Rover ethos to the opposite extreme – it’s the sleekest, most dynamic, driver-focused car the brand has yet produced. It fills a hole between the Evoque and Sport – whose name it surely should have had – but when that car was named there wasn’t a Porsche Macan to take on. And that, fundamentally, is the Velar’s job.

The latest Jaguar and Land Rover/Range Rover models have excellent, progressive design which successfully transports heritage brand values into 21st-century packages, but if anything they’re engineering marvels, not design triumphs. Making a two-tonne, high-riding lump of SUV like the Velar go around corners on rails and emit as little as 142g/km CO2 is a major achievement.

Yet the engineering bosses were confined to the shadows at Geneva. But at least Range Rover wasn’t giving Victoria Beckham a design credit.

Automation – the elephant (not necessarily) in the room

The technology behind automated vehicles is already with us; automated vehicles are not. And, as if to underline the fact that the public and legislators are not yet ready for self-driving cars, VW Group unveiled the Sedric, a fully-automated pod-type vehicle, not at the show but the day before press day, off-site. Perhaps they expected it to make its own way to the show.

sedric-large_trans_NvBQzQNjv4BqdODRziddS8JXpVz-XfUVR2LvJF5WfpqnBZShRL_tOZwSure, there was plenty of talk about autonomous vehicles on the stands. There should be – this technology will bring about seismic change for the carmakers and allow new players to enter the mix, grow quickly and reshape the industry. But VW didn’t want automation to gatecrash the party, and the nearest thing to a roll-out at Geneva was Nissan’s statement that its Leaf and Qashqai models will shortly be available with single-lane autonomous driving – commendable but something of a glorified adaptive cruise control with ancillary safety driver aids.

Industry executives spoke in reassuring terms to traditional car enthusiast media about using self-driving technology primarily to relieve the boredom of congested commutes in products which are otherwise still proper driving machines. Only Volvo seemed to have the courage to state upfront, via CEO Hakan Samuelsson’s press conference script, that automation’s number one benefit is safety. He outlined in convincing detail the efforts being put in at Volvo to make it happen, including an automation software JV with Autoliv, and even a program with Uber – a company representing as serious a perceived threat to the traditional carmakers as there is. Samuelsson also announced the world’s biggest autonomous vehicle testing program, DriveMe, using real roads and real car buyers in Sweden, the UK and China.

Even as it continues to develop a new generation of more dynamic cars to challenge the likes of driver-focused BMW, Volvo has the confidence to place automation front and centre as part of a core offering rather than in the form of a concept for an unspecified future. The company sees it not as a threat but a brand opportunity. And the fact that it talks so clearly and directly about automation only reinforces the brand by encouraging trust – a holy grail for any car brand in a post-dieselgate world on the cusp of change.

Clarity, driftwood and roots – how to identify the best brands

Taking a look around the Geneva show should leave you in no doubt about the value of brand. Some of the carmakers’ stands are downright confused. Some are trying rather too hard. Others seem effortlessly at ease with themselves. These are the ones which know what they stand for and their place in the world – today and tomorrow. They’re the ones with strong brands.

amggt4-geneva-096Mercedes has the most confident outlook of any Geneva exhibitor. Its model proliferation has taken it dangerously close to commoditisation, and it’s grown a little too fond of chrome. But the quality of the products, the way they’re displayed, the technology, the references to its F1 domination, and the interaction with the business both on-stand and digitally mean that it’s the most compelling of the behemoth brands at the show. The elegant and perfectly proportioned AMG GT concept is an admirably unostentatious statement of its assuredness.

But no-one better illustrates brand clarity than Volvo. It’s a brand which is evolving and growing in aspirational appeal but rooted in its historical values of safety, understated quality and its Swedish homeland, which it’s used to develop a Scandinavian design aesthetic. The product range is progressively and logically being renewed along these lines, with each core line articulating the brief slightly differently according to price point and target customer.

IMG_3931The contrast with JLR was marked. Both are effectively challenger brands to the German premium marques. Both are already producing vehicles of the same quality as Audi, BMW and Mercedes, but Volvo’s launch of the new XC60 was very different from that of the Range Rover Velar.

Those watching the Velar presentation had only to turn around to see the XC90 reveal, which immediately followed. Half a dozen XC90s sat concealed underneath cocoon-like pods. The video backdrop showed images of Scandinavian coastal scenes to a chillout soundtrack. And on came Volvo design boss Thomas Ingenlath, who unveiled…a piece of driftwood.

It’s fashioned by nature, timeless and sculptural. It made a point, and forms not totally unlike driftwood feature prominently in the new XC60’s interior. The Velar’s interior, in comparison, looked like a bachelor-pad fantasy. Ingenlath’s script had little hyperbole and self-congratulation and was the better for it. He really was speaking for the brand, as did the pods, which parted to reveal the new car as though giving birth to a hybrid of technology and nature.

Volvo is probably the truest car brand there is. Both Volvo and JLR, mutually orphaned by Ford, have thrived under new, enlightened owners. They’ve had fresh starts, helped by having limited and focused product ranges, which have enabled them to redefine themselves for a changing market while remaining connected to their provenance and values. And they’re able to re-shape their brands according to changing market needs in a way which the powerhouse OEMs like Mercedes can’t match, no matter how confident. It’s a real advantage at a time when upheaval is coming.

PSA-Opel – safety in numbers but how will it look in 2027?

You may have gone to Geneva secretly wanting only to gawp at the Ferrari 812, McLaren 720S or Aston Martin Valkyrie. But to get to any of those you had to wade through an undercurrent of PSA-Opel takeover talk.

Although GM’s rationale for leaving Europe is clear, if almost shockingly brave, the benefits for PSA are much less clear, with huge model range overlap and the addition of a languishing Opel brand to a portfolio of French brands which struggle outside their native France.

The announcement confirming the deal was made on the eve of the first press day but was light on detail. None of the brands involved – Peugeot, Citroen, DS and Opel – made more than passing mentions of it in their show press conferences so it was interesting to see how they articulated themselves in the new context.

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As though to reassure analysts that PSA has the wherewithal to nurture Opel better than GM, CEO Carlos Tavares headlined with Peugeot’s financial performance. Opel seemed at pains to make the point that the brand has real value, reminding people that the company has a very long history and that, being German, offers precision engineering. It also made the unlikely claim that the PSA deal is one of equals.

Ironically, what the discarded Opel did have was a pair of completely new models – the upper-medium Insignia replacement and a new SUV, the Crossland X. They’re important cars, the one because it’s in the increasingly critical compact SUV/crossover segment, and the other because it’s in the upper-medium segment where Opel and its UK offshoot Vauxhall still have to be credible for business sales. Both look competitive. And we were told that they’re part of a tsunami of 29 new models in a four-year period. But how will that fit with PSA’s model plans? The two companies have already been collaborating, including on the Crossland, but significant rationalisation will surely be essential. It’s a numbers game.

No doubt Carlos Tavares is a talented man, but you can’t help thinking that the additional scale Opel offers PSA is the opposite of the corporate nimbleness, lean product offering and crystal-clear brand thinking which gives Volvo and JLR such a great strategic opportunity in an industry facing inevitable and large-scale disruption over the next decade.

Changing attitudes to mobility: the hidden factor in the PSA-Opel deal

RNPS IMAGES OF THE YEAR - GERMANYThe likely takeover of GM’s European unit Opel by PSA isn’t all to do with economics. It’s also about changing attitudes to mobility and transportation.

Although fully autonomous passenger cars are still some way off, the technology is well advanced. And connectivity is already becoming a must-have, so the way we access mobility can change very quickly once legislation and a wider offering from the OEMs and new entrants are in place. Together these things promise to turn the automotive industry upside down. That OEMs must adapt to changing market needs is clear.

Yet the OEMs aren’t impatiently waiting for legislation and market demand; they like the status quo. Their existing, set-in-stone business model is based on customers paying a premium for a brand and owning the asset or leasing it long-term. The OEMs build a car, send it from the factory gates to a dealer and see it again in three years’ time. That’s how they like it. They react to change; they don’t drive it.

What they do like is the fact that barriers to entry for new carmakers are significant. Designing and building cars is extremely complex and difficult, and it’s even harder to make money out of them. Tesla is an exception to an extent, but it is not fundamentally different or disruptive, and it still doesn’t make money. It makes conventional looking cars with battery packs and motors and sells them to mainstream customers. It hasn’t reinvented the form of the product or the business model, and automation is a feature on its cars, not a purpose.

56b8575825067Effectively Tesla wants to join the establishment but doing it with a bit of chutzpah; it’s not establishing a new paradigm. But that’s what new entrants should be doing and existing players need to move towards. The likes of Google and Apple have wisely stepped out of the shadows to think very carefully about what their place in the mobility landscape should be. In a decade or less the power may well be at the other end of the value chain from the traditional business model, with Uber-type autonomous taxi brands and ultra-short-term leasing.

The barriers to entry here are far lower, and this is what the established OEMs have to be ready to be a part of.

So in the next few years they ought to be redefining themselves – moving away from the selling and ownership model, not trying to please everyone everywhere and instead focusing on the specific areas where they can offer real value and relevance. This was implicit in GM president Dan Ammann recently saying, “…we need to decide what we’re not going to do.”

It’s through this lens that we should view GM’s offloading of Opel. Leaving Europe is a big move for a company which has previously tried to be a leader in all markets, and no carmaker has ever walked away from a big share in Europe. But these are times which require clear sight and strong action. Yes, there are the financial imperatives – it hasn’t made money in Europe this century and, the last time it did, Clinton was in power: the world is has changed massively since then.

Being prepared to abandon declining markets and profits means that it can focus more on new technologies and new revenue streams. That’s the consequence of what Amman was saying.

2016102001a_link_co_geelySome of the other major OEMs are showing evidence that they’re beginning to think about how they can fit into a world of disruptive change – Volvo for example has established a new shared mobility unit and its parent Geely has recently launched the Lynk and Co brand, founded on the trend towards ad hoc usership.

But among the biggest players any new mindset is a consequence of necessity. VW is reinventing itself as an EV and mobility provider – forced into faster, more fundamental change by the diesel scandal – yet as part of that process is having to ask fundamental questions of itself: what is it, what is its purpose, what must it and can it become for the future? These are questions which, when answered, define a brand.

And ultimately this is a question brand – of purpose, relevance, engagement, vand culture. All the OEMs must start focusing on the shift from being a manufacturer of products – autonomous pods will inevitably commoditise a brand – to being a deliverer of a service and an experience creator. The existing OEM brands and new entrants all have to forge a positioning and offering which will allow them to prosper in the 2020s and 2030s, when the marketplace will look very different from today.

GM, for all the unsentimental expedience of its farewell to Europe, may have taken the first steps towards that.

Why Audi’s fall to 3rd place premium brand is a good thing – it’s simple

audi-logoAudi, the recent king of volume growth among premium brands, is about to be overtaken by Mercedes and slip to third in global premium-car sales.

It will be a big change from just a few years back. Mercedes was overtaken as number one by BMW in 2005, and was replaced as number two by Audi in 2011.

And last year, in Europe, ended with Audi as Europe’s number one premium brand. But Mercedes, with a dramatic product offensive, industry-leading quality, a turnaround in China, punchy marketing, domination of Formula 1, steadily growing profits and record sales, is on its way back to number one here too, quite possibly by the end of the year.

So this is a significant moment.

Paradoxically, it may be Audi’s very drive for volumes that’s seeing it slip behind Mercedes and BMW. Last year it was the 6th-highest selling brand in Europe overall, and fifth in the UK, where its volumes approach twice that of Toyota. It’s done this by storming into new segments, fuelling new niches, and aggressively invading mainstream territory.

It has trumpeted the number of models and derivatives it offers, talking of an extraordinary 60-plus model lines. So there’ something for absolutely everyone, and ultra-low interest rates have meant that anyone can get into an Audi, including people who may have only ever had cars from mainstream brands. If you can lease one for the same as a Nissan, Toyota, Renault or Ford, why wouldn’t you?

So how can all this lead to a slowing of sales growth? It has unavoidably become commoditised, but more importantly it has become complicated.

With such a vast product range, what’s needed is simplicity. Audi has a wonderfully simple and recognisable graphic identity, and product design which shows a confident simplicity. Design and engineering teams across all car manufacturers are engaged in delivering a sea change in how we interact with our cars, through the integration of connectivity and the emergence of autonomous driving systems. The human-machine interface is having to be transformed in order to deliver such complex technology seamlessly and intuitively.

But the same drive towards a necessary simplification of these for the user has not been applied to distribution and retail operations, and how the car manufacturers present their products.

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SUV? Low-riding SUV? Crossover? Coupe? Sportback?

Is there anything less intuitive than navigating vast product ranges of SUVs, crossovers, off-roaders, soft roaders, sportbacks, liftbacks, hatchbacks, high-riding hatchbacks, low-riding SUVs, SUV coupes, people carriers, sports tourers, sportswagons and estates? This doesn’t help the consumer. And in this respect the premium brands are failing delivering an appropriate brand experience at a critical point in the customer journey.

In brand consultancy Siegel+Gale’s last Global Brand Simplicity Index, Audi, Mercedes and BMW were all categorised as ‘low score/high premium’, meaning that “They need to simplify their brand experiences, and they’ll be able to reap significant rewards if they do”, according to the report. Tellingly, only Ford – a mainstream brand which has simplified its product portfolio – was in the ‘high score/low premium’ category, for brands already seen as simple and needing instead to focus more on showing the value of the simplicity they offer. Ford was also the only car brand to make it into the world’s top 40 brands across all sectors, in an impressive 17th place.

It’s clear: by expanding their product ranges so fast and so far, the German premium brands have made a rod for their own backs. Mercedes, in 44th spot, is doing better than BMW and Audi, in 65th and 66th places. But it’s humble Ford which leads the way, and ironic that Audi’s mainstream VW parent brand beats it in all the key markets.

It’s a picture reflected in how these brands fare in the UK. Ford is streets ahead at number 19 in the list, with Mercedes at 59, BMW at 81 and Audi at 89. And in the USA, not one of the German brands makes it into the listing of 125 brands, while Ford is at 24.

Look more closely and you see that, in the UK, Audi is the only car brand classified as ‘low score/high premium’, emphasising the gap between where it is an where it could be. But you’ll also see that BMW dropped 15 places in the latest GBSI. That followed another nosedive of 23 places the previous year in the global rankings, and a remarkable fall of 35 places in the listings for Germany, where the native car brands normally perform far better than they do elsewhere.

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Two different models from two completely separate model lines – apparently

So BMW, right now still the highest-selling premium car brand around the world, tumbling down the order. An anomaly, surely? I don’t think so. Audi has been the most aggressive of the three German premium car brands, but BMW was first to attack the mainstream when it pushed the 3-Series hard into fleets in the last decade, effectively making it an upmarket Ford Mondeo. Mercedes followed, with extremely aggressive lease pricing, and paid for it; Audi has merely taken it to the next level with its model proliferation, while BMW has tried to do the same, but has introduced a number of unloved, neither-fish-nor-foul models for tenuous niches. It has lost brand focus and the GBSI reflects that.

And this is the real significance of the current shift among the German premium brands: Audi and BMW may come to be glad of their soon-to-be status as numbers two and three in the premium sales charts. They could focus more on other ways of achieving success, like customer retention, car-sharing and on-demand mobility, to better fit consumer needs in a world where Apple, Netflix and Uber have set new paradigms for consumption.

Volume for volume’s sake is the enemy of the premium brand. Simplicity, clarity, vision and a better brand experience are its friend. Achieve that and the volumes will follow.

Tesla, lithium and the battle for power

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Seeing Tesla yesterday at Cenex LCV, the UK’s leading low-carbon vehicle event, was a reminder of the company’s challenges.

It’s hard to argue with the vision and ambition of Tesla founder Elon Musk – someone who promises not just to make the world a better place but even to help mankind find an escape route to another planet, via his SpaceX business, if plan A doesn’t work. His big pronouncements will always have plenty of emotional appeal.

37cdb07500000578-3769059-image-m-30_1472756569002But they can also fail spectacularly. In April, when he described the forthcoming Tesla Model 3 compact car as “the most compelling product launch on earth” he wasn’t aware that this month’s launch of one of his SpaceX rockets would be dramatically more compelling. The Falcon 9 failed explosively and extremely publicly, made worse by the fact that in its payload was a Facebook satellite for bringing broadband to parts of Africa. It was a PR-loaded fireball and could have been a metaphor for his aim of taking on the established carmakers.

Shortly after the Model 3 announcement it emerged that an owner of a Tesla Model S had been killed in a crash apparently as a result of the company’s Autopilot autonomous driving system failing to ‘see’ a truck. Last week the driver of another Autopilot-equipped Model S was killed in a crash, forcing Tesla to say that he wasn’t using the system at the time of the crash. This week another fatal crash came to light. And yesterday a public spat between Tesla and its former camera supplier Mobileye blew up, with the latter accusing Tesla of “pushing the envelope in terms of safety”.

Even July’s acquisition by Tesla of Solar City – the energy business of which Musk is chairman – undermined the big vision, being seen by most observers as merely a bailout, not a crystallisation of integrated sustainable energy.

tesla_model_3_2It’s been a bad year. Yet Tesla faces new, fundamental challenges and risks, and rather than provide welcome relief the Model 3 breakthrough car is the heart of it. Yes, the Model will alter the dynamics of the electric vehicle market if, as claimed, it comes to market in 2017 at a base price of $35,000, able to carry five people well over 200 miles and on to the high ground.

tesla-gigafactory-solar-roof-01But the real battleground is not the vehicles themselves – it’s how they’re powered. So if anything is going to be the Tesla gamechanger it’s the company’s giant Gigafactory battery plant, not the Model 3. It needs to be: around 375,000 people have placed orders for the 3, equivalent to a likely $16bn in sales. Musk says the 3 will propel Tesla from an annual volume of 50,000 vehicles in 2015 to 500,000 by 2018 to meet demand.

The Gigafactory will double global lithium battery capacity, but there lies the challenge. Where will all the lithium come from? That 500,000 annual production figure will require 25,000 tonnes a year of the precious metal, equivalent to 15% of global production. Lithium isn’t rare but it’s hard to reach, and as other carmakers ramp up their electric vehicle programmes the demand curve will steepen sharply. There could be a lithium gold rush, and a spike in prices: the cost of lithium carbonate imported into China has already tripled since the end of 2015. Tesla’s relatively low volumes will make it hard to bear sharp increases in costs, and unlike all the big carmakers it doesn’t make any cars which don’t run on battery power to provide reliable revenues.

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Tesla may need to buy a mining company to satisfy its appetite – the parallel with Henry Ford buying up rubber plantations to ensure that he had enough tyres to allow the Model T to transform personal mobility would no doubt please Musk. But there are other mouths to feed – not only the major carmakers but others with a longer record than Tesla in lithium battery production, such as BYD, the Chinese EV producer in which Warren Buffett has a stake. BYD has been making its own batteries for 20 years, and in 2015 produced more electric vehicles (EVs) than Tesla or anyone. A further stake in BYD has recently been bought by Samsung, which is pushing hard into automotive, supplies BMW’s i3 and i8, and is a massive producer of lithium batteries for mobile devices like the 6800 laptop batteries wired together to power the Model S.

And what if new battery materials or technologies emerge? Here’s the risk: the Gigafactory puts all Tesla’s eggs into one vast lithium basket. The battery pack for the crucial Model 3 will require new levels of energy density to achieve the claimed performance from a more compact volume, but we know it’ll be lithium and Musk has said he has no contingency plans.

Hedging its bets is part of the reason why the car industry is happy for Tesla to blaze the trail. There’s talk among the carmakers about building battery factories, but largely of JVs, where costs are shared and risks reduced. For the time being, however, it’s not that critical for them, because unlike Tesla their businesses currently depend very little on EVs. They can sit tight, wait to see how markets and technologies develop, then act – with power and accuracy.

There is undoubted allure to the Tesla brand – a disruptor with a bold vision. Tesla has a devoted fanbase, and you want it to succeed in a way you couldn’t want a Ford or GM to succeed. But a brand can’t continue to be a disruptor if its competitors can easily follow (only this week General Motors announced that its Bolt EV will beat the Model’s 3’s range by 10% and it will almost certainly hit the market before the Tesla) – or simply find a better way.

The money-burning carmaker business model alone doesn’t work and, objectively, making cars which happen to be EVs doesn’t even truly fit Tesla’s mission of helping transition the world to sustainable energy. Cars, even zero-emissons ones sold from shopping malls, are still largely privately acquired, carry one person from A to B and back again, and are ultimately disposed of. They fit the old model.

clnnbnwwaaanec5So you hope that, for Musk, cars are a way to create the momentum, goodwill and change of mindset for a wider energy brand and a new kind of grid – translating Tesla’s vertical integration into a world where EVs power not just themselves but our homes, are part of the internet of things and a smarter world. Otherwise his efforts may go the way of that Falcon 9.