Category Archives: mobility

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.

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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.

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.