Tag Archives: Geely

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.

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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.