Have Tesla and Apple disrupted the auto industry past the point of no return?

Image: Reuters/Tyrone Siu
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This question originally appeared on Quora: How will Google and Apple’s entry into the car market change the industry? Answer by Mike Barnard, Executive Consultant: Energy and Cloud at IBM.

The challenge that the old manufacturers are having is that they have to cannibalize the profits of their existing lines by making completely new vehicles from the ground-up to compete. So they mostly won’t.

The future of cars is battery electric vehicles; that’s just a reality. There are a bunch of reasons for that, but here are a few:

  1. Electricity from generation to wheel is a lot cheaper than any of the proposed intermediaries such as hydrogen fuel cell and air carbon capture + electrolysed hydrogen fake-gas, or diesel.
  2. The grid is decarbonizing, but you can’t buy carbon neutral gas or diesel.
  3. The VW scandal is just making public what a lot of people already knew: it wasn’t possible to make gasoline or diesel engines significantly better in the compromised space between CO2 emissions, NOx and other pollutant emissions, mileage, performance and engine longevity. That road, amazing as it has been, has reached its end.
  4. Electric cars just outperform everything else. I ran across a video of a 1968 Mustang fastback conversion to electric that give it 1.94 seconds to 60 mph and a top speed of 174. Teslas, obviously, are currently reaching 60 in 2.8 seconds with heavy, five-seven passenger luxury sedans. The quickest to-production cars in the world are gas-electric hybrids, because you can’t be fastest without electric motors these days. And the pitiful handful of fuel cell vehicles on the road are sluggish, because batteries are much more efficient at delivering electricity than fuel cells.

If you don’t believe me, how about the CEO of Aston Martin?

“Palmer said it’s inevitable that the entire industry will shift over to electricity, if only because it’s the most plausible way to deliver the power drivers expect.”

To make a good electric car:

  1. You have to throw away your frames. All of them. To build an effective, long-range, high-performing electric car, you have to start with something like the Tesla power slab at or below the level of the axles.
  2. You have to throw away all of your engine management software; all of the experience built up on getting amazing compromises out of an internal combustion engine is irrelevant when faced with an AC or DC motor.
  3. You have to throw away your internal combustion motor. No hybrid, serial hybrid, range extender BS. You have to throw it away. And start with the assumption that you are going to achieve range, fast-charging, and performance by committing to electric motors and batteries.
  4. You have to throw away all of your traction control systems. They are all designed around the ludicrously widely varying power output of an internal combustion engine, which changes literally every microsecond at every change of speed and driver input because those engines have such narrow power bands. Instead, you can rely on tremendously straightforward power to your wheels which is much more finely controllable. Your actual traction control results will be much better, but all of the hacks you built up will be useless.
  5. You have to throw away all of your emission controls experience, knowledge, technology, investments, and branding. It’s completely unnecessary.
  6. You have to throw away your entire fuel storage and delivery system. The tank, the lines, the pumps, the injection systems, all of it. It’s all obsolete.
  7. You have to throw away your body panels. They all depend on the frame, the gas tank, the mechanical linkages, and taking up space that they don’t take up anymore.
  8. You have to throw away your seat mounting systems, and possibly your seats. They expect a lot of wasted space due to motor and transmission drive shaft hump and gas tank that just aren’t there anymore. They depend on a frame which doesn’t exist anymore.

Tesla discovered this the hard way by trying to base the original Roadster on the great little Lotus Elise. They admit, somewhat ruefully, that it would have been a lot easier and cheaper to start from scratch. And they had no existing technical debt, politics, or any other barriers to making the right decision.

If you do all of that, what are the implications for an automobile manufacturer?

  1. Virtually all reusability between existing models and the new models is gone. This is a complete disruption of the economics of the car industry.
  2. The most powerful divisions within car companies lose almost all power.
  3. Massive investment in new frames and panels is required.
  4. Massive investment is required in new control systems.
  5. Completely new supply chain partnerships have to be forged.
  6. All of the executives and engineers who have made your company great on the back of internal combustion engines have to accept that they are back to close to zero. A lot of the engineers won’t have any role in the new world, or any way short of significant re-education and starting from junior positions to stay employed.

So what’s going to happen to the car industry?

  1. All of the majors will continue to deny the reality of the situation and continue to bet on cars with traditional frames, limited batteries, limited electric range and performance, and with internal combustion engines continuing to do the heavy lifting.
  2. New competitors such as Tesla and Apple will kick the traditional cars to the curb in every way. More competitors will enter as it becomes obvious to corporations outside of the automotive industry that a massive disruption is killing the traditional car companies, and that they are incapable of responding to it. Traditional electronic and electric motor companies will start wrapping cars around their expertise. Motorcycle companies such as Lightning and Zero will be approached to build cars instead of bikes.

Can we see this happening already?

Yes, BMW’s strategy is what I’ve outlined above. Their two existing cars, the i8 and the i3, are both inferior to the Tesla in most ways, both require gas engines to get more than a rather pitiful distance (and space for the engines, gas tanks, lines, and pumps are all set aside in the i3, so it’s not like you can do anything useful like extend the battery pack). The frames pretend to being unique but they still expect a lot of traditional crap being there, which is obsolete. And their strategy of electric motor components in their entire range by 2025 still has no plans for real electric cars that could compete with Tesla, just more crappy electric cars with internal combustion engines for real driving.

And BMW is one of the more innovative and adaptable traditional motor companies out there.

Most of the current major car companies will fail because they can’t adapt to the disruption that electrification is bringing to their industry. They will refuse to cannibalize their other products. They will refuse to shift power and money to the electric divisions. They will refuse to engineer true electric cars because the economics don’t make sense until they don’t have any money to do it, anyway.

This pattern has played out innumerable times over the past 100 years. Remember RCA? Philips? Control Data? Burroughs? Kodak?

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