In this videocast, I explain why Intel is a better car company than Tesla. The car business has three core transitions: operator (man to self-driving). ownership (individual to fleet) and technology (internal combustion to electric). Because smartphone will make aggregation more efficient (hey Uber and Lyft), the utilization factor of cars will improve and in future the need of owing cars will drop. The implication is that all that will matter is when you need to move from one spot to another, you order a car – you do not need to OWN a car because the easy of summoning one will improve. Who will care for the car brand? The consequence will be huge: car manufacturers will see lesser value while aggregators (Uber, Lyft) and components makers (e.g, Intel, Bosch) will rule. It will play out like the old PC world where Intel made money while HP, Lenovo and Dell struggled selling PC boxes. The cars will be the PC boxes of the future.
This is a great comment from a LinkedIn Commenter (EC) on this videocast. We are re-posting here as it expertly expands this discussion.
ndubuisi I nod my head in agreement at pretty much all you analysis, but with this one I am going to disagree. Car ownership is going away, correct. (And I agree with you that the more correct technical term is ‘autonomous vehicles’ (AVs), but in popular parlance ‘self-driving cars’ (SDCs) is likely to win out). But that will not dilute branding in my opinion. A few points…
1. Today, when people rent cars, they still put stock in the brand and type of car they rent. And this applies whether it’s the leisure, business or event segments;
2. Today, there is UBER Executive which charges more to transport riders in luxury cars. In the world of SDCs, there will still be classes of riders (e.g. status conscious), and categories of events (e.g. evening dinners) that will require branded products;
3. The thrust of your argument may on the surface appear to be supported by the large use case of mass commuting. The bulk of travel miles is done by people going to work everyday, and they couldn’t care less what car got them there. Correct. However, in the SDC world, utization of assets will trump most other metrics If the masses don’t care, but few self-conscious people care, aggregators, subject to full lifecycle analysis, will have no choice but to deploy the common denominator vehicles between all classes of riders. And these are likely to be the branded vehicles;
4. I could make a few more points, but let me close with the issue of liability. Because of the potential for injury, albeit small, that will still remain in the SDC world, where liability falls (most likely on car OEMs), is most definitely going to create branding power. Think Volvlo and safety, for e.g.
Response to Commenter
Wow – very pretty analysis. We are essentially saying the same thing. If 90% does not care about the brand, it is safe to say it does not matter. For the little 10%, brands matter – even if people do not want to own cars, branding may be a little way to differentiate wealth where Uber may offer you to choose from brands to make a statement to your host etc. Nice one