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Looking Out #14
VW's valuation speaks to a bigger problem for OEMS. Bikes take on inner-city logistics. Lincoln outsources... everything? And Toyoda-san plans a Brasilia.
31 January, 2019
A newsletter about the auto industry, mobility, design, and the cultures that surround us. Brought to you by Joe Simpson and Drew Smith of The Automobility Group. If you like what you see, tell your friends!
Diess in a ditch
Why it’s interesting: Given his sturm und drang over the past fortnight, one could almost feel sorry for Herbert Diess. Almost.
The headlines from the past few months of the Financial Times say it all really: trauma, scandal, attempted reform and misplaced martyrdom. It’s almost like the world’s largest car maker is an addict on its way to rock bottom. Or maybe it’s just going through the seven stages of OEM transformation.
Whatever the case, when Volkswagen Group CEO Herbert Diess complained that while his company was valued like a car company, Californian upstart Tesla is valued like a software company, it came across more than a little woe-is-me. I mean, it’s not as if VW hasn’t had the better part of a decade since the last industry downturn to reform its ways. You can accomplish a lot in ten years with the right mindset and a degree of willing.
It’s true: Volkswagen has invested more than most in electrification, but the fact that the first batch of their long-awaited ID3 electric hatch is languishing in storage facilities because of faulty software doesn’t exactly fill one with spark.
Although it’s easy to focus on the product pipeline and the significant challenges that come with becoming a volume manufacturer of EVs (mass redundancies of internal combustion specialists, new supplier relationships, underdeveloped software development capabilities, a radically different sales and aftercare model, the list goes on…), the real challenge for companies like Volkswagen - especially if they intend to be valued like a successful technology company - will be cultural.
I once sat in a project kick-off meeting that consisted of representatives from sales and marketing, product planning, engineering and the various design disciplines arguing interminably about a brief informed by - it appeared - not much more than the whims of senior management. After three trying hours, everyone retreated to their corner of the office to develop their individual responses to the brief and agreed to reconvene in a month’s time. There was nary a mention of getting an outside perspective on the challenge, much less developing an integrated , co-located project team.
I didn’t stick around long enough for the follow up, but anyone with any knowledge of automotive product development will tell you that the process will surely have been repeated multiple times by now, with each team sinking deeper and deeper in to what they know and becoming more defensive in the process.
Hot tip: this is not how the world’s most innovative companies develop new products or services.
The challenge for OEMs will be to develop cross-functional design and development teams. The right folks for the job - diverse in skills, life experience, origin and perspective - will work side-by-side on briefs. They’ll be informed less by supposition and tradition and more by insight in to the future needs of end users and the markets they inhabit. Critical ideas will be tested regularly and evolved iteratively. Outsiders will be invited in to challenge convention.
It’s an approach that might sound familiar to someone working outside the automotive industry but the creation of a car by such a team within a contemporary OEM is so radical as to seem like a moon shot. I’d desperately love for that to change.
If you want to be valued like a technology company, you’d better learn to work like the best of them.
Why it’s interesting: the auto industry is fascinated with a large group of users, who have never followed the same patterns of older generations, but are just beginning to settle down… and buy SUVs. How to react.
For years, the auto industry has fretted about the Millennial generation. They simply weren’t interested in cars said countless headlines. Or to be more specific weren’t buying them. In fact they weren’t even learning to drive. This was serious bad news.
Those of us who were born between 1981-1996 (Drew and I only just scrape in to the Millennial classification) simply weren’t perpetuating automobility in enough numbers to sustain the volumes needed to keep the industry afloat.
But a new study claims fresh insight on millennials and their relationship with cars. On a superficial level, at least, it appears good news for the auto industry. Millennials are ‘getting licensed’ (learning to drive in human speak) at their highest rate ever. In fact, Millennials now hold more driving licenses in the US than their (car-loving) Boomer parents.
Traditionally, it’s been thought that learning to drive at 16-17 was a right of passage, and that the rate of ‘getting licensed’ tended to start peaking when people reached their 30s. Because the Millennial generation bucked this trend, the fear was that they weren’t ever going to learn to drive, and would basically just skip owning cars. Analysis of the latest figures suggests that the reality is different: Millennials were just delaying.
Given their greater levels of educational debt, the rising cost of housing and the increase in motoring costs (learning to drive, buying a car and then running it), one could be forgiven for responding with “well, dur” to this seemingly obvious behaviour that has been exhibited by the Millennials.
But now, as the 30-nearly-40-something Millennials settle down and have kids, they too are hanging up their inner-city hipster shoes, moving to the suburbs, and buying an SUV.
Cue every product planner, CEO and automotive investor breathing a sigh of relief. As Benchmark Co Auto analyst, Mike Ward suggests:
“We believe underlying demographics support normal demand of 16.5-17 million units annually over the next 5-10 years,”
Before OEMs start rubbing their hands with delight at the thought of the SUV profit gravy train continuing for another decade, let’s not forget that this report talks only about the US. Or that the Millennial generation not only have a reputation for rejecting the doctrine of their (SUV-driving) parents’ generation. Or that they tend to be rather concerned about things like the state of the environment. They’re more interested in ethics, understanding where things are sourced from and generally less willing to turn a blind eye to brands they don’t trust, see doing wrong, or not being honest. That doesn’t bode well given some auto brands’ recent track records (see Drew’s piece above).
This creates a quandary which right now will be playing out in every legacy auto company boardroom. That data hints that sticking with business as usual (that’s short hand for developing more of the same, high-profit SUVs) could actually be the right approach. And for many veterans of the auto industry, it’s a much more appealing prospect than tearing things down and starting again. But danger lurks.
To build on Drew’s piece above, the answer here is to step back, and focus on understanding the different expectations, attitudes and desires of this new generation of customers with deep customer research. This is something that the auto industry hasn’t historically been very good at. Rather than crossing our fingers and hoping that Millennials are ‘just the same’, let’s work to understand them and their future context, and then reframe the way of working internally, so that individual function teams don’t just retreat into developing what they know.
Bluntly, the auto industry needs to find a better way to understand, work with and meet the needs of the Millennials – rather than just assuming they’ll behave like a delayed version of their care-free Boomer parents.
It could even act as a spur to drag car design out of its current malaise and define a new approach for the new decade.
Why it’s interesting: It’s hard to present yourself as a sustainability leader when your entire business model depends on people driving to your stores, and taking flatpack home in their cars. Ikea’s Vienna store is a rethink of the brand’s fundamentals.
It might sound odd for a brand that is the world’s largest single consumer of trees, but sustainability is a big deal at Ikea. The Swedish firm has undergone something of a silent transformation in this area in recent years, with regard to its products, processes and procurement. But there’s an issue. To get its flat pack products into the hands of end customers like you and me, Ikea’s model is to build huge blue and yellow boxes outside of large cities to which you need to drive. You then put its products in the back of your car, drive them home, and build them yourself. Go to Ikea on a bicycle and you’re not going to be able to bring much home.
As it continues to rethink its business around sustainability, Ikea’s taking the first steps to challenging what feels like this most fundamental aspect of its model. Ikea has come to the realisation that a business which can only be accessed in cars isn’t going to cut it in the future. So at Vienna’s westbahnhof station, Ikea’s first new city centre store is taking shape.
It’s designed by Querkraft Archikten, as a flexible green grid – full of shrubs and trees and crowned with a ‘green carpet’ roof. The architects and the company hope it’ll become something of an urban destination and community hub – but of course, there’s still an underlying aim to sell you some flat pack. Just with a catch. The building features no parking – and is specifically aimed at urban city dwellers who don’t have cars, so will arrive on a train, by foot, tram or on a bicycle. That’s fine if all you’re after is a cushion and some kanelbulle. But what about if you need a Billy? No fear, says Ikea. A key part of the concept is that Ikea will deliver any product you choose, to your home within 24 hours. Which sounds like the ultimate kind of ‘choose in person, get delivered to avoid you the logistics hassle’ shopping approach pioneered by premium fashion brands like Burberry.
Why is this in the mobility section? Because a theme that’s run through Looking Out to date is the importance and context of urban commercial delivery, driven by our changing shopping habits and global logistics networks. While mobility tends to focus on bikes and scooters, there’s a quiet logistics revolution under way which will impact how our cities function and look.
As Arrival gains investment from Hyundai Kia, and 20,000 orders from UPS, we’re wondering how Ikea will manage the van/truck based delivery, relative to its delivery promises and its sustainability drive? Could it be the next customer for Rivian’s electric delivery trucks, or join Hyundai in investing in Arrival? And ultimately, are the growing number of stories like this one, and the need for new types of sustainable delivery vehicles, justifying the high valuations and significant investments being made in companies developing new commercial delivery vehicles?
Why it’s interesting: A coming revolution in inner-city logistics will require a new level of collaboration.
Alex Mitchell, Looking Out reader and leading light of the Los Angeles cleantech scene, has recently published a cogent look at the future of eCargo Bike delivery in our cities.
As we continue to transition to a delivery-based culture, the shift from large vans and trucks to cargo bikes in urban areas has the potential to dramatically improve the liveability and efficiency of our cities.
That said, such a shift will require a radical rethink of how space is allocated on roads and alongside them, and the development of new infrastructure solutions that incentivise bikes over their bulky alternatives.
The whole piece is a great read and it’s heartening to know that one of our readers is at the forefront of advocating for these sorts of changes in that most car-oriented of cities, L.A.
Why it’s interesting: the EV brand that’s always seemed more Lincoln than Lincoln will help Lincoln make Lincolns.
Like many among our community, I’ve long had a thing for Lincolns, whether the early Mark II Continentals, Elwood Engel’s austere landmark, or Our Gerry’s stunning neo-International revivals of the Premier Automotive Group era.
Lincolns, and in particular, Continentals, have on occasion represented a discrete and delightfully patrician take on American luxury. Like the best Jeeps and unlike the greatest Cadillacs, the best of Lincoln never needed to shout.
In between and all around these landmark cars, Lincoln has also been a hot and confused mess.
Apart from Alfa Romeo or Maserati, I struggle to think of a brand that has been quite so terrorised by its history, under-appreciated - nay - disrespected by its stewards, and unloved by the market. Lincoln keeps some heady company.
But the brand may just produce another truly desirable car, through a tie-up with Rivian, the darling electric upstart from Normal, Illinois.
Although details of the venture are yet to be revealed, I can’t be alone in thinking that you could *almost* stick a Lincoln badge on the existing Rivian product and call it a day.
Since their reveal, I’ve admired the restraint of the Rivian cars, and their sensitive interpretations of the greats of American industrial design, Lincoln included.
Naturally, building a Lincoln product on a Rivian platform gives rise to all sorts of irritating questions about just what is a Lincoln. But the reality is that, those earliest Continentals and Zephyrs aside, even the best Lincolns has depended on judicious appropriation. The Engel Continental was, after all, a rejected proposal for a 4-door Thunderbird. The current Continental, awkward, unresolved and weirdly likeable, is a stretched Mondeo.
There’s one question Joe and I simply can’t escape, however, and that concerns what the hell Ford is doing with its electr vehicle platform strategy. Indeed, do they even have one?
Between the Mustang Mach-E platform, developed in-house, the MEB platform that Ford is to license from VW, and a derivation of Rivian’s skateboard for Lincoln, Ford will have to work with three different EV architectures. Against a background in which most OEMs are struggling to design and deliver just one, Ford has its work cut out.
Apple: standardisation versus innovation
Why it’s interesting: Apple cries foul at regulation that could improve ease-of-use, and doubles down on its peripheral exceptionalism.
The first signs of my 2015 MacBook Pro’s inevitable slide towards the great e-waste dump in the sky have begun. You know the sort of thing – strange behaviour, random shut downs, fans on all the time.
And yet I’m desperately clinging on to it, for reasons that were illustrated neatly during a recent meeting. As a colleague plugged the TV screen’s HDMI cable into the Apple adapter needed for his new MacBook Pro’s USB C port, nothing happened. Wiggle. Nothing. Cycle through the TV input modes. Nothing. Change ports. Nada. This went on for a full 5 minutes, before eventually the screen sprang to life.
Apple’s relentless slashing of port diversity on its newer machines has required users to spend up on dongles to ensure connectivity with peripherals like chargers, headphones and screens, or sometimes even just to use slightly older Apple products. By comparison, my older MacBook’s brace of USBs, 3.5mm jack, thunderbolt, HDMI and SD card slots mean I rarely need an adapter.
But this reduction in diversity on its own devices is not matched by any keenness on Apple’s part to agree to a common standard for end connectors – which is being pushed by the EU. A report, commissioned by Apple and entitled ‘United in Diversity’, suggests that the EU proposal for a single, common device-end connector, would :
“harm consumers significantly more than it would help either them or the environment”
“forced standardisation can curtail or slow innovation”.
The EU’s proposal largely sits around an environmental context of so-called e-waste, because – startlingly – each European generates 16.6kg of said electro-landfill, each year. The EU also thought it might be a little more user-friendly if everything charged and connected off a single end-connector. The irony that Apple has built much of its reputation on user-friendliness is not lost on us.
But no dice, says Apple’s report. On the contrary, the “consumer harm” of a single type of end-connector device would amount to at least €1.5 Bn. Whereas the “environmental benefit” would be just €13M.
The report outlines some entirely reasonable design factors why every phone, tablet and small device having to charge or connect via the same end-connector is undesirable. But it doesn’t tackle the elephant in the room, which is that Apple’s business is now hooked on peripherals. Or to be more precise, the profits they bring. The changing and extinguishing of ports on its devices has created a scenario where a some portion of Apple’s revenue now comes from selling low-cost, high-margin adaptors.
In so doing, the company has created a scenario where every time one of those connectors must be rummaged for or replaced, or jiggled nervously during an important meeting, it chips a bit of sheen off Apple’s glossy, reputation for being user-centred. Is this really a company that’s focused on me, I wonder? Do standards really cause me inconvenience and apply the brakes to innovation. Would Steve Jobs have applauded the company’s proliferation of peripherals?
Why it’s interesting: Toyota has announced a city-building collaboration with Bjarke Ingles. Beware the lessons of Biosphere and brittle systems beyond.
What could be more fun for a tech-obsessed Toyota employee than taking residence in your very own tech-obsessed company town?
No, you’re right, it sounds like a freaking nightmare. But nonetheless, Toyota will build just such a place - called Woven City - in order to test things like sensors, advanced material science and and sustainable energy.
For anyone mildly interested in architectural utopias, this has more than a whiff of Biosphere 2 or Google’s Sidewalk Labs about it, and that’s not a good thing. Because beyond the surveillance and architectural megalomania, Ingels and Toyota seem to be building a uniquely brittle concept of a town:
Ingels highlights in-home robotics and sensor-based AI that will automatically restock the fridge, take out the trash, and check the health of the homeowner. No do-it-yourself-ers needed.
Imagine for a moment that the systems - presumably Toyota run, if not designed and owned - collapse. Not only will your Toyota fridge go empty, but your atrial fibrillation will go unnoticed by your Toyota health monitor. Once everything is back up and running, you’ll be carried out of your apartment on an autonomous stretcher built, of course, by Toyota.
The problem with so many utopias, whether Brasilia, Canberra or Biosphere, is that they tend to be built to the vision of one, or at most a few people and are heavily optimised to a particular worldview. Built almost exclusively for optimisation and efficiency - thus the current obsession with making cities “smart”, there’s no room for the fuck-ups of human existence. So when things do inevitably fuck up, a small issue that might have been absorbed by human ingenuity and resilience cascades to systematic catastrophe. The lessons of Biosphere are instructive here.
Apparently, Toyota CEO Akio Toyoda thinks that Woven City will provide a real-world environment in which to test new technologies. The pronouncement smacks of the very worst of techno-centrism. Woven City will not be in any way a real-world environment. It will be built to Ingels and Toyoda’s singular vision.
Our greatest cities are additive, chaotic and deeply human. Built on hundreds, if not thousands of years of creative adaptations, they are deeply human-centred representations of the multitudes that have inhabited, and therefore changed them.
That's it for this issue. We love feedback (positive and negative), and to answer any questions you have. So email Joe or Drew and we’ll get back to you.
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