I don't want anybody to get the idea that I'm cheering on the demise of these companies. But I do think not discussing these issues doesn't help anybody. The consequences of transition are profound. And if they aren't addressed, those consequences will be much worse and catch us all unprepared when they arrive.
Imagine, you're three years out from Henry Ford launching the Model T and you're still selling horse driven buggies and promising to develop an engine and production line to catch up to Ford. Still thinking a year isn't a big deal?
I want you to consider how fast Tesla is moving for comparison. First million cars they sold took 12 years. The second million took 18 months. The third million took 11 months. The fourth million took 7 months. Musk is saying Tesla will produce 20 million cars a year in 2030. Even if Tesla produces half of that, given that the auto market isn't actually growing, that alone could be the end of some legacy OEMs. But it's not just Tesla, the Chinese EV OEMs are eating their share outside North America and are just as aggressive as Tesla.
I don't think you get it. It's not government timelines that are the problem. It's competitive pressure. From the EV only startups. In a decade, Tesla went from selling $90k Model S to $50k Model 3 while adding range, acceleration and automation, growing their charging network and their sales and service networks. They were running near broke to fund that growth and development. Imagine what a Tesla with 25% margins (and growing) will do over the next 10 years. This is what a lot of people don't understand. Between the pressure coming from Tesla and the Chinese OEMs, at this point, Western governments are trying to force a transition to save these companies from themselves. Imagine the consequences for Germany or Japan if their auto sectors fail because executives kept insisting EVs are some hippy nonsense fad. Imagine the consequences for the West of basically ceding most of the auto sector to China by not building EVs. I don't expect average auto fans to get this. But I do expect auto execs to know and understand this.
My frustration is that they just don't get it. Ford and Renault do somewhat get it. They are the only two companies to completely segregate their EV businesses from the rest of the company. Ford even made sure that only one of the new executives in the Model E division came from the auto sector. They recognize that they need to build their EV businesses with a startup mindset. They can't default to how things have always been done and existing supply chains or they just won't be able to compete. The rest of the companies just don't get it.
North America and Asia (mostly China) are #2 and #3 for revenue for Toyota. And dare I say where most of the profits come from (particularly SUVs and pickups in North America). If these start declining, Toyota is the going to get into trouble really fast.
I will say again. Understanding the change in focus from hardware to software is fundamental to understanding what the change from ICEV to BEVs means. Their challenges aren't really in putting a motor and battery in a car. It's in the software. And this is not a minor matter. It's akin to saying Nokia, Motorola and RIM know how to build phones so they should dominate smartphones. Where are they now? They couldn't survive the transition from buttons to touchscreens. It wasn't putting a touchscreen on the phone that was the problem. They even had some touchscreen phones before Apple and Google. It was the software challenges.
I think they are largely stuck trying to retrofit existing tech, processes and plants into manufacturing. This is largely why they'll take an existing crossbeam and stick it in an EV. Even where they know they should change, they are stuck. A good example of this is Tesla going from 12V electrical inside the car to 48V. Every auto engineer will tell you this is a good decision that should have been done decades ago. It saves a whole lot of copper wiring. It's why on the aviation side, commercial aviation loses 300VDC (my professional background). The legacies partially use higher voltages in their hybrids. So why hasn't the industry switched? Because the entire supply chain with everything from door locks to washer spray runs on 12V. Tesla basically said that whatever industry won't provide with 48V they will build themselves. This is an example of the kind of changes that the legacies just can't do because they they will never imagine building subcomponents in-house and their business model is based on squeezing suppliers, not engineering cost reduction as a whole. But since Tesla builds most of the car and sources out a much smaller portion, they are consistently looking at how to reduce cost of the whole car.
Another example... Tesla builds in an extra $1000 worth of computing power and sensors into every car they sell. Yet only 15% of buyers take up the $10k full self drive packages. So why do they do it? Because the reduced complexity in manufacturing is worthwhile to them. And they get the data from these sensors which keeps refining their AI models. Meanwhile the legacy OEMs will literally build different wiring harnesses for different trim levels of the same car to avoid giving away an extra $2 in wiring. And this is justified as boosting margins.
This is a long one (nearly 2 hrs) but if you're interested you can watch John McElroy (who used to be a Tesla and EV skeptic a few years ago) talk about all this with Sandy Munro (auto consultant who used to work at Ford). Most of these examples are from there. I will disagree with them on Toyota pivoting quickly. But otherwise, I mostly agree with this:
• Video Link
Will the legacy OEMs give these folks the freedom to structure their businesses, source components as they need and design what they want? Or will they tell them to design different harnesses for different trims and source components from the existing suppliers to preserve volume discounts?