Automotive Updates

I’ve held shares of Ford for a little while, and so I’m naturally inclined to perk up a bit when I see them mentioned in a headline. In this case, the article in question is a piece in the Wall Street Journal, which talks about how the car company is investing heavily in autonomous vehicles in China. Now, as we all know, the next big things are drones, driverless cars, and China, so that Ford is synthesizing two of these elements (and tightening smartphone connectivity to the dashboard) seems interesting. But the most compelling thing about the article is the fact that Ford recognizes their own potential irrelevance to consumers. The article notes:

“We see China as a very big growth market,” he [Ford CEO Mark Fields] said on Monday. “It’s a great opportunity to grow not only our core business of selling cars and trucks but also provide services to people that may not want a car but still want to be mobile…’China has fewer than one private passenger car for every 10 people, compared with roughly eight per 10 people in the U.S. Ford in September launched a pilot carpooling program in crowded Shanghai and Beijing. Ford and its partner Dida Pinche, a Chinese online carpooling service provider, has completed 170,000 rides, said John Lawler, Ford’s China chief.”

It’s been long-acknowledged that the firms who stay committed to an idea – rather than a product – are the ones who survive in the long-term. In 2011, The Economist profiled IBM, another early-20th century behemoth. The article observed:

IBM’s secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses. At first this meant making punch-card tabulators, but IBM moved on to magnetic-tape systems, mainframes, PCs, and most recently services and consulting. Building a company around an idea, rather than a specific technology, makes it easier to adapt when industry “platform shifts” occur.

Apple has followed a similar direction (albeit in a much shorter timeframe), changing its focus from computers to consumer electronics. Its name change, from Apple Computer to Apple Inc. in 2007 was more than just a semantic adjustment. (To that end, IBM and Apple announced a partnership to distribute Apple’s hardware and IBM’s software in the workplace – a move aimed at securing IBM’s relevance while offering Apple the chance to crack the enterprise market.)

I’m not suggesting that Ford remove the “Motor” from its name, but I do think that they – as well as the other carmakers – should examine their place in a more connected (and thus, less wasteful) market. Automobile companies thrived when every family owned a car or two, but the model is shifting now that consumers leverage technology to remove inefficiency: namely, to carpool, to use Uber or Lyft or Silvercar, and eventually, perhaps, to enjoy driverless vehicles. Ford was wise to partner with Dida Pinche, the aforementioned Chinese carpool company, and a comparable partnership with similar services – Waze’s RideWith comes to mind – would bode well for them, or any other carmaker. Audi’s partnership with Amazon – wherein packages would be placed in owner’s trunks – is an inventive use of existing assets and a neat exercise in potential cost reduction. But I’m just dreaming of the day when I’ll have an Oculus VR headset that will let me feel as though I’m behind the wheel of a Mustang.  It’s a heck of a lot cheaper than car insurance.