Disruption: Electric cars to outsell petrol ones … again!

  • We are witnessing a new era where many incumbents are going to be killed off
  • Disruption of this nature will also have impact on entire supply chains

Disruption: Electric cars to outsell petrol ones … again!IT’S now only a matter of 10 or so years before electric vehicles (EVs) outsell petrol ones.
The electric vehicle era probably started at the time Ferdinand Porsche hand-built one in 1898, calling it the P1.
In the United States, from 1890 onwards, there were several manufacturers producing EVs for city use, and by 1900 “electric cars were at their heyday, accounting for around a third of all vehicles on the road.”
Steam and gasoline engines were the alternatives, but the electric car was easy to use and very popular with the ladies, as reported by the New York Times on Jan 20, 1911.
However, the market for EVs collapsed after Henry Ford introduced the Model-T in 1908. Through the standardisation of parts and mass production, Ford was able to offer a car at US$850 at launch, and then dropped the price further to less than US$300 by 1925.
This was significantly lower than the price of hand-built electric cars. In 1925, the electric roadster cost US$1,750 whilst a petrol-car cost US$650.
The world had changed and the companies that were involved in EV manufacturing and that supply chain did not.
So we entered the era of the petrol car which offered performance, range, and a wide variety of format options.
Porsche, an outstanding auto-engineer, worked on various car designs, but then in 1948 created the Porsche 356, which was the first car to carry his name.
The iconic Porsche 911 Turbo today is a 3.8-liter, twin-turbo six-cylinder engine that delivers 427kW and goes from 0-100 km in 3.0sec. Pretty fast for old-school technology, but read on to see what you can get from the Tesla Model-S.
Tesla’s trailblazing

Disruption: Electric cars to outsell petrol ones … again!

The Tesla Gigafactory in Nevada (pic above) is expected to be operational in 2017 and will have a car production capacity of 500,000 units.
More importantly, it will manufacture lithium-ion cells for the industry based on technology provided by Panasonic Corp, also an investor in the Tesla plant.
The car battery pack has been designed around existing cell technology, which is not proprietary, thereby making it possible for all car manufacturers to enter the market. Think of it as an open-source platform for carmakers!
We are witnessing a new era in car technology that is likely to kill off many of the incumbent players. Disruption of this nature will have major implications on all existing players.
We see this happening around us a lot at the moment: Large companies tied down by their bureaucracies, planning and approval cycles are being taken out by entrepreneurial startups.
Organisational theorist, educator and author Eddie Obeng provides an eloquent warning to market leaders: “Most of us spend our lives acting rationally in response to a world we recognise and understand but which no longer exists.”
Leadership teams need to ask their companies this critical question: “Are we stuck in the world before midnight”?
EV sales forecasts will be wrong
Disruption: Electric cars to outsell petrol ones … again!Bloomberg New Energy Finance forecast electric vehicles sales to increase from 462,000 in 2015 to 40 million in 2040, or 35% of light car sales.
We know that forecasts are typically wildly wrong, but we never know in which direction. What was the forecast for PCs? The IBM PC announced in 1981 was forecast to sell 250,000 units over five years, but reached one million in just two years.
More recently, former US Vice President Al Gore (pic), speaking at TEDtalks, revealed interesting statistics on the forecast sales of solar panels.
“The best projections 14 years ago were that we would install one gigawatt per year by 2010,” he said.
“When 2010 came around, we beat that mark by 17 times over. Last year, we beat it by 58 times over.”
When disruption comes, the impact will be massive. We are already seeing that after the VW emissions scandal, diesel is not the way to go – too much after-combustion technology is required to maintain emission standards.
Hybrid technology made possible by adding a motor and battery storage to a petrol engine is an unnecessary compromise and will be abandoned.
Companies that have invested in these technologies will be writing them off the balance sheets and hoping they have the engineering strength to participate in the EV world.
Cannibalisation isn’t a dirty word
What happened to companies that were afraid to cannibalise their markets?
Well, most of them disappeared, waiting for the right time to make the switch or afraid to cannibalise their existing business.
Kodak developed the first digital camera in 1975 but engineer Steve Sasson could not convince the company to adopt a product that would not require physical film. At its peak, Kodak had 145,000 employees, which fell to 8,500 after the bankruptcy in 2012.
Take James Dyson, who invented the world’s first bagless vacuum cleaner in 1983. He named it G-Force and showed it to manufacturers of domestic appliances but was unable to get anyone to license the technology.
Dyson finally found a manufacturer in Japan which launched the product there in 1986. Hoover’s vice president Mike Rutter was quoted as saying: “I do regret that Hoover as a company did not take the product technology off Dyson; it would have lain on the shelf and not been used.”
Hoover fared poorly and was acquired by Maytag Corporation in 1989. When Maytag was acquired by Whirlpool in 2006, it was divested to Hong Kong-based Techtronics Industries Co.
Dyson remains profitable and is still 100% founder-owned.
Tesla-Lotus partnership
When Tesla looked to market an electric car, its focus was on the electric train – after all, the company did not have many auto-engineers and needed to find a suitable chassis on which to build its car.
The partner of choice was Lotus Group, and Tesla cofounder Martin Ebehard, in a blog post, provides a complete history of the relationship.
The aluminium Lotus Elise chassis was redesigned to suit Tesla’s requirements, with the electric battery pack in the rear. The pack was moved down to the floorboard, releasing a lot of space in the interior.
The importance of having a custom-designed chassis fit-for-purpose cannot be underestimated. It does not make sense to use an existing chassis which was designed to accommodate the fuel system, transmission, gear box and other gear necessary for petrol engines.
It reminds us of platform transition issues faced by Yahoo and Facebook.
Technology transitions are painful

Disruption: Electric cars to outsell petrol ones … again!

When Marissa Mayer (pic above) was appointed chief executive officer of Yahoo in July 2012, she moved the company off HTML5 development in favour of building with native platforms.
It takes more resources to build on native platforms, but then you get a far better product.
Mark Zuckerberg said the same thing about Facebook’s move to mobile. The initial product was badly panned as it was a simple port from the PC version, which Zuckerberg said was a major mistake.
The mobile version had to be completely rebuilt from scratch.
Another example: Nokia hung onto the Symbian operating system which could not make the transition to touchscreen.
Incumbents would be well warned to consider the limits of their existing technologies before attempting a major shift.
Cars as software, managed from the cloud
Locating battery packs in the floorboard caused some issues, but then all car companies have their share of mishaps.
In the case of Tesla, it is worth recalling the events to understand how truly disruptive a software-designed car can be.
The first fire incident occurred in October 2013 when the car hit some debris on the highway, resulting in a fire – but since the battery packs are modular, the driver was able to drive to the side of the road and safely exit the car. The second incident was on Nov 6, 2013.
On Nov 18, 2013, in consultation with regulators, Tesla issued a software update to the air suspension system to raise the ground clearance at highway speeds.
It simply told the car something along the lines of, “At high speed, ground clearance is to be increased by one inch” – and that was it. No need for a recall, changing of the spacers, or any physical intervention.
Isn’t that amazing?
Changing the car paradigm

Disruption: Electric cars to outsell petrol ones … again!

Initially sold to ‘environmentalists’ and consumers looking to save on petrol bills, Tesla cars are now sold on looks, features, space and performance. The top of the line Tesla Model S P90D develops 90kW and takes you from 0-100 km in 2.8sec.
Yes, that’s faster than the Porsche 911.
Some car companies are hedging their bets, trying to adopt existing platforms for the EV; others, like Tesla, are pushing the envelope in design and performance.
More change will come. Tesla founder Elon Musk has been in a four-year battle with US regulators as he wants to replace the external side rear mirrors with a camera and in-vehicle display! When this is allowed, there will be one less supplier to deal with!
What will happen to the ‘world before midnight’ carmakers?
Well they won’t go out of business soon, but they will … eventually.
And when they go, they will take with them most of their supply chain because the electric car does not need fuel tanks and lines, gearboxes, engine control systems, exhausts, emission controls, drive trains, starter motors, timing belts, oil pumps, radiators, etc. The list is very long.
What about the engineers working on these systems, the faculty and students at automotive colleges?
Extend the network further: Gas station owners, transporters of fuel, teachers at the colleges, etc.
You get the drift. Whilst we won’t see the change occur overnight, it will happen in stages and will leave a lot of people stranded – without a job and needing to be ‘right-skilled.’
And in Malaysia …
In Malaysia, 100 luxury Model-S cars will be brought in by the Malaysian Green Technology Corp, a non-profit under the Ministry of Energy, Green Technology and Water (KeTTHA).
The cars will be leased to government-linked companies for the lucky drivers to chauffeur their bosses around Kuala Lumpur and Putrajaya.
Pretty cool, right? A car that is faster than the Porsche 911, but can seat five and hence, space for the driver!
Tesla launched its entry level model in Los Angeles on Thursday, March 31, 2016 and by Saturday had racked up 250,000 bookings. Not bad for a car that will only be available in 18 months, but will have an interior that “will feel like a spaceship.”
I think KeTTHA would be better off considering industry-shifting loan schemes to assist vulnerable industries develop new products for the world of the electric car.
In 2009 Tesla obtained a US$465-million interest-bearing loan (according to TechCrunch) from the  Department of Energy as part of a US Government programme to support the development of the Model S car and powertrain. The loan was fully repaid in 2013.
What do you think governments should do to support companies that are going to be disrupted?
Anwar Jumabhoy & Srikrishna Vadrevu are passionate about bringing entrepreneurship into large companies through the adoption of the ‘nine entrepreneurisms’ which they have identified. Their book, Beyond Corporate Entrepreneurship, is due to be released in 2016. #9entrepreneurisms
Related Stories:
The next industrial revolution is going to hurt us bad
The Tesla approach to ERP
Digital disruption: In 3yrs, nothing will be the same
For more technology news and the latest updates, follow us on TwitterLinkedIn or Like us on Facebook.

Keyword(s) :
Author Name :

By commenting below, you agree to abide by our ground rules.

Subscribe to SNAP
Download Digerati50 2018-2019 PDF

Digerati50 2018-2019

Get and download a digital copy of Digerati50 2018-2019