Not since Henry Ford and General Motors founder Billy Durant put America on wheels has the auto industry faced the disruption it does right now.
Not because oil prices are skyrocketing. And not because consumer demand is plummeting.
Forcing the change are two inexorable forces: technology and government regulators. They’re converging quickly. And the combination is pushing the likes of GM and Ford Motor into making seemingly contradictory bets.
The two companies that book billions in profits on pickups and SUVs are doubling down on their core business today. They’re also pledging to introduce a flood of electric vehicles over the next five years or so.
Let’s be clear: hordes of customers are not yet clamoring for electrified powertrains. But central governments – led, naturally, by China – are vowing to outlaw internal combustion engines by some date in the future.
Who’ll pay for this technology transfer? Not government, that’s for sure. Bureaucrats can change rules, leaving shareholders and customers the privilege to pay for the technology transfer. Funny how that works, huh?
Driving the transformation is the biggest innovation in transportation since ol’ Henry unveiled the moving assembly line. And that’s electrified vehicles armed with suites of technology enabling them to drive themselves. The prospects for a slice of a market estimated to measure in trillions annually is fueling a mad scramble best described as the “Wild Wild West.”
Detroit’s place in it all is by no means assured.
No fewer than 42 firms have permits to test self-driving cars in California. Apple calls autonomous vehicles the “mother of all” artificial intelligence projects. Google has its own self-driving unit, dubbed Waymo. Players in the auto and tech spaces are spending big money to acquire expertise they need but don’t have.
Auto suppliers that once made a living producing low-margin parts have shed those commodity lines in favor of business focused squarely on the emerging mobility space.
The century-old auto industry business model is facing what Morgan Stanley calls “unprecedented technological disruption.” And that starts with “the very definition of the market itself.” Soon the business will not be measured by the millions of vehicles sold; it will be measured by the trillions of miles traveled annually around the globe.
The challenge is existential. That’s why you see Ford replacing its CEO just months after booking its three most profitable years in the company’s history. That’s why GM is acquiring assets in Silicon Valley, ramping up development of electric vehicles and touting its advancements with self-driving cars.
Already the smart money paid to make winning bets on the automotive future seems to have reached a conclusion: it’s that Detroit’s automakers are less likely to emerge the victors.
Not because they don’t have the engineering prowess or manufacturing chops. It’s because they don’t have cultures that favor speed, innovation and risk-taking. Three qualities vital to negotiating this new Wild Wild West.
Detroit’s only choice is to prove the skeptics wrong.
Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.