Before anyone thinks that I’m going to start offering tips on how to make a fortune in their local casino, I will immediately declare that my card skills are limited to simple childhood games like snap and whist.
When I visit Las Vegas for the NADA Show every other year, I have absolutely no idea what’s going on at the gaming tables other than a certainty that the house is winning.
My interest in ACES is a bit closer to home – the acronym for autonomy, connectivity, electrification and sharing, also referred to as CASE, but seemingly both falling out of favour as the big consulting firms come up with a new sales pitch for the top management of their target clients.
ACES or CASE has come and gone, leaving barely a ripple in terms of any positive impact on the industry as a whole and with many nursing some pretty severe losses and writedowns on investments that have turned sour.
This was brought home to me by the news last week that General Motors is going to exit their Cruise autonomous car venture – that particular ship has docked, and heading for the breakers’ yard it seems.
What was promised to be a US$50bn new revenue stream by 2030 has turned out to be an unaffordable drain on the business with no clear road to profitability.
Waymo, it’s main US-based rival is still losing billions annually, but is still able to rely on the profitability of other businesses in the Alphabet portfolio to keep it afloat.
There is more positive progress in China, but it is difficult to judge whether the technology is better or just that the criteria for safe operation are different.
Connectivity is a slightly different story insofar as most cars now sold in the major markets are ‘connected’ and have the ability to send and receive data.
This is having practical benefits in terms of supporting e-call (alerting an operator and emergency services in the case of an apparent accident) and enabling over-the-air (OTA) updates that improve the customer experience and reduce the need for workshop visits.
But the additional revenues that were supposed to flow to car manufacturers from sales of digital services haven’t happened.
The promised billions are just possibly millions for those who are trying like Audi and BMW, and the reality is that when we want digital services, we want them on the device we always have with us, all the time in every mode of transport – our smartphone.
The smartphone manufacturers who are coming into the car business like Huawei and Xaomi in China are not doing so because they are worried about losing revenue to car manufacturers, but because they think they can provide a better user experience applying smartphone thinking and extend their world into a broader slice of their customers’ lives.
The next big step in connectivity is probably not revenue generating for the manufacturers either, but the benefits that could flow to their customers and society at large from V2X connectivity – the internet of things that allows car-to-car and car-to-infrastructure communications.
Turning to sharing, meant by some to indicate the end of individual car ownership, and a move to different forms of shared usage, this has also faltered, with most manufacturers withdrawing from the sector and those that remain like Stellantis’ Free2Move and Toyota’s Kinto actually covering quite a wide range of services including regular leasing and daily rental business.
The ‘big lie’ in many of the pitches for a rapid growth of car sharing services was that the typical car was used only 5% of the time, so ownership was inherently inefficient.
The two problems with this are that consumers want to use their car for the same 5% of the day, not conveniently smoothed out across the 24 hours, but they like the idea that if they only have use of the car for 5% of the time, then the cost will only be 5% of what it costs to own a car.
As the cost of the car sharing fleet does not disappear for the 95% of the time that it might be parked up, the promise of a general shift to car sharing will never happen in my view.
Which brings us to electrification which definitely has happened – on a much larger scale than any of the other three aces, but with pretty torrid results for almost everyone involved.
In markets where BEV uptake is relatively strong like the Netherlands, there is not any answer in place or even planned for how the grid will support the BEV population as it grows.
Manufacturers, dealers and leasing companies are facing huge losses on residual values and massive discounting costs to move the metal.
As the technology keeps on moving, it is not obvious to me that this situation will ease in the coming years.
Even the planet may not be truly better off as (with the notable exception of Norway which has almost 100% ‘green’ electricity) the total environmental impact of a growing BEV parc including production and energy generation may not be that significant.
(I hasten to add that I have no hard data for this, but I think that too many statistics are only reflecting a slice of the total impact).
I am not being negative on all of these things – I personally find the changes amazing and exciting.
I enjoy all of the ACES on a reasonably regularly basis and find it amazing that my car can end up with new features overnight or I can get a Hertz van for an hour through my smartphone.
I enjoy the electric driving experience and find even Level 2 or 3 autonomy incredibly relaxing.
But in the end, despite all the hype, they have not changed our world. We still need to deal with the basics – developing and building competitive cars, finding customers for them and giving them a great ownership experience.
I feel that will never change.
On that thought, this is my last blog for 2024. Have a great holiday break, and recharge the batteries for what I’m sure will be a challenging 2025!
