Byton – Interesting optics.

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Byton may not need to make vehicles long-term.

• Of the high number of EV start-ups all rushing to the market for electric vehicles on Tesla’s coat tails, I think that Byton is the one to watch.
• Byton is thought of as a Chinese EV start-up but is in fact a European EV start-up financed with Chinese money and head quartered in Shanghai.
• The company has just expanded its foot print with the opening of a new facility in Los Angeles that will focus on working out how to deliver the best driving and autonomous user experience in the context of a digital vehicle.
• To me, this is where Byton is different.
• Most EV start-ups think of themselves as electric car companies and intend to compete on that basis.
• This is no different to the OEMs that currently dominate the market for internal combustion engines which I think is at risk of declining precipitously when electric vehicles become a reality (see here).
• Should this come to pass, then the OEMs will be forced to cut prices and use every bit of scale they can muster to survive.
• This is because EVs are much easier to build than internal combustion vehicles meaning that competition could be even fiercer than it is today.
• Against that backdrop, a small EV maker that simply makes a vehicle is likely to get crushed.
• I think Byton is interesting because it thinks of itself as a digital vehicle company rather than an electric car company.
• Byton admitted right from the start that making EVs was reasonably straight forward and is instead decided to focus on the digital experience.
• Byton aims to deliver a seamless vehicular transportation experience and outside of form factor, it is using the vehicle simply as the delivery mechanism for its digital experience.
• In the long-term, I think that this could also mean that Byton no longer needs to make vehicles but instead licences its ecosystem to others for them to put in their vehicles.
• This mindset is liberating as it has also allowed Byton to design its platform such that the design cycle for the fast-evolving digital components is separate from the rest of the vehicle.
• This allows things like screens and processors to be upgraded immediately prior to launch meaning that the performance of the digital aspects of the vehicle meets consumer expectations.
• OEM infotainment units today are invariably 4-5 years out of date by the time they hit the showroom floor because the infotainment unit specification has been locked to the vehicle’s 4-5 year design cycle.
• This is major reason why consumers prefer to use their smartphones than the infotainment unit in the vehicle and unless it is fixed, OEMs are at risk of becoming irrelevant in automotive digital services.
• Of all the car companies I have seen, Byton is the one that is the closest to solving this problem as it recognised it early on.
• However, it not all roses as I think Byton has some very serious challenges to overcome.
• These include:
  • First, gestures: Byton is using a gesture-based user experience in its vehicle which unless perfect (very difficult) could be even more distracting to the driver than a touch-based UX.
  • Second, digital integration: RFM research (see here) has found that the best digital vehicle experience will be one where the data from the smartphone is used in conjunction with the data from the vehicle.
  • This means that Byton has to convince the providers of the top Digital Life services, both in developed markets and in China, to integrate with its systems.
  • Furthermore, it has to deliver that integration in an easy and fun to use way that also gets a good rating against RFM’s 8 Laws of Robotics for digital ecosystems.
• I see these as existential challenges for Byton because unless it really gets this piece right, not many people are going to buy its vehicles.
• Furthermore, even if Byton beats its own forecast meaningfully, its volumes will be very low in the context of the automotive industry.
• This will put it pretty low in the pecking order for developers when it comes to choosing where to expend their resources in putting their services into digital vehicles.
• These are not insurmountable challenges but will require innovation I have not yet seen in a vehicle to overcome.