Geneva Auto Show – Own goals

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OEMs promote their own demise.

• While the automakers are falling over themselves to appear up to date and innovative at the Geneva Motor Show, very little thought appears to have been applied to considering the consequences of their actions.
• I see these consequences as potentially devastating for the long-term differentiation, growth and profitability of both themselves and potentially, the radio broadcast industry.
  • First, electrification: Thanks to Tesla, this is now a major trend in the industry where every vehicle maker has no choice but to have a roadmap that spells the end of the internal combustion engine.
  • This is potentially devastating for many OEMs as most of their core intellectual property is to be found in the internal combustion engine and its drivetrain which are obsolete in electric vehicles.
  • Furthermore, RFM has calculated that electric cars should last twice as long and have a total cost of ownership of around $5,000 per year less for the consumer.
  • This combined with their superior performance makes electric vehicles a no brainer for the consumer once the issues of range anxiety and battery charging have been solved.
  • Hence electrification could trigger a decline in vehicle shipments that no OEM is likely to survive in its current form.
  • Second, digital. Fiat Chrysler and VW are offering 6 months of Apple Music for free in new vehicles equipped with Apple Car play.
  • While this is very similar to the model by which subscription service Sirius XM is offered, there is a key difference.
  • Sirius XM is offered as part of the OEM’s overall user experience in the infotainment unit while Apple Car Play is an over-the-top offering.
  • Bentley has even gone so far as to include pictures of Apple Car Play running with an iPhone hardwired to its vehicle in its own promotional material for the Bentayga Hybrid.
  • Although Apple Car Play offers no threat to the opportunity that exists around sensor data, the OEMs are pushing users to spend time outside of their own digital environments.
  • As digital becomes more and more important, this has significant and detrimental implications for the OEM’s ability to entice their users to engage with their own digital services.
  • Furthermore, navigating out of Apple Car Play back into the OEMs own user experience has been deliberately made difficult without physically unplugging the iPhone.
  • There is no reason why Apple could not remove the exit button entirely meaning that the OEMs own user experience would become unavailable while the iPhone is plugged in.
  • Given, how poor most OEMs user experiences are today, I am pretty sure that users will simply spend all their time in Apple Car Play, rendering the OEM’s entire digital strategy ineffective.
  • Third, radio broadcast. The vehicle is the most important place for listening to radio broadcasts and in USA, an $18bn (Statista) advertising industry depends on it.
  • By encouraging users to spend time in Apple Car Play, OEMs are making navigation to the radio tuner difficult which may cause analog radio listening to enter into a steep decline.
  • I think that the same advertising revenues are available on digital streaming but the differences in licensing terms for music on streaming vs. radio broadcast will destroy the profitability of the broadcasters.
  • Hence, unless the radio broadcasters can figure out a way to bring the analog tuner into the digital arena, then they also risk going down with the OEMs.
• The net result is that the outlook for the OEMs remains pretty bleak as they face being commoditised into makers of handsets on wheels unless they can figure out how to engage the user with digital services powered by their unique sensor data.
• This is how they can begin to mitigate the impact of digitisation and electrification upon their industry and RFM’s initial calculations are indicating that the opportunity here is substantial.
• However, while they continue to unwittingly promote their own demise, it would seem that the real benefits will accrue to other players.
• I continue to see the OEMs being at great risk of being also rans in their own industry.