The Rebirth of the Car – Vehicles for the Future?

by Jörgen Eriksson on June 14, 2014

1885 BenzThe birth of the car as we know it today took several decades and involved many inventors. Early attempts of steam powered road vehicles gave people the idea of the horseless carriage. In 1885 the first petrol powered car rolled down the streets and on January 29, 1886 Karl Benz patented his Motorwagen in Mannheim, Germany.

The Motorwagen had a gas-powered 0.954-litre, four-stroke, water-cooled one-cylinder horizontal engine with open crankcase and cast-iron flywheel. It had belt-drive and integrated differential; rear-wheel drive. The horsepower strength was 0.75 at 400 rpm. Ever since the Motorwagen, the petrol engine has provided the spark for automotive performance and for the automobile itself.

95-black-model-t-fordThen the automobile industry came of age with Henry Ford, when he introduced bulk production of cars in 1914, with the introduction of the assembly line with first the A and later the famous T-Ford model. This lead to rapid development of the industry as many new technologies and methods adopted by the Ford Motor Company, made the new cars an innovation for the masses.

Henry Ford produced an automobile that was within the economic reach of the average American. While other manufacturers were content to customers who could afford expensive cars, Ford developed a design and a method of manufacturing that reduced the costs of the vehicles. The T-Ford model made its debut in 1908 with a purchase price of $825 (about $20 000 today). Over ten thousand were sold in its first year, establishing a new sales record. Four years later the price dropped to $575 and sales soared and by the 1920s the price was $265.

By 1914, Ford could claim a 48% share of the automobile market. Today, 100 years later, we still drive around in petrol driven cars and we have been waiting for mass production of electric vehicles for three decades, since the enabling technologies were developed in the 1980s. Why has no automobile producer yet made a breakthrough? With billions in research and development spending by the industry and government subsidies in many countries, it is a wonder why we are not yet driving around in cars powered by electric, clean technology? Like in so many other industries, it is because what is proven is safe and risk free, and so much is invested in factories for the old technology.

However, we live in turbulent times for the automobile industry. The demands on the business have never been greater and customer expectations of vehicle quality, reliability, safety, and utility are at an all-time high, while at the same time, worldwide overcapacity has put pressure on the industry to maintain, and even reduce, vehicle price. Petrol prices, on the other hand, just keep on increasing.

We are witnessing major structural changes in the industry too. Globalization is being realized through business alliances and public-private partnerships that have realigned the world’s vehicle manufacturers into six major conglomerates and alliance groups. This process is currently sorting itself out. Once it is concluded, only a few companies will survive independently because they occupy a unique market niche or possess a special competitive competence.

tesla-model-sAt the same time, new niche players are appearing, such as Tesla Motors, a California based American company that designs, manufactures, and sells electric cars, established by the great innovator Elon Musk.  

Maybe 2014 will be the year the breakthrough to electric vehicles finally starts? Tesla Motors is gaining world wide recognition for their innovative designs and the Tesla Model S was the top selling new car in Norway in September 2013, becoming the first electric car to top the automobile sales ranking in any country.

Then Thursday this week, Tesla made something completely unexpected.

All Our Patents

On June 12th, Elon Musk announced that Tesla will let other companies use its innovations under an open source policy. Musk said ”Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

The move looks drastic at first sight. According to technology websites, Tesla has hundreds of approved patents and many pending for all manner of spectacular inventions tied to electric-vehicle technology. Tesla pioneered innovations that lowered the cost and increased the safety of battery packs. Tesla´s cars recharge much faster than others on the market, thanks to an innovative connector, software, and power-management advances.

Now Tesla offers these innovations to Tesla´s competitors and asks for nothing but goodwill in return.

According to Musk, Tesla made the gesture to bring the rest of the automotive market along. Tesla’s Model S has proven that there is an interest in a well-made, fun-to-drive electric car. Still, they are barely making a dent in the massive auto market. I think Musk releases the patents in hope to promote a dramatic shift toward electric cars, and as the industry moves, he counts on Tesla to be most agile. It is a very bold move.

Musk VisionIn effect Musk is saying the other car manufacturers are not his competition. It is Benz 19th century technology with the petrol driven combustion engine itself that is Tesla Motors’ competition and they are not beating it, yet.

Tesla Motors sales are are only a splash in the ocean in comparison to the vast fleets of gas fuelled cars that are driven out from giant factories around the globe by the millions.

It may be Musk’s vision that if Tesla had some more serious competition in electric vehicles it would actually be good for Tesla and would help grow his business, and make the world a cleaner place as well.

About Jörgen Eriksson :

Jörgen Eriksson is the founder of Bearing and is the Chairman of the firm since it was created. He has successfully expanded Bearing into covering projects on four continents. He is also Adjunct Professor of Innovation Management at the International University of Monaco and at Universitat Politècnica de Catalunya in Barcelona and he is an active member of the Founders Alliance organisation.

Working with consulting engagements across Bearings practices, he has over the past fifteen years participated in and supervised a large number of client projects, from innovation system development and place development and branding, to merger and acquisition assignments and leading edge research and business development activities for key clients.

His new book, Branding for Hooligans, will be published in 2015. It is about how innovation and branding are key survival factors in our modern times of hyper competitive markets.

Prior to Bearing, he was Director of Europe, Middle East, and Africa for Trema Treasury Management, a technology and consulting services provider, supplying financial software solutions for the global financial industry, Clients included The European Central Bank, Citibank, SEB, South African reserve Bank, Deutsche Bank, Abu Dhabi Investment Authority (ADIA), as well as many other large financial institutions and Fortune 500 companies.

Early in his career Eriksson was educated at the Stockholm School of Economics, where he studied economics, financial economics and philosophy. He then worked in Scandinavian investment banks and also for the Swedish Institute of National Defense Research.

You can contact Jörgen on e-mail jorgen.eriksson@bearing-consulting.com, connect on LinkedIn on http://fr.linkedin.com/pub/jörgen-eriksson/0/38/8a0/ and follow him on twitter on joreri508.

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