When one contemplates an industry like the auto industry, the first things that come to mind are long-term established players, massive capital requirements, consolidation, national entrants... the list goes on. It is hard to imagine, for some at least, that there is much opportunity for disruption in an industry like the auto-industry. The sheer mass of the industry, the brand equity of the players, the technological bank that resides in the manufacturing and design processes, dealership networks; all offer a massive barrier to even thinking about entering the market. Perhaps, however, the industry structure is as it is because of institutional momentum and decadence rather than necessity. As a casual observer and industry outsider, I bring innocence to my contemplation of the industry, perhaps hardened industry participants will call me naive, perhaps even scoff a little – I will persist at any rate, so please through rocks if you like.
The people’s car design thinking. Simple to build, long lasting, fun, functional, durable, economical to operate, ownership maintenance and SAFE. Think if you will “dune buggy” “VW bug” “new bug” “VW thing” “Land Rover” “Volvo”, a vehicle that commutes Mom and Dad to work by weekday and takes the family into the Canadian outdoors by weekend; Mom & Dad the two kids and a couple others as well. Imagine the new bug, only with a wider stance - think the original Hummer, think a flattened cargo roof, and a 48 Mercury pickup hood on the front cargo trunk. Think high profile 17” tires and accompanying suspension and undercarriage considerations to facilitate maximum clearance. Think a mid-engine horizontally opposed “blue tech” turbo diesel engine and a six-speed transmission – 80 MPG anyone. Take the core component concept, and extend it to every part of the car. Ding a driver’s door, return it to the designated depot for a replacement having used a Philips screwdriver to removed its easily accessed mounting bracket, 150k km detailed engine maintenance required - 4 bolts 3 quick couplers and a friend - you return the engine core to the depot for a replacement, suspension change - that’s componentized as well. You’re noticing the theme, low maintenance and what is required for maintenance is done by the owner. The key consideration here is in accessing the value buyer who is interested in an offering like this, is to clearly demonstrate at the point of purchase contemplation a greatly reduced ownership cost; this formula is working for Honda and the Civic and others, it will work here only more so.
The present car manufacturing company; has a head office, has a design department, has a marketing department, has a parts manufacturing capacity plus jobbers, has an assembly plant and has a dealership network. The proposed business model has none of that or at least very little. The design and engineering will be outsourced, the parts that are specific to this car, hopefully, few, will be manufactured by jobbers, the assembly will be outsourced, there will be no dealer network but rather a depot system via existing retailers, marketing will be done via conventional media, selling and distribution will be executed via a web-based system. The full margin will be accessed and inventory challenges mitigated or eliminated by reduced consideration for annual change, that is to say, manufacturing runs will be made in accord with scale efficiencies and no further manufacturing will be solicited until complete inventory is marketed or at least until the next run is financed by the prior run.
The car itself offers disruptive market access opportunity given its design and overall value offering, the proposed marketing modality offers disruptive market access opportunity. Disruptive market opportunity is largely derived from reduced overhead and the absence of “carrying” a dealer network and all the requisite costs associated with it. There will be no need in the design process to consider the requirements of the dealer parts and repair departments; the company becomes more profitable, the less a customer is exposed to repair and parts costs; an anomalous element in the industry at large.
The simplicity of design, the simplicity of the overall offering and the simplicity of the business model are critical to achieving a superior value offering in this market space. This car will come to market at the $19k range but will gain a competitive advantage in this space due to a well-defined value offering that shows greatly reduced cost of ownership over the life of the car. Initial market acceptance will be garnered by the consumer's knowledge that the design is supported by convention, that the many of the parts are “off the shelf”, that the 10-year use design horizon is supported by a third party warranty carrier – generous roadside, no questions asked.
Comparatively, this model requires very little capital to execute. With a superior value offering and lower capital and overhead costs, there may be an opportunity here.
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