Design Con 2015
Breaking News
Comments
Newest First | Oldest First | Threaded View
<<   <   Page 3 / 9   >   >>
junko.yoshida
User Rank
Blogger
Re: Economies of scale
junko.yoshida   9/25/2013 1:00:41 PM
NO RATINGS
Thanks, DMcCunney. Always good to have a guy who can do a "reality check" for us! Much appreciate it.

DMcCunney
User Rank
CEO
Re: promise
DMcCunney   9/25/2013 12:02:50 PM
NO RATINGS
@Junko: As the auto industry continues to remain as the low margin business, traditional carmakers aren't getting much traction or investment from the investment community.


This is an over-simplified viewpoint.  There's a difference between the need to have a large market to do something in the first place, and the margins you can make if you do.

Automakers have been battered by increasing globalization.  The days are long gone when GM was concerned with keeping its US market share below 35% to avoid anti-trust actions, and "foreign cars" were a niche market in the US and competition was between the Big Three.

As the global economy increasingly flattened, the Big Three weren't competing with each other in the US market - they were competing with the likes of Toyota and Nissan in the world market. The GM that emerged from bankruptcy as a going concern did so in part by shrinking: the Oldmobile and Pontiac brands no longer exist.  GM was in some respects competing with itself in its lineup.  Customers who bought a Pontiac weren't buying a Chevrolet.

The old GM had a carefully thought out marketing segmentation strategy from Chevrolet low-end to Cadillac high-end, but that segmentation became increasingly counter-productive in a global market.  (Incidentally, I highly recommend the late Alfred P. Sloan's "My Years With General Motors" as background reading.  Sloan was CEO of GM during the formative years, and was largely responsible for the powerhouse GM became.)

The US automakers aren't the only ones facing the issues.  Foreign makers have merged to get economies of scale or ceased to exist, because they couldn't drive costs low enough or sales high enough to remain going concerns.

They are simply recapitulating what happens in any industry.  As competition occurs, some players win and get bigger, some lose and get acquired or cease to exist, and you are left with a few big players and an assortment of niche market vendors addressing areas the big guys can't do profitably.

In contrast, those who stand outside the automotive industry (read: Tesla, Google) are getting money from investors "on the promise" of delivering something (read: margin) that Big 3 can't offer.

A friend recently bought a Tesle, and is over the moon about it.  He bought the model one step above the base model, and paid $80K.  He said "You put down a $5K deposit, and you get to take a test drive.  If you don't like it, they'll return your deposit, but you won't ask for the deposit back because the car is awesome and you will like it..."

His model gets about 200miles on a charge.  It's splendid for the local driving he does.  If he planned to travel any greater distance it would take planning, and he might find it better to just rent a standard car.  Even if there are charging stations en route, you can't recharge an electric car as fast as you refill a gas tank.  Even the "fast" high-voltage charging option is relative: insread of leaving the car plugged in over night, you leave it plugged in for an hour or so, and plan on having a leisurely dinner or something while you wait.

DMcCunney
User Rank
CEO
Re: Economies of scale
DMcCunney   9/25/2013 11:26:07 AM
NO RATINGS
@Junko: . I guess what I was (am still) curious about is whether sometihng like VLC is DOA for US carmakers, or it might get to that "concept" stage...

It might, for the "developing technology that might get used elsewhere" reason I mentioned.  I don't expect a US auto maker (or a large one elsewhere, for that matter) to actually put something like this in production.  There simply won't be a big enough market to do it profitably.

Niche-market manufacturers are common enough.  Consider Lamborgini, makers of high-end sports cars.  They are pretty much hand assembled, the sales of any model is measured in thousands, not hundreds of thousands, and they cost a mint.  They have to.

Again, size matters.  If you are a big company, you need a big market to address and the ability to sell high volumes of whatever it is to do so profitably and survive.

Edison2 might be able to exist as a niche-market maker, but as mentioned elsewhere, the reasons a buyer might choose one of those vehicles will have more to do with status markers than anything else.

 

krisi
User Rank
CEO
Re: promise
krisi   9/25/2013 10:06:37 AM
NO RATINGS
Point well taken Junko...it is understable that VC community is trying to place some bets that have a *chance* of paying off...Tesla/Google makes much more sense than Ford in this case...Kris

junko.yoshida
User Rank
Blogger
Re: promise
junko.yoshida   9/25/2013 8:35:36 AM
NO RATINGS
I think what is missed in our conversation so far on this VLC topic is the following.

As the auto industry continues to remain as the low margin business, traditional carmakers aren't getting much traction or investment from the investment community.

In contrast, those who stand outside the automotive industry (read: Tesla, Google) are getting money from investors "on the promise" of delivering something (read: margin) that Big 3 can't offer. 

I think that's the point made by Kuttner in his speech, and it's worth giving some thoughts to -- if the auto industry needs to move forward.

junko.yoshida
User Rank
Blogger
Re: Economies of scale
junko.yoshida   9/25/2013 8:20:29 AM
NO RATINGS
@DMcCunney, you wrote:

They will all invest in producing prototypes to gauge interest and develop technology that may get used elsewhere - "concept cars" are long standing traditions in the industry.  Whether it goes from concept to production is another matter.


Very true. I do understand the big difference between concept and production. I guess what I was (am still) curious about is whether sometihng like VLC is DOA for US carmakers, or it might get to that "concept" stage... I know, call me an eternal optimist or romantic. I want little guys to win once in a while!

Bert22306
User Rank
CEO
Re: Economies of scale
Bert22306   9/24/2013 6:15:01 PM
NO RATINGS
I hear you, Betajet, but I also posted that very recent Wall Street Journal article about buying trends. Niche markets will exist, but the niche product may or may not surive, and it will cost a lot no matter what.

The other point is, the major automakers do introduce lighter weight materials and improved engines and drivetrains. It's not like they don't care. They HAVE to care, in large part because their fuel economy mandates are going up and up in the next few years. So they have to meet these requirements while still selling cars to people who prefer behemoths.

And the buying public DOES prefer behemoths, here (and elsewhere too, if they could afford to run them). Perhaps if we taxed the living bejeesus out of gasoline, as Europeans do, the buying puclic could be coerced into buying mnore responsibly. The excuse you read over and over again is "safety." In my view, it's more caused by the obesity crisis, and the shift in perceptions that creates. (You know, like anorexic people always see themselves as too heavy, only the other way around.)

DMcCunney
User Rank
CEO
Re: Economies of scale
DMcCunney   9/24/2013 6:02:08 PM
NO RATINGS
@Junko: But what about so called "low mass, high efficeny designs" that seem to be coming out of different carmakers in the world?

Renault's Twizy, VW Xl-!, Opel's RAK-e, and Toyota-s FT-Bh?


What about them?  I'll be fascinated to see your analysis when you do the write up.

But I go back to economies of scale.  The bigger you are in any industry, the larger the market has to be for something to make it worth your while to make it.  If you can't do it profitably, you don't do it at all, and as you get larger, the size of the market you need increases.

The questions for all of those designs will be "How big is the potential market? How many could we sell if we made it? What would we have to charge to make money at that volume of production? Could we get that price?"

Different automakers will have different answers to those questions based on their cost structure and the demands of their local market, but you can assume they'll all ask those questions.

They will all invest in producing prototypes to gauge interest and develop technology that may get used elsewhere - "concept cars" are long standing traditions in the industry.  Whether it goes from concept to production is another matter.

krisi
User Rank
CEO
promise
krisi   9/24/2013 5:56:22 PM
NO RATINGS
You did Yunko, I just didn't read it carefully...selling the promise sounds exactly as it should: this just a promise

betajet
User Rank
CEO
Re: Economies of scale
betajet   9/24/2013 5:52:05 PM
NO RATINGS
The "buying public" can only buy what's actually for sale.  There were about 10 years around the turn of the Century when you couldn't get a small, economical hatchback.  The car companies then would rather sell you an SUV and pocket the profits.  These days I would love to be able to get a nice electric for tooling around town -- it would be the perfect vehicle for a lot of elderly who don't drive enough to keep an ICE happy.  But the available NEVs have awful styling and freeway-capable electrics are expensive overkill.

My mother remembers when she was a little girl in Berkeley CA in the 1930s.  There was an elegant old lady who tooled around down in her electric car -- basically a motorized carriage steered with a tiller.  Perfect vehicle for her needs.

<<   <   Page 3 / 9   >   >>


Top Comments of the Week
Flash Poll
Like Us on Facebook

Datasheets.com Parts Search

185 million searchable parts
(please enter a part number or hit search to begin)
EE Life
Frankenstein's Fix, Teardowns, Sideshows, Design Contests, Reader Content & More
<b><a href=Betajet">

The Circle – The Future's Imperfect in the Present Tense
Betajet
5 comments
The Circle, a satirical, dystopian novel published in 2013 by San Francisco-based writer Dave Eggers, is about a large, very powerful technology company that combines aspects of Google, ...

Max Maxfield

Recommended Reads From the Engineer's Bookshelf
Max Maxfield
31 comments
I'm not sure if I read more than most folks or not, but I do I know that I spend quite a lot of time reading. I hate to be idle, so I always have a book or two somewhere about my person -- ...

Martin Rowe

Make This Engineering Museum a Reality
Martin Rowe
Post a comment
Vincent Valentine is a man on a mission. He wants to make the first house to ever have a telephone into a telephone museum. Without help, it may not happen.

Rich Quinnell

Making the Grade in Industrial Design
Rich Quinnell
16 comments
As every developer knows, there are the paper specifications for a product design, and then there are the real requirements. The paper specs are dry, bland, and rigidly numeric, making ...

Special Video Section
The LT8640 is a 42V, 5A synchronous step-down regulator ...
The LTC2000 high-speed DAC has low noise and excellent ...
How do you protect the load and ensure output continues to ...
General-purpose DACs have applications in instrumentation, ...
Linear Technology demonstrates its latest measurement ...
10:29
Demos from Maxim Integrated at Electronica 2014 show ...
Bosch CEO Stefan Finkbeiner shows off latest combo and ...
STMicroelectronics demoed this simple gesture control ...
Keysight shows you what signals lurk in real-time at 510MHz ...
TE Connectivity's clear-plastic, full-size model car shows ...
Why culture makes Linear Tech a winner.
Recently formed Architects of Modern Power consortium ...
Specially modified Corvette C7 Stingray responds to ex Indy ...
Avago’s ACPL-K30T is the first solid-state driver qualified ...
NXP launches its line of multi-gate, multifunction, ...
Doug Bailey, VP of marketing at Power Integrations, gives a ...
See how to ease software bring-up with DesignWare IP ...
DesignWare IP Prototyping Kits enable fast software ...
This video explores the LT3086, a new member of our LDO+ ...
In today’s modern electronic systems, the need for power ...