Kotagiri said this when he opened the annual Management Briefing Seminars for the Center for Automotive Research on August 4. According to the Magna CEO, automakers will have to rethink not only how they make a car: the entire cycle of production due to climate change concerns and carbon emission limits will also have to shift.
We already saw that happen in multiple situations. Some automakers are now pledging to use steel produced with no carbon emissions. Others will go fully electric in increasingly shorter deadlines, but there’s way more than that, and it relates both to manufacturing and the business as a whole.
When it comes to building a car, electric motors and batteries allow for a completely new structure. Battery packs are being placed on the vehicle’s floor, making them lower their mass center. These components can be structural, which will help save weight and complexity in manufacturing the body, as the Ford Mustang Mach-E revealed.
Electric motors are smaller and more efficient than combustion engines. They can be placed directly on the axle, saving a lot of space cars had to find under the hood, under the rear seats, and so forth. These cars can be built in completely new ways.
Tesla is now investigating mega castings to make the vehicle structure easier to build, more robust, and theoretically more precise. Unfortunately, the company based those projects around the 4680 cells, and issues with their mass production have delayed new products conceived like that. The company also promised a revolutionary electric system – with less wiring – but it is also yet to deliver that.
While that does not limit everything that can happen with manufacturing, the business model may also change dramatically. Tesla’s direct sales model has broken the dealership standard. Most automakers are still trying to figure out how to adopt something similar.
Volkswagen is the one that is closer to a winning idea with the agency model, which turns dealerships into contact points with customers. They do not markup vehicles, and clients can buy them with dealers or online, but the delivery always goes through these contact points. That makes buyers always know how much they will pay for a vehicle, and dealerships always know the fee they will receive for each sale or delivery.
Instead of selling vehicles with different equipment, automakers are now considering putting all the available ones in all cars and activating them through software. That will lower their manufacturing costs and increase their revenues with services that customers decide when to buy. As long as the buying process is easy and refunds for accidental purchases are fast, it may work well.
The biggest supplier in the world cannot say that in public, but Kotagiri also mentioned that electric cars could cause a revolution because of “mobility as a service.” Hopefully, he was not talking about car sharing, a bad idea that got even worse with the COVID-19 pandemic. Most drivers want cars not only as a means of transportation but also as private spaces.
Riversimple already proposed that with multiple repercussions. Its business model cuts the need for a car company to make profits by producing and selling increasingly more vehicles, also demanding more natural resources. Riversimple will make money if it manages to offers vehicles that are efficient, robust, and convenient.
If you think it through, Kotagiri was not warning about how electric vehicles can impact the future. He was alerting about how some companies are already shaping it with them.