“Killer App” is a computer industry term. It refers to the software that creates the value that makes people buy the hardware – lots of hardware. In this post, I use “killer app” rather loosely, to mean a whole genre of software that breathes life into new hardware platforms.
The Next Killer App – Part 1 reprised the idea of an electro – mechanical continuum in equipment design. As design emphasis moves past electric to electronic, software becomes increasingly important, such that the equipment increasingly becomes a means by which the software creates value. That’s why I think that the next killer app will be will be electric automobiles, and the value that sells them will lie in safety, convenience, comfort, efficiency and entertainment.
Electric Vehicles: Why?
The global vehicle industry has been evolving rather slowly since about the year 1900. The rate of evolution has accelerated in the last few decades, such that today’s vehicles powered by internal combustion engines are remarkable machines by almost any measure. Today, however, there is a convergence of technical and social factors that make electric vehicles much more desirable – so much so that electric vehicles may well become our vehicles of choice over the next few decades. Here are a few of those “technical and social factors”:
>> There are persistent concerns with importing and burning huge quantities of petroleum every year. These concerns include a pernicious deficit in America’s international balance of trade figures and accumulating levels of atmospheric pollutants from combustion.
>> Highway safety figures have improved significantly over the years, even while the number of miles driven has increased. Still, 32,675 people died in vehicle accidents on American roads in 2014. Compare that to commercial airline figures, which are consistently near zero, never mind travelling 500+ miles an hour, six miles straight up.
>> Battery and electric drive technology has improved dramatically, especially over the last decade or so, vastly improving an idea – electric automobiles – that is as old as the automobile industry itself. (Mrs. Henry Ford is said to have owned an electric car).
Fifty years ago, a newspaper ad for a used car might read something like “1956 Dodge 4 door sedan, 48,000 miles, excellent condition, R&H” The “R&H” meant radio and heater, which were extra cost options. Since then, add automatic transmissions, air conditioning, power steering, seat belts, fuel injection, stereo entertainment systems, GPS and more. The long term trend in the features that people want badly enough to pay for is clear enough.
Tesla Leads a Revolution
Tesla Motors, of course, is current leader in electric vehicles. Their cars define the current state of the art. But Tesla isn’t just about spiffy new cars. Tesla has stated that their intention is to lead a revolution – a revolution in how we think about transportation. Tesla recognizes that it needs to create an electric vehicle industry for electric vehicles to become more than a side show in the very large global vehicle circus. To that end, Tesla opened its considerable cache of patents, license and royalty free, to any firm that seriously attempts to build electric vehicles.
Further, Tesla hasn’t shied from confronting the external barriers to the general acceptability of electric vehicles. For example, Tesla continues to construct what is already an impressive number of electric vehicle recharging locations in the U.S. and elsewhere. Also, in July of this year, Tesla will hold the Grand Opening of a huge gigafactory which will produce the vast number of lithium ion batteries that Tesla expects to require (on the hurry-up).
The Business Model Continuum
The 360,000+ orders Tesla booked in a few weeks for their new Model 3 confirmed that demand for vehicles like Tesla’s does indeed exist. That’s good, because over a dozen serious prospective mass market electric vehicle manufacturers have already emerged globally. At least initially, there appears to be a continuum in the approaches these firms take toward electric vehicles. On one extreme, some existing global vehicle manufacturers seem to regard electric vehicles as a line extension, as hybrid vehicles are. I call this the Detroit view, although Nissan may prove to be the best example. Toward the other extreme, Tesla represents what I call the San Jose view, where the vehicle is viewed as a conduit for technology that provides new value in transportation.
Here are some examples:
>> Faraday Future has broken ground for a $1 billion manufacturing facility near Las Vegas where “we are eager to start production of the vehicles of the future that will embrace the increasingly intrinsic relationship between technology and mobility.” Like Tesla, Faraday Future is headquartered in Silicon Valley (physically and in mindset). Their initial products are expected to be high performance premium vehicles. Any firm that invests a billion dollars in a grass roots manufacturing facility is worth taking seriously. The firm is reported to be closely linked to the Chinese equivalent of Net Flix.
>> There have been strong rumors of a coming electric vehicle from Apple (yes, that Apple). Apple has spent about $5 billion in additional R&D from 2013 to 2015, which, along with a $1 billion investment in a Chinese ride sharing service, suggests that Apple has a strong interest in shared mobility, expressed through shared, rather than owned vehicles. Driverless vehicles might well provide a new vessel for Apple software functionality, as Apple’s iPhone provides a vessel for personal communications software technology. It is interesting that Apple does not manufacture iPhones, or anything else that I know of. It is reasonable to suppose that an Apple car will be designed by Apple but built by somebody else.
>> There was a recent ad in the Phoenix newspaper for a Manager for Google’s driverless car operations in the Phoenix area. Google’s cute driverless vehicles are being widely road tested (more than 1.5 million self driving miles to date). Google has been working on self driving cars since 2009, so now has a lot of experience with the necessary software. It seems likely that Google will partner with established automakers to provide self driving technology, rather than building their own vehicles.
>> The June 2016 issue of Fast Company magazine lists Mark Fields as #13 in its ranking of the 100 most creative people in business in 2016. Mark Fields is the President and CEO of Ford. Fast Company is not the sort of publication that normally associates “creative” with Detroit executives. The brief Fast Company listing notes that Ford has been conducting extensive road testing on driverless vehicles. Fields is quoting as wanting driverless technology for mass market vehicles that is “true to (Ford’s) brand”.
Incidentally, Ford recently announced a coming electric version of the mid-sized Ford Fusion model, featuring a 200 mile range. Sounds like a line extension to me. So, maybe Ford is still closer to Detroit than to Silicon Valley.
For Smaller Manufacturers
The automotive industry is obviously in a state of transition, perhaps disruptive transition. A lot of new competition is coming on several fronts. In situations like this, existing supplier relations are at risk. Bad, if you are an incumbent supplier. Not so bad if you have been on the outside, looking in. Better yet, there is room for new faces and new ideas as the distance between Detroit and Silicon Valley diminishes.
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.
 How big is that “very large global vehicle circus”? Statista reports over 72 million vehicles sold in 2015, while projecting 100 million for 2020! http://www.statista.com/statistics/200002/international-car-sales-since-1990/