Should automakers leave automaking to others?

[kscarbel2]

Larry Vellequette, Automotive News  /  December 2, 2017

Why not mimic Apple and focus on R&D and marketing?

If I had a limitless amount of money, I know exactly what I'd do. I'd go to the world's automobile manufacturers and offer to buy their assembly plants. I would then produce their vehicles under contract and sell them back to those same companies at cost plus a tiny margin.

Buying the plants today would put me way out front of where I believe the world's auto companies are headed. Seriously, how long before we get to the point where automakers no longer make autos?

Yes, that sounds incredible, but it also feels inevitable.

Manufacturing vehicles with consistently good quality might be the hardest thing this industry does. Just ask Tesla. Heck, ask Toyota. Any CEO will tell you that manufacturing without consistent quality can absolutely destroy a brand's image.

If automakers could shed their manufacturing responsibilities, they could streamline operations down to little more than r&d, design and marketing. They would continue to be creators and masters of the look and feel of their vehicles, as well as their performance and positioning — thus their brand appeal. They'd essentially follow Apple's business model, which I hear works just fine.

Super cost-efficient?

Think about it. What if a car company outsourced its entire vehicle production operations to a secondary entity that would operate like an automotive version of Foxconn, Apple's gigantic manufacturing partner?

Wouldn't that automaker be at a competitive advantage? Wouldn't it be rewarded in spades by the stock market? Ultimately, all traditional automakers would be pressured by investors to offload their costly, complicated manufacturing operations to an entity willing to run them on a cost-plus basis.

It's already happening, albeit at a smaller scale. The services of the industry's best-known contract manufacturer, Magna, are in high demand, especially from premium brands. That relationship works because Magna is good at what it does, and automakers know and trust that fact.

Now imagine the world's vehicle assembly in the hands of a single, super cost-efficient back-end manufacturer? That company could dictate common loading points across various designs, allowing the factories to be flexible enough to build similar-sized products for several manufacturers simultaneously.

As robotics continue to advance, the cost structure of these factories would drop precipitously even as manufacturing complexity increased. This automotive Foxconn would have sufficient scale to make its own 3-D printed tooling, and eventually maybe even "print" its own automobiles.

At that point, giant automotive factories would be unnecessary. Instead, you'd have localized printing centers where consumers would pick up the completely personalized automobiles that they had designed and paid for at their local dealer a few days before.

A bite of the Apple

Look at the future that's been forecast for the auto industry: autonomous cars with identical driving dynamics — all controlled by algorithm, so vehicles will no longer crash. A new ownership model will naturally follow autonomy and widespread electrification. Basically, what we'd have is a transportation collective.

Unlike so many people, I remain deeply unconvinced that this apocalyptic automotive future is just over the horizon. While it may be technically possible to do all these things in the next 20 years, I don't believe humanity will change its habits that fast, if ever.

But whether it happens or not, why does manufacturing need to remain a center of excellence for automakers? Why will today's companies continue to expend their energy and treasure on being the "handset provider," as Bob Lutz puts it?

Why indeed?

You ask: What will be left for carmakers to do if they don't make cars? Well, more or less what Apple does.

So like Apple, leave the manufacturing to manufacturers. In fact, leave it to me.

.

[Maxidyne]

GM seems to be half way there already. And does this business model work for Apple? I've been waiting for over a week for Apple to produce and deliver a new laptop for me, and my patience is getting thin.

[fxfymn]

Quality and relying on a sole source supplier would make this a pretty hard pill to swallow for the auto manufacturers. Being held hostage to your supplier while not being able to control costs would also make this an unwise choice.

There is a reason most very large manufacturers are vertically integrated.