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The Automotive Industry Renaissance Is Just Beginning

Ford gets it, and many from Detroit, Nagoya, and Stuttgart will attempt to follow. Apple, gets it, and others from Silicon Valley will follow. There will be much arm waving by those who follow on both sides that say they get it, but few yet understand the enormity of the it that is this renaissance of innovation in the automotive industry. It is not Apple producing an Electric Vehicle (EV) or Uber building an autonomous car. It is not GM putting Pandora in the dash or BMW sending you an email when your car needs service. The majority of airtime is taken up with discussion around topics that either won’t impact consumers for at least another 10 years or seem like 10-year-old technology.

There are significant changes coming, and consumers will begin feeling the effects of it now. Long before we see the first driverless cars on the road, the entire consumer experience from driving, to buying, to servicing a car will change and all of the business processes around these will improve to the benefit of the consumer.

Industry Giants Meet On the Road

Ford began to make moves in 2009 when former CEO Alan Mullaly gave a CES Keynote. It was solidified this year when Ford CEO, Mark Fields, opened an innovation center in Palo Alto. This was not because it’s cool to be part of the Silicon Valley culture. It is a deeper recognition that Silicon Valley has a near monopoly on talent at the leading edge of User Interaction/User Experience design, has the thought leaders in customer service and relationship management platforms, and has a growing community of innovators that are rethinking the way cars work.

Just down the road from Palo Alto, Apple has been hiring top personnel from Tesla, A123, and other companies innovating around the vehicle. Most of the chatter is Apple will build an electric car; however, what is being missed by most is the much larger opportunity that Apple is already going after. There are one billion cars on the road globally (250 million in the US) and less than 25 million of them are connected to the Internet, and it is not going to stay that way. Apple’s great strength isn’t in building things, it’s in designing great, connected products with sticky applications and services that consumers are passionate about and now view as an aspirational luxury good.

There are others giants who get it also and are using dominant positions within the automotive industry to engage with venture-backed startups and drive internal innovation. Prime examples are:

  • USAA, one of the largest insurance companies in the US has made investments through-out the automotive ecosystem in companies like TrueCar (Nasdaq: TRUE) and other companies that influence every aspect of the car ownership experience.
  • Cox Automotive Group, who owns Manheim (the largest automotive auction company in the US), Auto Trader (the leading customer acquisition platform), and several key software platforms for auto dealerships has made investments in Get Around (the leading car sharing platform) and acquired Xtime (the leader in web enabled Customer Relationship Management for dealership service departments).
  • While we haven’t seen anything from them yet, CDK Global (Nasdaq: CDK) is poised to shake the industry up as well. Formerly part of ADP, CDK has a platform that manages most of the core functions and customer data of nearly half the US dealerships. Recently made a separate entity, they are poised to become as major force in changing the industry for consumers.

It Is the Whole Customer Experience

With little true differentiation in the mechanical engineering of vehicles anymore, what these companies get is that it is about the consumers experience throughout the entire lifecycle of ownership. The auto industry is in need of a massive overhaul of this experience. Ford is adding in the resources to get ahead of its competitors, Apple is using its thought leadership to move into a massive vertical ready for change. Startups have demonstrated time and time again over the last decade that consumers will change to a new supplier if the experience is designed to please the customer, and isn’t a product of corporate group think.

The Opportunities That Are Already Here

There is much discussion around the autonomous vehicle, and to get there still requires much work to be done on concepts like vehicle-to-vehicle and vehicle-to-infrastructure communications. The reality is that for the average driver these are still very far away.   There are, however, technologies and software in market now that have begun the renaissance.

The Out of Store Experience Driven by Mobile not Cars

While technology in the vehicle has dominated the discussion in the media, the spread of mobile devices will drive the first wave of fundamental changes to the consumer car ownership experience. The frictionless nature of well-designed apps, and convenience of e-commerce has changed consumer expectations.

In response, expect to see mobile-enabled services that allow a consumer to move from the dealership to their driveway. Push button apps will send a driver to pickup your car for service, to get a price on a trade in, or deliver your new car to wherever you are.   These apps will include mobile payments, features to check your license and insurance, and tools for managing the loaner car you’ll be driving.

EVs Are Interesting, But Democratization of the Interior is Bigger

Most pundits are focused on the operating system (OS) in the vehicle. Consumers are less wedded to the dogma of which OS is best, and more interested in which delivers the best experience.

The basic systems of a car could be accessed through an API (the way all other platforms interact with each other), then the selection of the hardware and apps for a vehicle can be owned by the consumer. Apple’s opportunity is an entire overhaul of the cockpit. Seat heaters, AC, cabin lights, radio, trunk button, are universal experiences and none of them touch the mission critical systems or depend on battery management.

 There is an App for That

Early experiences for the few consumers who have used an app in their car isn’t much different than what you can do on your smartphone already. That’s beginning to change. Apps designed for the car will not only be connected to the Internet, but also pull data from the vehicle enhance the entire car ownership experience. Consumers spend on average $10,000 a year on their cars and everything from insurance, service, financing, and convenience features all have opportunities to be vastly improved with data from the vehicle.

Consumers will control the gigabits of data that are produced by their car allowing them to select apps on both their mobile device and in the vehicle that change their entire relationship with their car. It can even improve the way manufacturers build cars by actually knowing from consumers how they use their cars.

Renaissance first, Enlightenment to follow

One way or another, the automotive industry is beginning to completely redefine the consumer experience: The way a driver interacts with cars, the way cars interact with each other, how a car buyer or owner interacts with the dealership and manufacturers, and the way the entire ownership experience is improved by data.   This renaissance will introduce all new market dynamics that shift how the players in the industry compete, and that competition is just truly beginning now. There will be more noise filling Twitter and Facebook feeds that tech companies are building EVs, and “marketing” announcements from OEMs that serve to keep industry pontificators busy. There are real changes though that are already here, and be it startup, auto company, or consumer electronics company, those that are responsible for the changes now to the consumer experience will own the long term conversation and be amongst the winners.

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