Bold innovations in motor vehicles
Dec 03 2013
In his own words, “I always felt that Nano should have been marketed towards the owner of a two-wheeler because it was conceived giving the people who rode on two-wheels with the whole family an all-weather safe form of affordable transportation, not the cheapest.” According to press reports, a new and improved version of Nano will soon be launched in new geographies.
Nano pioneered the thinking of an affordable, personal vehicle and engineers went to the drawing board with a “price-minus” mind set rather than the conventional “cost-plus” approach. It will continue to innovate around the “value for money” approach and all global automakers have adopted this mindset for price-sensitive customers in emerging markets.
Buyers of cars are increasingly worried about our degrading environment and carbon emissions. The younger generation is particularly unwilling to be active contributors to global warming. The automakers first responded with hybrid vehicles which use, usually, two sources of energy to move the vehicle. It uses the traditional internal combustion engine fuelled by some form of hydro-carbon and one or more electric motors. Toyota launched its Prius hybrid car followed by Camry-hybrid and Avalon hybrid. BMW, Mercedes, Volvo, Ford, Honda, Volkswagen, Porsche, GM and even Ferrari have launched hybrid cars. If the tax regime of a country does not provide breaks, hybrid cars are usually more expensive and one needs to run the car for at least five years to see some savings in operating costs.
The bold innovator in this space is Tesla Motors. It is named after Nikola Tesla, a Serbian-American inventor, whose 1882 electric motor design inspired the first Tesla car. The vision of Tesla, according to Elon Musk, chairman, product architect and CEO of Tesla is “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.”
The strategy of Tesla Motors is innovative. It not only makes cars but also electrical powertrain components and battery packs. Thus, while it competes with vehicle manufacturers, it also creates unique alliances with them. For instance, it has created separate alliances with Daimler and Toyota. One of the breakthrough innovations of Tesla is in its design. It enables fast battery swapping. While a fuel-powered car takes typically four to five minutes to fill up in a petrol pump, the Tesla car takes 90 seconds to do battery swapping.
Tesla’s business model, at present, is dependent on four unique features. First, Tesla Motors is building a network of 480-volt fast charging supercharger stations. As of June this year, Tesla announced that all existing stations in the supercharger network and all new stations would become Tesla stations. All of them will have facilities to support under-two-minute battery pack swaps for all future Tesla models. Secondly, as of August, Tesla operates over 50 company-owned showrooms worldwide. It also sells cars online.
Its showrooms are similar to retailers such as Apple and Starbucks. Tesla has hired former Apple executive George Blankenship as the vice president of design and store development to build Tesla’s retail strategy and network of retail locations worldwide. This is very different from how American companies use dealer networks to sell cars. Third, Tesla is a listed company and has raised funds from the public. For instance, it received a $365 million low interest rate federal loan. It also receives federal tax credits. Fourth, it has a unique collaboration with Panasonic to produce the advanced battery cells for its electric vehicles. Naoto Noguchi, president of Panasonic’s Energy has said the Japanese firm’s cells will be used for Tesla’s “current and next-generation EV battery pack.” The partnership was part of Panasonic’s $1 billion investment over three years in facilities for lithium-ion cell research, development and production. However, Panasonic will not be the sole supplier of battery cells to Tesla.
Another bold innovation in motor vehicles is in the area of navigation and driving. Initially, it was the use of global positioning systems (GPS). A GPS facility can provide information about the car’s position and provide the best route to a desired destination by accessing a built-in digital map. It guides the driver every step of the way through voice-activated directions. Google has taken the concept further by combining GPS, sensor technology, analytics and computing. It has developed a software called Google Chauffeur with a vision to create driverless cars. The system drives at the speed limit which is stored on its maps and maintains its distance from other vehicles using its system of sensors. It, however, uses very expensive equipment like laser radar systems that is not yet commercially viable.
All the three bold innovations described above are in the sphere of producing more affordable, environment-friendly and safe, driverless vehicles of personal transport. In the future, a mind shift is necessary in urban planning. Instead of having all the focus on personal modes of transportation, it will be important to divert research funds and tax incentives to safe, efficient, environment-friendly and inexpensive forms of public transportation. Enrique Penalosa, the former mayor of the city of Bogota in Colombia hit the bull’s eye when he said, “A developed country is not a place where the poor have cars. It’s where the rich use public transport.”
(The writer is managing director of Deloitte Consulting, India. These are his personal views)