We may be seeing the “leading edges” of the passing of the modern Automobile business model.
A short trip down History Lane to put this all into perspective, starting with two snips from Wikipedia to set the course. First, the historical origins:
“Nicolas-Joseph Cugnot is widely credited with building the first full-scale, self-propelled mechanical vehicle or car in about 1769; he created a steam-powered tricycle. He also constructed two steam tractors for the French Army, one of which is preserved in the French National Conservatory of Arts and Crafts. His inventions were, however, handicapped by problems with water supply and maintaining steam pressure. In 1801, Richard Trevithick built and demonstrated his Puffing Devil road locomotive, believed by many to be the first demonstration of a steam-powered road vehicle. It was unable to maintain sufficient steam pressure for long periods, and was of little practical use.”
If you’re new to UrbanSurvival, welcome to the place which holds to two major premises. The first is that the USA is the most thoroughly monetized economy ever to pillage the Earth.
The second premise is Everything is a Business Model.
Helping us along are two concepts from business management and software engineering. The former is the Product Development Life Cycle while the latter is the System Development Life Cycle.
Product development is easy. Just go Wiki these four parts:
6 Phases of product lifecycle and corresponding technologies
- 6.1 Phase 1: Conceive
- 6.2 Phase 2: Design
- 6.3 Phase 3: Realize
- 6.4 Phase 4: Service
Now let’s perform this morning’s shotgun wedding of concepts, shall we?
This was the period from the invention of cars until they were readily enough built that serious manufacturing came into view as a distant objective.
This is where fine-tuning of designs took place. The original automobile concepts were largely evolved from the [draft animal] cart, wagon, and carriage industry.
Meet the Model T and so forth. The initial (early adopter) peak of multiple technologies including cars, radio, and telephones, along with urban electricity came along about the time the 1929 Roaring Twenties Stock Market Bubble was being reached.
Next time you’re watching PBS and hear about an Alfred Sloan Foundation, here’s a little Wiki snip explaining why: “Alfred P. Sloan extended the idea of yearly fashion-change from clothing to automobiles in the 1920s. His company, General Motors, was the first to introduce planned obsolescence (in cars) by means of making the production date, and thus the car’s newness or lack of it, visually discernible..”
In customary Product Development Life Cycle work, we would have excellent service, mainly, by this point in the evolution of automobiles.
To be sure, some outfits like ours Lexus dealer up in Fort Worth have totally nailed that…even though our old Lexus is 10-years old. It may run longer than we do.
But the other aspect to think about is commoditization. That’s where the auto industry has been. And from 1981, or so, the industry has been holding prices at reasonably profitable levels by taking advantage of generally falling interest rates.
I appreciate that understanding where America is on the interest rate front can be somewhat confusing. Fortunately, the Federal Reserve keeps track of such things in their Consumer Debt (they call it “Consumer Credit” because banks unpaid are creditors – but it’s really a DEBT report):
The data seems to suggest the best time to put a lot on a credit card would have been 3-years ago. And the best time to have purchased a car looking at rates alone would have been Q1 2016. More such jovial details over here.
The question to ask now is “What is the NEXTCAR going to look like?”
A lot of that will depend on how the pending (resumption of) war with North Korea goes. If it goes cleanly (and there’s no counterstrike on US homeland soil) then we might see an orderly replacement regimen as self-driven cars are replaced with autonomous vehicles.
One school of thought argues that for the sake of environment, the NEXTCAR everyone buys should be all – electric. But another says no, hybrids are the only thing that make sense.
In the event of a dirty (read: nuclear) resumption of the Korean War (*which was only fought to an armistice), then a number of NEWCAR concepts could come off the table.
For example, the idea of a high-tech, electronics-laden smart car, will make less sense because manufacturing and the availability of cheap parts from Asia will evaporate overnight.
It’s not beyond thinking, for example, that North Korea could hit US West Coast container ports. Bye-bye electronic subassemblies…the dark side of globalism and the folly of dispersing domestic manufacturing to least cost offshore locales will come into stark focus.
What’s worse is that should North Korea take the battle to the American heartland, the whole Mississippi River infrastructure that the whole country depends on for food and energy distribution, becomes a risky proposition.
In that case, you might have more ‘location independence’ by stocking up on cordwood and building a “Producer Gas-driven automobile.”
What falls out of all this is a “topology” of what the future of automobiles might look like.
Since we showed above how new car interest rates are beginning to climb, at least one factor in the declining auto sales picture should be clear to you now.
An article in Fortune Wednesday gets into replacement rates – which is yet another angle of the automaker’s pickle. Obviously, once the automakers started making a better car, people began to enjoy their high reliability vehicles. As the Fortune article notes, braking is never fun.
A few of our friends are buying high-end hybrids with soup-to-nuts electronics. Automatic-spacing and braking on cruise control, lane change alerts with assistive correction, auto-parking, and 360-degree cameras.
It’s cool, I have to admit, but there’s a whole new business model coming into view: The Uber and Lyft models. Cars have become bloody-awful expensive. And just like jet airlines don’t make money sitting on the ground, neither to cars amortize their high capital outlay when they’re parked in the garage.
We suspect that high utilization will be “the future” in cars. Sure, some of the high-end “grays” with a few saved FeRN’s to spend before check-out time will buy them and pass them on. But with high-dollar battery pack replacements due in 6-8 years, the monthly nut on driving the high-end hybrid is pretty steep on a per-mile basis.
Increasingly, therefore, and event more so if the NK’s go nuts off the aggressive end of the pool, we expect that shared-use business models will be around for a long while. Nothing would surprise us more than Uber and Lyft becoming the new norm for the middle class, not just the student-loan-hounded Nuevo Broke who are testing the corporate-government alliance’s “Rent Your Life” business model.
The way this works is simple: Load up on student loans, get the best job you can, then trust government to fill the gaps. Ignore the fact that such thinking failed in the Soviet Union…it’s makes a sweet song to the mass of youth today, most of whom haven’t taken a management accounting class in their life.
The NEWCAR is coming. But despite all the hype, pardon me if we continue to sit on the wallet a year or two longer. We don’t want to be the last sucker to buy a current-design car coming off an assembly line featuring parts that won’t be replaceable shortly thereafter. Few companies seem to get customer service spectacularly right…especially if their product has four wheels and air conditioning.
An Amazing Customer Service Story
This is not to say all corporations are bad.
In fact, I had a customer service experience this week that completely blew my socks off.
I might have mentioned that I bought a Schwinn 840 Treadmill back in 2011 from Amazon. It came with a 10-year guarantee on the motor.
Fast forward to Monday when visiting daughter Denise took a break from her “hot Yoga” and ran on the machine – full tilt (10-degrees) and full speed (10 MPH).
The machine failed 8-minutes and 13-seconds into the run.
Turns out that Nautilus has acquired Schwinn exercise products. So when I called, we went through a well-structured trouble-shootizing (sic, that’s a Googlism, lol) process. It was either the motor or the controller board.
So I whipped out the credit card and bought the controller board ($177 and change). It should get here next week.
The motor, though, is a different story. Back-order from hell.
Now here’s the AMAZING part: My customer service rep called Tuesday and said “You know, Mr. Ure, since we don’t know when your motor will be in – it could be several months…could we just send you a new treadmill?”
Holy cow! No shipping….no strings, nothing.
Oh…and being a gambler I asked “What if the new controller board fixes the old machine?”
“I’m sorry, I guess you’ll have two treadmills, then…”
OMG…what a treat.
This is how Nautilus (which holds Schwinn, Bowflex, and other brands) is going about building customers for life.
They don’t know I write – they know nothing about me except where we live and I have a credit card and bought what I thought would be a lifetime machine.
Shockingly, in today’s age, I actually may have done that very thing.
Hope for America? Yeah…sometimes I still think so.
Urban Department of Reminders
On with George Noory at www.coasttocoastam.com tonight at midnight central, 10 PM out West and 1 AM in the East.
And yes, look what appears on Amazon for Kindle today!
Write when you get rich,