Sunday, 26 June 2016

Industry Practice – 'Value Stream' Exploitation – Conclusion

The tour of those functional areas recognised as the functional automotive corporate innards has been completed; that journey having 'come full circle' upon Sales and Services, the end-point to which the whole corporate enterprise is ultimately dedicated. Thereafter the process invisibly morphs into the early research aspect of Marketing, the essential start-point for any organisation.

A lengthy journey undertaken to give broad explanation of, and find new insight into, the vital question posed at the very beginning of this multi-part, extensive weblog topic...

….The critical need to better exploit the complete automotive 'value stream' to avoid the possibilities of either investment capital stagnancy or indeed possible destruction; very real possibilities the apparent 'new norm' of delayed and anaemic growth.

Since the financial crisis eight years ago we have witness what could be termed 'yoyo' economics affecting broad national and continental economies, capital markets and so corporate confidence swaying back and forth as the initial massive prime pumping of liquidity through economies and its partial success has given way to 'on-off' governmental fiscal policy and stimuli during the transition period away from 'melt-down' toward a new normality.

Growth has indeed emanated within the USA, the UK and latterly Europe – as seen by the surge in auto-sales from their 2009/10 lows (the US now effectively fully re-inflated at 17.5m units pa).

Yet as seen by US employment rate volatility, whilst wholesale money markets operate and the consumer credit taps have been re-opened (unfortunately far too quickly back to sub-prime regards car financing) the national economies of the western world are still not what might be described as healthy, indeed still fragile.

The intended trickle-down effect into the general economy has been delayed because of the interwoven complexity of the 'global macro' and the effective re-structuring complexity of a broad range of sectors and companies (ie examples in the UK ranging from the remnants of 'old industry' as with TATA steel Mill in Port Talbot, to the vicissitudes of the service sector as with Serco Group).

Thus the US and UK have enjoyed long continual regrowth in vehicle sales, but despite what the auto-sector sales numbers illustrate as a seemingly re-attained norm, it is unclear whether returned and returning vehicle demand is fully sustainable at previous levels going forward.

It has been recognised that every trick in the generic economics text book has been thrown at the problem to try and kick-start growth, the catalytic fiscal-monetary impetus prompting the re-emergence of previously lost or delayed consumer demand; especially seen in auto sales given the delay of the previous replacement cycle.

But such present glee might provide a partially misleading picture, noted by industry chiefs with near saturation of the USA car market. Having gained strong traction there over the past five years traction they and the investment community now look to a continued upturn in sales across Europe to off-set slowed North American sales, with thereafter Latin America and Asia.

Thus it is presumed that a over-lapping series of demand sine-waves will booth even-out and steadily grow global demand and so capacity into the future. With also an expectation that any endemically structural demand loss in Triad countries will obviously superseded by stronger new demand in EM regions (Jaguar - Land Rover's recent mention of its new Brazilian factory for 'Mercosaur' just one example).

Yet as experienced, the immense socio-economic impact of the Financial Crisis, the European Sovereign Debt Crisis and the scale of post-boom EM contraction has had an undoubted impact upon the consumer consciousness of the older and newer global middle-classes.

It is very possible that an altered and more cautious mind-set might have become engrained in individuals, families and communities globally. Not just from Birmingham, Midlands UK to Birmingham Alabama, USA, or more obviously from Athens, Greece to Athens, Georgia USA, or Paris France to Paris Texas, but also importantly from to Sao Paulo in Brazil to Sao Paulo Portugal. Those persons  now viewing  themselves as metaphorically burned by the turmoil of global economic events hitting hard locally,. And so more hesitant to return to the past spendthrift behaviour of the 'good old days'.

Any definitive return to any form of 'normal' would be illustrated by strengthening and sustainable industrial and services productivity providing the trickle-down value creation for their employees who in turn can draw upon credit sources for vehicle loans and agreements.

However, consumers themselves have also been caught in the deflationary spiral of recent years with wages/salaries necessarily kept on hold and the rise of short-term contracts to help stabilise many companies themselves.

Thus unlike the post-WW2 productivity boom which itself was stronger than the simultaneous expansion of lagging consumer credit, and unlike the 1990 – 2008 growth period based upon all oo easily available governmental and corporate credit, today's general environment is that of constrained governments, cautious corporations and inevitably altered consumer behaviour.

It looks likely that the under 35's have re-prioritised their far more limited discretionary budget spending toward basic necessities (rent, food, commuting) these painful costs off-set by more immediate gratification (home delivered food, restaurants, clothes, health and fitness, and IT hardware and software) coupled with 'scheduled escapes' (weekend trips, holidays and extended global travel). The relatively high-cost of a even a new average car simply seen as irrational, when other options exist, from 3 and 5 year old used cars to rental vehicles to local and app-based private-hire taxi cars to scooters, bicycles and public transport.

Instead new car sales supported by its original (post-WW2) demographic in the 35+ range, with family responsibilities toward not just children but also now longer lived parents and diverse activities, from taking off-spring to better but further afield schools to trips to a new eco-genre of garden centres.

Conversely, even with present EM contraction and retrenched consumerism, with vast 'under-served' populations, global capitalism and accordant car sales will rebound and indeed thrive in those already much developed EM countries and the so called 'Pioneer' nations. The emergent and newly emerging nations ready to enjoy in a very similar suburban manner the fruits of sustained economic expansion. (This more than ever thanks to the intra-nationalist trade and economic bloc pacts made between EM nations to obtain greater independence).

Though many are presently somewhat burdened by the US Dollar denominated national debt made stark during the contractionary period, it is beholden to for the success of global capitalism that those countries evolve their own national capabilities and so develop a sustainable trickle-down effect for general EM and indeed AM prosperity.

So yes global car-makers will expect changed homeland and international dynamics in overall sales splits and vehicle types, as the patterns of western and emergent countries' automotive use and ownership changes.

Those in the west that do purchase requiring 'value purchases' (as seen with popularity of Renault's Dacia Duster) and more 'affordable fashion' (as with PSA's DS brand). Whilst rising middling EM consumers span the full spectrum of purchase preferances, from 'value purchases' (akin to that which underpinned the old VW Gol) through to 'mainstream' (in the old Ford Focus/Modeo/Taurus manner) through to increased displays of status (the usual German badges having to fend-off both Japanese near luxury brands – Lexus, Acura, Infiniti – but also now Hyundai's official launch of the Genisis brand), as well as high performance niche sports cars.

And of course along with this fundamental re-orientation of sales TIV per brand type and vehicle type is the impact of those that best utilise increasingly cyber-moulded and cyber-accessed consumerism; ranging from the already entrenched new vehicle info-tainment reports by media outlets to possibilities such as a new-car discount programmes via a points accrual system through the likes of MPESA mobile payments.

As has become obvious, car-makers' business models marginally but obviously under attack from both sides of the sales and usage equation: with the likes of driving scale-based price discounting from dealers and manufacturers, and the likes of Uber, Lyft et al re-creating user's perceptions about the cost and availability of on-demand private-hire cars. Why buy a car when you have one notionally a finger-click away? Or if set on purchase, why go to a showroom at all?

Furthermore – as predicted by investment-auto-motives – we can see just how the Californian titans of IT and 'New-Tech' have created a new wave of Merger and Acquisition. Aided by massive liquidity 'war chests', closely aligned to local 'FinTech' - itself close to cyber-based business disruptors - aswell as Wall Street's enduring connections with established consumer durable companies, we see the effective re-building of manufacturing and services sectors. With new multi-dimensional (vertical, horizontal and diagonal) conglomerate entities being formed.

[NB the recent announcement by Elon Musk that he seeks to merge Tesla Motors with Tesla GigaFactory and SolarCity to create a closely integrated clean energy and mobility enterprise was itself 'scenario expected'. Though the $2.7bn new share offering in the Motors company to absorb the $3bn of SolarCity's debt is indeed grievous to in-situ Tesla investors. Furthermore converse to Musk's rhetoric about eco-tech government funding – as used to assist Motors – it looks likely that this too will be reined-in. Yet, though as questionable as the process is, this example of corporate integration is itself a prompt for similar re-calibration across cash-rich and progressive corporate America. The Microsoft – LinkedIn merger also illustrating the American desire for continued IT dominance and influence, with yet greater fusion of the perceptual and physical realms toward a new era of soft-power global market dominance in the technologies and solutions of tomorrow].

Thus inevitably into the mid and long-terms, the shape of the auto-producer's business model looks to be unlike the relative conformity and stability of the past century.

Thus, given the continued fragility of western and global economies and the changing usage patterns of cars and their ownership, and the 'effect of the net', those auto-makers that fail to undertake a surgical and exacting approach to value creation will inevitably lose control of their destinies to better attuned counterparts and new entities.

However, critically, as previously explored, that investigative approach to value creation must however not be simply biased toward the threat of the new in the external world, but as critically, be directed inward to better appreciate what true value may be extracted from within the organisation.

The descriptive functional tour sought to demonstrate why car-makers must learn to become their own internalised 'self-disruptors', by questioning every aspect of the internal value-stream within the both the individual company and in a unified manner across the established sector as a whole.

This requires objective reasoning to underpin rational 'visioneering'.

Whether this be about about:
1. Possible technology transfers (as seen with QR codes)
2. 'Deconstruction and reconstruction' of corporate methods and processes to better reach organisational goals.
3. The possibilities for new business incubation and spin-offs from such discoveries.
4. The co-creation of new entities with external agents of change.
[NB as regards the last point, not simply the obvious IT giants and up-coming highly publicised disruptive minnows – many of which are in reality simply seeking highly profitable exit strategies - but a deeper and better structured collaboration with domestic and international academia.
A critique of the UK's Automotive Catapult initiative useful herein as an guiding template]

Moreover, as engines of worldwide economies, it is arguably beholden that auto-makers – with suitable governmental assistance by way of tax breaks, development zones etc - become a fundamental part of the solution toward overcoming possible spectre of continued under-par growth.

This very necessary to combat and the now very engrained ongoing general malaise amongst many in a disaffected global populace.

As things stand, exempting the likes of India, China, Indonesia and Vietnam, the remainder of the world sits in what could be described as a 'yoyo' economic circumstances, whereby much governmental intervention is required to prompt powerful but short-lived capital statistical growth, this affect over-whelmed by constrictive deflationary forces. The ripple effect is that the real economy has not yet advanced beyond 'bottom-gear'.

Although previously corporate returns were much improved at the EPS level thanks to the reduction of inventories, reduced staffing levels, hard negotiating and critically the use of profits for share buy-backs (so again boosting the profit available to stock-holders), the reduced earnings power of corporate America since Q4 2015 demonstrates the need to obtain healthy macro-economic growth so as to not rely upon short-spell micro-economic ploys.

This never more required than today, with the tremors of Britain's referendum exit of the EU shaking the market fundamentals around the world of both the prime inhabitants of capital markets (insurance companies, pensions companies, asset managers) by virtue of the heavy selling of both banks and cyclical stocks experienced on 'Black Friday' (24.06.16).

Without such a 'path to growth'; companies and their stakeholders - from shareholders to employees to consumers - will continue to experience the present unsettling 'yoyo' effect of choppy growth.

The actual consequences of 'Brexit' are yet to be felt, but they will be invariably be negative to a lesser or greater extent for international relations and the Eurozone project; even if paradoxically because of the dramatically dropped value of Sterling, Britain could looks more attractive as trade partner to EU and worldwide businesses.

That helps UK based auto-makers – Jaguar Land Rover, Nissan, Toyota, Honda, Ford, GM-Vauxhall, Bentley and Rolls-Royce – who will gain from the immediate highly positive FX-effect, but only if we see sustainable growth across Europe (and elsewhere) which is now affected by the concern of EU-wide disintegration.

And it must be recognised that for most of those players (except JLR) the UK is but a single manufacturing location within their still shaken global empires.

Thus to counter any lost potential auto-makers must continue to reduce costs by driving conventional efficiency gains from functionally within their value-streams and should undertake 360 degree cost and productivity regimes from the ground-up – critically staff multi-tasking (from office cleaning to cross-learning of roles).

Just as standard practices should be reconsidered to maximise manpower utility for the corporate common good, so in such a new and open (almost 'campus') climate, exploration must be made as to how the corporate machine can better operate cross-functionally and externally to revolutionise the visible and invisible vagaries of engrained practice.

The impact of external disruptors has “set a cat amongst the pigeons” for auto-makers, and as the threat became ever more tangible, the pigeons have indeed set themselves on a path of new world reformation.

The institutional investors in GM, Ford, VW, BMW, Daimler, FCA, PSA, Renault-Nissan, Toyota, Honda and Hyundai should hereafter act a greater inquisitors – indeed in an pseudo activist manner – as to exactly what manifesto each has laid-out for continued semi-revolutionary change.

Those necessarily confidential manifestos will inevitably be only rough commercial maps given the reality of ever-changing circumstances, but more than typical corporate presentations of the specifically financial or specifically technical, should allow investors to better gauge whether corporate strategy goes beyond the usual automotive sector orthodoxies.

“Value Stream Exploitation” remains the prime goal, recognising that into tomorrow the river delta of the prime value stream will indeed be fed by a myriad of internal and external inter-connected tributaries.

Just as “the network-effect” has impacted upon the changing trends of consumerism (street food to clothes to automotive), so there will eventually be more proximity of cluster and real-time feed-back prompts into Marketing, Design, Engineering, Production, Distribution and Sales and Services.

The Intelligent Investor will seek out the Intelligent Automakers; those who deploy a marriage of ever more Artificial Intelligence allied with ever more Insightful Creative Intelligence. 

Friday, 10 June 2016

Industry Practice – 'Value Stream' Exploitation – Identifying New Possibilities (Part 5.7)

The last section of what has been a marathon tour of the automotive corporate entity and subject associated themes.

Sales and Service is what the general car-buying public recognise as the motor industry. Whilst better attuned to the 'behind the scenes' activities from Design to Distribution thanks to the plethora of information and infotainment, it is inevitably the specific personal interaction with a specific brand or retailer via the web, over the telephone and in the showroom, – whether good, bad or indifferent – that sets the picture for many people.

These being those prospective customers, retained customers or indeed lost customers, spanning the high expectations of the 'cash rich, time poor' wealthy business person, to the  lesser but more exacting requirements of a 'squeezed middle' parent, to tomorrow's aspirations of the school-child.

The retail arena has undergone a veritable revolution over the last twenty five years or so, with manufacturers and dealers having to massively “raised their game” given the ever greater influence of the broad retail sector across fashion and restaurants, the growth of leisure shopping experiences and of course the reach, immersion and enormous prompting affect of the internet.

Sales and Service(s) -


The ability to market and sell via a strong connection to the marketplace, with the right product and tailored salesmanship, has obviously been a critical factor for success.

As such the realm of the customer facing retailer has seen much change since the birth of the car.

Originally known as 'handling agents' or 'representatives' in the early 20th century, then 'sales agents' by mid-century , thanks to the post-war affluence, American influence, and great rise in unit volumes, by the 1960s in the US and 1980s in UK, what had been primarily a family business sector had become increasingly 'professionalised' by big business interests.

The 'Dealer' was born.

This name and correlated approach was popularised by the mutual interests of both automotive manufacturers and ever larger scale-seeking retail groups; with the specific aim of slowly reducing the role of the old family run agencies via merger and acquisition consolidation.

The name 'dealer' and 'dealership' knowingly applied to mimic the dynamics of professionalised casinos, specifically their high volume turnover effect of cards and playing (ie paying) customers.

To this end, what had once been a generally sedentary sales space comprised of long-lived client relationships and much non-committal “tyre-kicking” was transformed into a more 'modern' vibrant and fast-paced environment, as dealers deployed a myriad of old and new sales tactics to “get a deal done” and the “metal shifted”.

[NB Through character acting the late 1950s British comedy film 'The Fast Lady' wonderfully precurses and demonstrates the post-war era of change. The juxtaposition of conservatively minded buyer (played by the cautious Scot) being seduced by the charming yet hollow deal-focused salesman (played as the slippery 'chancer')].

A key aspect of that era of general economic expansion and so increased sales volumes, was the manufacturers' recognition of the need to gain closer proximity to the end-user.

So  as to:
1. improve the dealer - client relationship.
2. to critically cross-sell other products and services.
3. ensure retained revenue capture of post-sale mechanical servicing.
4. grow per unit margins via sale of accessories and vehicle financing.
5. create ongoing repeat business.
6. enjoy positive 'word of mouth'.

Thus, given the importance of scale and service proliferation to the bottom-line, a once highly diverse set of independent dealerships across the USA, UK, Europe and elsewhere around the world have been increasingly consolidated by the aligned and irrestible forces of manufacturer's and auto-group's commercial interests; all  over the past forty years.

With that consolidation trend well entrenched, it was further promoted by 'absorbant' advertising', initially via the power of the media: press, television, cinema and radio, and over the last twenty-five years the psychological reach of the internet.

Furthermore, manufacturers and dealer groups have followed in the footsteps of much evolved shopping mall retailing which saw ever more sophisticated sales environments and sales approaches from the 1990s onwards.

Today, both sides – manufacturer and retail group - seeking to gain 'share of mind' via ever more complex websites and portal 'apps' as marketing and sales channels, assisting in brand, model and prospecting 'immersion'; so helping to grow increased customer 'foot-fall' in dealerships.

The ideal to seemlessly blend the cyber and physical environments so as to absorb the prospective customer.

Hence dealerships themselves much changed again from what was a 'high pressure' environment toward a far more friendly, apparent trust-based, atmosphere. Instead purveying a myriad of less immediately recognisable 'low pressure' tactics, wherein retail spaces have become far more welcoming (especially for females) and far more interactive.

Today the prospective customer is seemingly left to peruse but is in fact taken on a subtle journey of immersion: wherein the in-situ showroom vehicles are used as a light conversational pieces and the basis to draw 'the prospect' onto a pyschological 'sales travellator'. This achieved by presenting the world of possibility via involving vehicle configurability screens, so as to explore the myriad of new model options or inventory possibilities, which when whittelled down to exactitude or close approximation, then becomes a far more serious purchase discussion, leading to the all important purchase transaction.

Whereas once the process was all too obviously uncomfortable for the prospective customer, with him or her having to generate barriers within a high pressure atmosphere – unfortunately still the case in many 'back-street' used car dealers – over the last few decades the leading brand retailers recognised the commercial sense behind creating a positive comfortable experience. So providing the ability to guide the customer toward a 'win-win' end-point for both sides of the equation.

However, it is also noted now that with this approach firmly entrenched, the revolution that is the internet has once again set change in motion.  New business model thinking by 'sector disruptive' new entrants; these often with no or little sector experience, instead large financial backing and the desire to effectively 'cut and shut' the historical template of selling vehicles, and radically undermine the progress made in traditional showroom retail. 

This is exemplified in the Services section to follow later.


As recognised this term was born when, thanks to likes of Ford, Peugeot and Austin, motoring mobility underwent economic transformation from an enclave of the elite toward mass 'democratisation'.

Previously when the motor-car had been overtly niche, expensive and so upper-class, the technical maintenance had been undertaken by a household's chauffer, himself also expected to be a proficient mechanic obtaining petroleum from pharmacy shops, oils from a hardware shops and parts either from the 'handling agent' the automobile had been purchased from or a suitable local blacksmiths turned light engineering shop.

[NB it should be noted here that like the bicycle previously, the automobile was used quite literally as a vehicle of self-assertion by the emergent women's movement; especially so the Suffragettes. Some of the fortunate few who had been bought cars from inheritance monies or trust funds or who had been given cars by parents or husbands, learned about basic mechanics so as to convey the idea of self-reliance to broader society and visibly propel women's rights].

The availability of far cheaper “people's cars” with the 'Model T', 'Bebe' and 'Seven' altered the previously fragmented, cumbersome and problematic maintenance process.  A new breed of automobile agents sought to not only sell increasing volumes of small, efficient vehicles, but critically seek to provide after-market services regards the care, maintenance and repair of those vehicles.

This even went so far as to offer 're-bodying' services wherein a customer might choose to change the car-body type given his/her altered needs or indeed whims.

This service especially pertinent when a vehicle had been in an accident, sold-off cheaply (often to the agent) and the same chassis altered and re-bodied in a different style, often older vehicles re-bodied as trucks and taxis, so creating what were effectively secondary sales routes for the sales-garage.

The massively altered after-sales approach was effectively undertaken hand in hand with the new set of large manufacturers, assisted by their own technical standardisation procedures allowing for reduced time, part costs and so service-repair costs.

It was recognised that a thriving business model could be created from the unfamiliar new customer's need for such services so as to keep the car in good mechanical and cosmetic condition, and the standardisation of parts ensured that servicing, reconditioning and repair tasks could be done efficiently and effectively, with a sizeable profit margin available given the cost and pricing 'spread' between increasingly cheaper parts and the technical ignorance of the customer.

'Servicing' would go on to grow a strong relationship between sales-garage and buyer, aswell also critically creating a buoyant used-vehicle market wherein pre-owned cars would be offered in good mechanical and cosmetic condition, thereby giving peace of mind to those on even tighter personal budgets.

Whilst still in its infancy compared to later decades, the growth of 1930s cinema and associated consumerism when supported by the exponentially grown 'After-Market' activities would see customers willingly trade-in and change their vehicle for a newer more fashionable models.

As vehicles became ever more technically specialised and ever more aesthetically sophisticated so some of the activities that were once undertaken by the local sales-garage were out-sourced to dedicated operators.

So 'behind the scenes' to the customer a host of specialisms expanded; from tyre-fitters to 'body-shops' to re-conditioning professionals in areas as varied as radiators, generators/alternators and later automatic gearboxes.

This then created a new second tier of after-market operators. And as vehicle technologies became increasingly complex mechanically and electro-mechanically so behind that second tier yet another tier of equipment and hand tool makers appeared to provide for aspects such as necessary technical tolerances and pre-release (part) testing.

Over the course of the twentieth century it was the evolved complexity of the vehicle – to offer performance, comfort and convenience – that in turn grew a plethora of commercial requirements and opportunities back-stage of the After-Market arena.

Yet, this previous explosion of trade-services also appears to have dwindled over the last two decades or so, as vehicle manufacturers and aligned large dealer groups seek to form greater control and so revenues gain from the after-market sphere.

This also done to ensure that the vehicles in circulation adhere to exacting standards so as to uphold any one brand's reputation.

Since the problem with second and third tier trade-services providers is that they themselves are caught between ever greater technical replacement cycle needs and the cashflow problems of being a small operator, most obvious during economic downturns and so loss of both compliance and capabilities.

Thus the little recognised but once prolific trade-services sector has diminished as a world that once reared true mechanics; instead mere certified 'fitters' whose role is simply that of component and sub-system replacement; this changed role undertaken in a rote-learned manner using costly diagnostic equipment or workshop manuals.

This then the result of rationalisation so as to assist the large dealership – conscious of overhead costs - to better manage the pay-scale of the said unskilled or semi-skilled 'fitter'.

Very necessary in an era when dealership margins have themselves been squeezed by necessary workshop and showroom investments to maintain capabilities and appeal, and ever more voracious competition because of the pricing comparison power of the internet.

So inevitably, the lesser intricate knowledge required by a 'fitter' - vs the once broad knowledgeable of old fashioned engineering mechanic - and the greater the availability of such labour, the less his or her actual value to the dealer and within his/her own labour market.

Yet whilst many in the profession may bemoan this fact, it is also endemic of the manner in which modern society has become less product orientated and more service biased.

That service aspect itself necessarily 'packaged and commoditised' to ensure organisational profitability and necessary reinvestment.


The auto industry itself has long recognised the spectrum of very disparate lifestyle related self-drive transport needs of people. Whether that be as the weekday commuter vs weekend leisure activities, or indeed for different life-stages.

The idea of the multi-use or reconfigurable car has been with us for almost a century.

Initially within the society circles of the 1910s and 1920s elite, the original  wooden-panelled 'station wagon' could be reconfigured as the 'shooting brake'. Thereafter models such as the American 1950s Nash Ambassador offered fold-flat seats to create a large in-car bed for interstate travelling salesmen, the mid-late 1940s Jeep Station Wagon (steel bodied) and off-shoot Jeepster the first true socially acceptable on-road/off-road/beach-side SUVs (Sports Utility Vehicles), and of course a plethora of offerings since, from 1990s Japanese 'Camping Cars' such as the much accessorised Honda CR-V to the 2000s  invention of the large hi-luxury pick-up truck with the Lincoln Blackwood.

At times the auto-industry has sought to create visions of a possible future which would directly cater for the multi-fold needs of the 'mood and mode' customer.

In 1995 Mercedes showcased its original (and very different) Vario concept. Although that name was later applied to a passenger van variant of the Vito, the concept then was to have a medium sized vehicle (ostensibly a C-class) capable of swapping body styles within 15 minutes or so.

As such the customer, whilst owning the majority of the vehicle (consisting of chassis, engine, drivetrain, lower body, driving controls etc) would be able to rent specific body-types responding to his/her changing needs. The idea was to 'simply' drive into the local M-B facility – an owned dealer or officially sub-contracted operator – enjoy a cup of coffee whilst perusing M-B lifestyle television channel – and within 15 minutes drive out again with effectively a different car. The four body types offered were: sedan, estate/wagon, convertible and pick-up; so able to cater for the plethera of a singleton's, couple's or family's needs.

[NB this was perhaps the first notion of using 'CFRP' (carbon-fibre re-inforced plastic) for the changeable rear units; CFRP coming to production fruition en mass twenty years later with the BMW i3].

In reaction to the Kyoto Summit, by the mid 1990s Ford was ideologically exploring a project code-named 'Indego'. Intended to be much assisted and executed with its then ownership interest in the Norwegian electric car company TH!NK.

The far-horizon logic was to combine its EV interests with that of its stake in the global rental firm Hertz. So then able to offer, on a flexible purchase basis, an extended product range including from electric city-buggies or “NEVs” (neighbourhood electric vehicles) to full-size F-series pick-up trucks.

The parallel was that of the early growth in mobile telecoms payment models. Ultimately, Ford sold its interest in both TH!NK and Hertz, but like other producers, has kept a watching brief over evolving social trends.

Many of those broad-brush mega social trends have indeed occurred since the mid 1990s, with changed western demographic profiles of buyer types (expected) and the growth of EM Mega Cities and so populational personal transport needs (expected). But (unexpectedly) has been the critical watershed consequences of the 2008 financial crisis, changing the purchase patterns of the masses and critically massively altering the attitudes and behaviour patterns of tomorrow's European, American customers, this sociological effect (and a much wider changed social construct) replicating those seen in socio-economically stagnant Japan since the mid 1990s.

Unlike the earlier Japanese experience, the latter Western stagnation thus far has been complimented by the power of the internet and its ability to propel new business models which match the needs of a realistically constrained economy, necessitating the emergence of the so called 'sharing economy' and so aligned cyber based services and products.

Acting in that sector-disruptive manner has seen the ability of those new entrants to initiate and grow all new - yet socially adept, and so powerful – brands on-line as new retailing names. This now adding serious competitive pressures to the activities of the Volume Manufacturer and Independent Group Retailer, who themselves are taking stands to either resist or conjoin the new entrants.

Such newer dynamics of the dealership sector and its changed sales environment was described in detail in a previous web-log which encompassed how the much changed world of physical sales has itself been much impacted by the emergence of 'virtual brokering'. This format being propelled by convenience for the customer over his or her smart-phone, tablet or laptop, and use of snappy or simple business names to make an immediate pyschological connection to Generation Y and the Millenial Set.

The intentional overlap of 'old' versus 'new' commercial models – the purely physical showroom, embued with metaphysical website, itself now only one of various car buying portals – has led to creation of a 'market funnel' effect which has expanded the sales dimension and from which virtual brokers hopes to gain.

As with most 'disruptive entrants' by posing a threat to mainstream manufacturers and dealers, these new 'cyber-preneurs' hope to themselves drive their new business model success by co-opting the old guard incumbents; especially regards reduced vehicle pricing and increased vehicle type and usage possibilities. 

As part of the digital revolution, having recognised the increasingly, indeed hyper-competitive, environment and the subtly changed social behaviours of both vehicle owners and non-vehicle owners, the established auto-players have sought to fight back against the rising tide of alternative mobility possibilities that have emerged.

Each day sees a new newspaper article about the old guard either mimicking the actions of the new entrants or getting into bed with them; typically doing so in a small way so as to at worst better understand the threat and to at best better inter-fit the new-entrant into its own commercial model and ambitions so as to enjoy a new commercial growth template.

Thus amongst others, we see GM buying into Lyft, whilst VW and Toyota taking stakes in Uber.

[NB Within the mobility space itself, even London's Black Taxi trade now aligned to Gett, the interesting fact being that many of London's notionally official “black-cabs” are no longer the iconic FX/TX series, but a host of MPV vehicles, Ford's Galaxy or the Mercedes Vario typical. This illustrating the manner in which a cyber-based service operator seeks to create a shared interest with a VM by opening new commercial possibilities. This leading to the greater possibility that the iconic London Cab will indeed be superseded by a supposed spiritual successor, with elements of similar styling yet actually based upon a standardised MPV or Van ].

Prompted by Ford's and others' previous explorations, and critically by the re-emergence of bicycle rental schemes in France (conventional and electric), PSA likewise later created a multi-use scheme to befit customer needs. Given Peugeot's broad span of vehicle offerings, it obviously preferred the idea of providing a service that would allow the customer to pick and choose from its range of bicycles, scooters, cars and vans.

Instead of offering an overly complex hi-concept idea (such as changeable bodies) it simply sought to adopt and adapt the conventional car rental scheme, by exploiting its full range of vehicles The scheme named 'Mu' has been rolled out across France, Germany, the UK and elsewhere and seek to not only attract new part-time users to PSA, so allowing them familiarise themselves with the brand, but add another new service offering to present owners.

[NB The business model of individually moving all these vehicles to requisite locations (dealer or otherwise) is obviously costly to PSA, no doubt in part to provide alternative work to ex-admin or ex-factory staff, very much on the social agenda given France's present need to reform national labour structures].

This cost partially off-set by the ability of customers to include the rental of necessary additional items; from info-tainment devices to roof-racks, roof-boxes, bicycles, bicycle racks, dog-guards etc.

Thus whilst the fortunate yesteryear Japanese 'Salarymen' of the mid 1990s could buy and totally “fit-out” their Toyota, Honda or Nissan for leisure pursuits, the European 'Freelancer' of tomorrow will be increasingly likely to undertake his everyday and leisure mobility requirements on a 'pay as you go' or 'contract-hire' basis.

This new era of course initiated by the consumer patterns laid out by the telecoms sector; which itself has already massively influenced the feature content of vehicles and so cyber-space connections and increasing introduction of augmented reality (eg 'HUD') so creating a widening virtual demand loop for personal mobility options.

After a century of 'Sales and Service(s)',  the former – in terms of innate financial value – has already been surpassed by the latter thanks to manufacturers becoming wholesale buyers of credit from the financial markets, and so becoming credit providers.  

Moreover, the newer world of finance agreements and cyber-services will further diminish the historical idea of 'Point of Sale', with Usage rather than Product per se set to become centre-stage in the following decades.

Twenty-five years after Ford's tentative beginnings with the future-planning of 'Indego', a combination of Peugeot's 'Mu' with a raft of vehicles available, and the crop of VM buy-ins into new App based hailing and ride-sharing mobility companies, at last demonstrates the world of tomorrow.

Even if given the comparatively enormous size and value of today's conventional auto-market means that this trend is presently only a glimmer on the near horizon.

In the meantime however, beyond the Sales and Services scenario planning and tentative experimentation, the prime ambition of automakers is to expand the profit margins of the product, retail financing, bundled packages of insurance / road tax / fuel, options and accessories...all the while critically needing to limit the value destructive uses of historically engrained sales incentives.

Whilst also seeking to substitute any sales slowdown, because of a less auto-minded younger demographic, with an increase in sales to the app-related owner-driver private hire trends.

Even though it is largely business as usual in the meantime, value-addition will only come from firstly stemming old bad habits and propelling good new habits.