Disrupting the Auto Industry

A startling article on the front page of Bloomberg.com  by writer Julie Verhage forecasts the future of the automobile industry. Verhage illustrates her article with a chart that breaks the auto industry into four quadrants and as one moves through the chart, it is possible to see the auto industry’s past, present, near future, and distant future. Importantly, Morgan Stanley analyst Adam Jonas  says that the chart “will be the focus of the rest of my career” and he is correct but not in the way that most people would think.
Jones astutely has picked up on something that others who follow the auto industry may have overlooked:  the real threat posed by companies like Tesla and, to a different degree, Uber, is not so much the technology but the business model. Tesla is a car company developed around a modern, Silicon Valley style business model: agile, innovative, adventurous, software driven, totally comfortable with rapid iteration and cross-technology/industry idea development.
The automobile industry today is anything but that model; it is inward focused, silo managed, slow to change, low tech, highly unionized, non-flexible, and far too heavily invested in an outdated distribution and production model that suffers the “union penalty” in terms of cost and performance.
Put Jonas on your “keep up with” list.
The revolution is now very, very public.

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