The disruption of transportation - Why the Nokia story was just a ripple

When cars first entered the market in the early 20th century, it meant the end for horse drawn carriages. The famous investor Warren Buffett once stated how hard it could be to pick the winners from the advent of a new technology and how much easier it usually it is to spot the losers. This was especially true looking at the birth of the automotive industry. At one stage, there were more than 2,000 separate automobile manufactures in the US. Even if you had bought shares in all of them in the early days, you would have lost money in the end.

The best investment strategy would have been to go short horses instead. In 1900 there were as many as 20 million horses in the USA alone and today there are only about 4 million. 

With electric cars as well as autonomous vehicles (in all kinds) entering the market there is a storm a brewing within the automotive industry. The mobile phone industry went through a tremendous shift in technology when smart phones entered the market. In just a few years’ time, a company like Nokia went from the star of the industry into a complete crisis mode. The same thing could just as well happen to the auto industry. In 2008 Nokia had a 40% market share in terms of sold mobile phones. Today they are with Microsoft, and the Windows Phone is below 1% in market share. It’s not just the automotive industry that is being challenged now. Just think about the shift for the retail industry. Online retailing is gaining market share every day, week and month, with losers being the physical store owners with less and less people coming through the door. Risk really happens fast.

The global automotive industry was worth more than 1.7 Trillion US dollars in 2015. That is equal to the GDP of Canada. Who will be the winners and who will become the losers in this major change that will turn the automotive industry upside down during the next decade?

According to a report from RethinkX written by James Arbib and Tony Seba, the automotive sector in the US will undergo a significant change in the coming decade. Electric Vehicle startups like Tesla, BYD, Lucid Motors, Zoox, Faraday & Future and others as well as different flying versions of cars like Kitty Hawk or the Larry Page project of Zee Aero are popping up everywhere disrupting the industry. One key take away for all the traditional car makers out there should be that competition will get worse. Even today the competition is fierce but with cars moving away from a consumer product and transforming into a consumer service instead (with TaaS, transportation as a service), a whole new playfield opens. This is just not about electric engines or autonomous vehicles technology. The most important change will be the behavioral change by the consumer in how cars will be consumed in lack of a better word. According to the RethinkX report the transformation of the industry will have the following impact in US alone:

• Savings on transportation costs will result in a permanent boost in annual disposable income for U.S. households, totaling $1 trillion by 2030
• Productivity gains because of reclaimed driving hours will boost GDP by an additional $1 trillion
• As fewer cars travel more miles, the number of passenger vehicles on American roads will drop from 247 million to 44 million
• The geopolitical importance of oil will vastly diminish
• This will have a catastrophic effect on the oil industry through price collapse (an equilibrium cost of $25.4 per barrel)

With this amount of change in just this short time frame there will of course be significant impact to the whole industry. Car manufacturers, automotive suppliers, insurance companies, dealer networks, service providers and others. A whole new industry will come into play and cars will not be seen nor used in the same way as today.

Today you ask your friends what brand of car they are driving, tomorrow you will ask what transportation company they are using.

Just the same way as we used to buy CD records and instead went over to streaming music we will start buying the transportation service when you need it.

What are they key takeaways from a report like this for me? Well, first, it means a lot of uncertainty. What will happen? How fast and what will the change mean to my company? (pretending I am a OEM or an automotive supplier) One thing for sure is, product life cycles most likely will be shorter. Since change is happening so fast and with such a deep impact once it strikes, no company wants to heavily invest in product models aimed to last for too long time. Agility and speed are two important factors here. Small product series, short time to market and constant feedback loop to not fall behind competition. In this environment, a system like FlexQube will be the solution for intralogistics needs. The innovative design process makes it possible to rapidly create the needed intralogistics applications for material handling. With a built-in modularity, the designs will be able to adapt to the development in material flow system including robots and other autonomous vehicles. With our new electric and autonomous eQart? we will be able to let our customers transform their material handling flow as their operations change. No other system or intralogistic product in the market have the same versatility. FlexQube is all about change and we look forward to be part of this transformation.

Anders Fogelberg

CEO, the FlexQube Group

[email protected]