The Essential Minimum: Gaining a Deep Understanding for the Future of Vehicle Manufacturing

Here’s the essential minimum reading list we use at Divergent 3D for understanding automotive manufacturing economics and how it drives the environmental impact of transportation. Its scope ranges from automotive insider’s perspective on the centrality of production to the environmental impacts that follow shifts in government regulation.

1.      The Entrant’s Guide to the Automobile Industry by Horace Dediu – This article uses the number of automotive entrants to understand why production is the ‘predominant consideration for participants and that the entire industry revolves around this measure.’

2.      Confessions of a Capital Junkie by Sergio Marchionne – This article provides a broad overview from an insider of the economically disastrous state the automotive industry is in, e.g., capex + R&D investments are growing unsustainably, structurally low and volatile returns, not earning back the cost of capital over the previous cycle. It also shows where development costs are – tooling costs are 40% of a typical development project, and the overall strategy is to try and create more differentiated products while increasing the percentage of common parts. Even with this massive ongoing effort, automakers are still left with the destructive risk and capital intensity of volume and design dedicated tooling and facilities. That is why we invented the Divergent Adaptive Production System – to provide a 10x economic and environmental solution.

3.      Atomization – Auto Industry Apocalypse ahead – Vehicle Nameplates Soar as Sales Fall by George Peterson – Quantitative dissection of how a mature automotive industry’s profit is decaying through ‘atomization’ of the market, e.g., little growth in overall sales coupled with consumer demand for more nameplates results in lower sales per nameplate and an impending ‘marketing war.’

4.      Sustainable business models and the automotive industry by Peter Wells – This article succinctly describes the causal relationships between product technology, manufacturing processes, the structure of the industry, and business models employed.

5.      The all-steel body as a cornerstone to the foundations of the mass production car industry by Paul Nieuwenhuis and Peter Wells – This article provides a historical overview for why the invention of the steel body became the cornerstone of vehicle mass production, contrasting the prevailing narrative of the assembly line being the key enabler of mass production. It also describes how the steel body transformed the economic structure of the automotive industry.

6.      Electric switch poses an existential challenge to carmakers by FT – This article describes how automotive OEMs must choose between a ‘bespoke’ or ‘flexible’ architecture for electric vehicles, and how there are ‘enormous differences in profit’ at stake. ‘Some analysts estimate that as much as half of global carmakers’ R&D budgets are spent on platform development.’

7.      Pollution studies cast doubt on China’s electric-car policies by FT – Environmental lifecycle analyses generally show that vehicle electrification in coal-backed countries like China and India may not yield net reductions in pollution (both climate, and health impacts).

8.      Making the Modern World: Materials and Dematerialization by Vaclav Smil – This book describes the materials we use to meet the demands of the modern world. It’s an eye-opening exploration of what it would take to bring the global majority into a developed economy, and how technological progress on dematerialization (e.g. bringing material demand of a cellphone down) often leads to overall increases in material usage.

9.      Power Density Primer by Vaclav Smil –This primer discusses power density as a ‘key analytical variable’ to explore energy flows, both anthropogenic and natural. It is a quantitative take on the fundamentals of various energy flows.

10.   Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use by the National Research Council – This report evaluates ‘key external costs and benefits’ associated with energy which are not reflected by market prices. It was extremely influential in our thinking on the need for a full lifecycle measurement and reporting which includes auto and fuel manufacturing over a narrower view of emissions and externalities associated with just tailpipes – as it clearly demonstrates that auto and fuel manufacturing outstrip exhaust as contributors to environmental and human damage.