You are participating in a brand workshop. The question - "How success looks like in the future?" comes. There is a pause. And you start to hear Apple, Tesla, Apple, Tesla. These are two brands that I keep hearing. Don't know how this sounds to you - Apple of the white goods sector or any other category for that matter. Becoming a reference brand is an ultimate recognition. Apple indeed is one of the best brands in the world and the most successful company. Yet, I don't want to write about Apple or the Appleness. I want to share some thoughts on Teslaness of other automotive brands.
As good as Tesla
Almost every automotive brand in the world has built an electric vehicle. It seems that the sole purpose of making an electric vehicle is to let other people know it can be as good as Tesla. Suppose you pass the test - good. If headlines in media appear saying that Tesla got a new competition - even better!
Venturing into EV (Electric Vehicle) territory is always pursued with a completely new model, rarely with an existing one. I haven't heard about the electric Porsche 911. Porsche 911 will never be electric - if we were to belive their CEO. I don't. But, I have heard about Porsche Taycan - a fantastic electric vehicle. Without a doubt Porsche and all other automotive brands can make good EVs. This makes me wonder why it is so that it is always a completely new model. As if everyone thinks that EVs are for different people. Or, if we screw-up, we will not damage the reputation of our current models. Or even worse, what if we cannibalize the existing volume.
Sitting in two chairs - procrastination
Whether we like it or not - the pace of electrification is going faster than expected. That's a fact. We have to thank Tesla for it. Yet, many manufacturers seem to be tiptoeing in the EV segment. There are many outlooks out there, ranging from 30% to 100%. For the sake of argument, by 2030, let's say that 50% of all cars will be EVs. That is nine years from now. Roughly, every manufacturer that sells cars today will need to convert 50% of its ICE (Internal Combustion Engine) volume into EV. But there are few EVs on the streets now, and most of them are entirely new models without any equity. Don't know how everyone plans to achieve conversion —making one EV as good as Tesla is not good enough to survive this tectonic shift. Also, making one model in pursue of Teslaness and not what makes you who you are is not the way either.
The automotive industry is not exclusive to automotive brands
Until recently, the automotive industry was exclusive to automotive brands. The focus was on mechanical engineering. Today, tech is leading the industry. Software is becoming more and more critical. For this reason, many automotive brands would like to consider themselves to be tech companies. No wonder, as a number of lines of codes in a car precedes any computer. Thus, the nature of the future EV market is tech-based. As such, it welcomes other non-automotive tech companies to enter. Some tech brands are seeing the opportunity. Sony's Vision S is a stunning EV. This tells me that the future EV market will have more competitors than the ICE market ever did. Just because some companies have a considerable reputation built on ICE, it doesn't mean that their EVs will enjoy the same. Sony could have more trust in this market than many automotive brands out there. The same applies to all other tech brands.
That value shift
Today around 90% of the value of a car lives in the hardware. Morgan Stanley predicts 40% hardware, 40 % software, and 20% of the content that streams into the vehicle. My humble extreme prediction - 90% tech and 10% hardware. Regardless of who ends up being right, the shift is evident, and it completely changes the game. The automotive brands of the future must become a tech company like the Googles of this world. Even if they buy hardware from a generic supplier, they still have pretty good chances to be the top automotive brand in the world.
Framing the strategic challenge
The task is simple - you need to convert 50% of your current volume to EVs and manage brand & volume.
There are two fundamental questions that you need to ask yourself:
Where to play? How to win?
Here are some of the possibilities that come to my mind:
How might we focus on converting volume & brand driver models first as they could help to transfer the equity into the new market?
How might we create a separate line-up of EVs that will co-exist with ICE and, through time, absorb it completely?
How might we start bringing icons from the past that are discontinued into the EV segment?
How might we reduce the number of vehicles in our portfolio and use this shift to focus on our future wins?
How might we create a vertical integration with a tech company?
How might we acquire a tech company to boost our tech capabilities?
Every automotive company has built some brand equity. The question is, how will they manage it and make strategic choices for a different market altogether.
Is Toyota Prius just one model, or could it be an entirely new line-up of EVs coming up? The same goes for the Nissan Leaf. I could imagine several models continuing the legacy that Nissan started in 2011 under the badge of Leaf.
Additional thoughts
As much as I'm connected to the automotive industry, I'm a big fan of motorcycles. But there is a tension. E-motorcycles don't make a sound, while the sound is essential for the pleasure of driving and safety.
Akrapovic is one of the best exhaust companies in the world. They produce beautiful exhausts with great sound that many use to accessorize their bikes (I did the same). One way of looking at their current situation is this. Instead of being an exhaust company, become a tech-sound engine one. Perhaps an era of tech sonic branding is coming to the motorcycle industry.
So excited to be witnessing these changes. And with an insane curiosity, I'm looking forward to seeing what happens next.
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