Thursday, April 06, 2006

Auto Company Primer: Running a Car Manufacturer in the 21st Century:

In my arrogance based on voracious reading/viewing of car related material over the past decade (car magazines, news articles, Top Gear episodes) I'm going to set forth some rules I think are important for a car company to follow for success in this changing world of ours.

1. Embrace Small Cars: In a world with ever increasing fuel prices, consumers want more fuel efficiency. The easiest way to make a car more efficient is to make it lighter, and frequently that means making it smaller. Everywhere in the world the market is going to be seeing smaller cars with higher quality design. We are seeing small hatchbacks in Europe with 11 airbags per car, we are seeing small cars like the Mini with beautiful interiors. People are flocking to them, and running away from heavy, large, fuel inefficient vehicles like SUVs.

2. Embrace Design over everything else: If you are an American or European car company you have to realize that you will never be able to match the Japanese in the reliability game. You may come close, you may even occasionally match, but it will take years to convince the buying public that you have vehicles that are as reliable the Japanese. The reason for that is decades of making cars that weren't as reliable as the Japanese, and thus it will take years to undo the damage. The Americans and the Europeans have a secret weapon, heritage, and that is something that can be drawn upon to influence design, and more importantly influence customers.

3. Ignore the lure of power: This will be controversial with some. Bob Lutz is on the record for being a big fan of power, and power is as American as mom and apple pie. But does power sell cars? I sometimes wonder. The new Mustang has been a wild success, but does it sell well because it is a rear wheel drive muscle car, or because it has great classic design features? Most sales of the new Mustang have been of the v6 model. The risk of selling a vehicle as a high performance car is that if gas prices increase dramatically (and they most certainly will if you believe in the theory of peak oil) is that there could be a backlash. If people see big engines as part and parcel of a vehicle, they might not buy it, even if a fuel efficient version is available.

4. Sell the same cars worldwide: As fuel prices increase, people want cars that maximize their space which means hatchbacks. The car choices Europeans make are the result of their environment. Hatchbacks make more use of space than sedans (saloons) do. Americans have traditionally not liked hatchbacks. I think this may change, especially with increased fuel prices. If you think about it, an SUV is similar in shape to a hatchback. Form follows function. If consumers are made to realize that a hatchback is a vehicle with increased space, with a fuel efficient engine, they will buy.

That's all for now. I have to apologize for the lack of updates but I have been transitioning recently. I am planning on moving to Dubai in the next few weeks, where I will be working for a large PR/ad agency. Dubai has a car market like the US was a few years ago because of cheap oil prices. In fact the Middle East is probably the last place in the world where there are cheap oil prices. Who knows, maybe I'll be a hypocrite and buy a gas guzzling vehicle that I never could have afforded if I lived in the West.

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