Order Reprints

Auto Focus

By Julie Cridler
Senior Market Analyst, IRN Inc.
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

The lines between the traditional automotive industry and the alternative vehicle segment are beginning to blur. Up until recently, the definition of the auto industry referred to a well-defined set of companies that have been household names for as long as most of us can remember. The alternative vehicle segment, however, was largely a wild card with a set of companies that few people had ever heard of and new names coming into the fray almost on a daily basis. The definitions are starting to change, and with them so will the nature of the auto industry as a whole. It is interesting to step back and take a look at the ways in which this is happening.

What does a more mainstream status for alternative vehicles mean for the industry overall?

• New companies joining the industry – Just a year or two ago, the identities of even some of the more prominent electric vehicle makers were largely unknown to the general public. Today, most people have heard of companies like Tesla and Fisker, and even some of the more obscure companies are becoming well known. The set of players in the industry will both expand and become more fragmented as there are many start-ups vying for a position as the leader of the electric vehicle segment.

• The first OEM IPO in 50 years – The automotive industry has not welcomed a newcomer to the ranks of publicly owned vehicle manufacturers in over 50 years. Yet at the end of June this year, the initial public offering of Tesla Motors raised $226.1 million for the company, and secured its place as the first publicly owned electric vehicle OEM. This is a monumental event for an established industry, where the barriers to entry are extremely high.

• New terminology and products – Until the last several years, the term “range anxiety” was not part of the industry lingo, but now it is constantly discussed along with the up and coming electric vehicle product launches. Furthermore, the elimination of range anxiety is a major selling point for electric vehicle makers — definitely a different basis of competition than we find for traditional vehicles. This is just one example of the new terminology that is working its way into the industry standard, and there are many more examples like it.

In addition to new terms and concepts, the electric vehicle segment is also creating opportunities in terms of new products. The lithium-ion batteries that power electric cars are one area where new product opportunities exist. While the technology has come a long way, there are still breakthroughs that need to be made. At the same time, the charging infrastructure that must be developed along with the electric vehicle industry offers opportunities as well.

New names are also cropping up along with the new products. Completely new companies like Ecotality are entering the market with their charging technology. Similarly, existing companies that are new to the auto industry will become more common. For example, General Electric will be launching an electric vehicle charger, the WattStation, in 2011. And with yet another twist, existing automotive players are entering the electric vehicle segment with new products. Nissan’s development of charging technology is a good example of this.

• New partnerships – With new companies entering the market and existing companies working to develop new products, we begin to see some interesting partnerships that would have previously been considered unlikely. A good example of this is the agreement between the established player Toyota and the up-and-coming Tesla. The two companies are collaborating on an electric vehicle to be launched in 2012. The vehicle will be Toyota’s RAV4 model with a Tesla electric powertrain.

• New ways of thinking – Along with new technologies and concepts comes the need for different ways of doing things. There are several good examples of this occurring in the industry. An obvious one is the development of marketable, mainstream electric or plug-in hybrid electric cars by companies that have built their reputations in vehicles with internal combustion engines. General Motors and Nissan are counting down to impending launches of their versions of alternative powertrain vehicles.

To help pull potential buyers in this new direction, automakers are beginning to offer innovative incentives and warranties. For example, General Motors will offer an 8-year, 100,00-mile warranty on the Volt’s lithium-ion battery and its 161 components. This is definitely a new way of thinking for automotive warranties, but a necessity to eliminate risk in the minds of potential buyers.

All of these things boil down to one common theme, and that is that the auto industry as we knew it is a distant memory. The roles and responsibilities of the industry players will continue to evolve. All the participants — old and new — have the opportunity to help define the technology and products of tomorrow.

  Order Reprints

TAGS:

• auto focus
• column
• irn
• julie cridler
• manufacturing