5 ms·

'Some auto executives say they can hold on to their roles as hardware providers while also tapping into the growth of more-profitable services' Simple question

by blihp 8y ago

'Some auto executives say they can hold on to their roles as hardware providers while also tapping into the growth of more-profitable services' Simple question for anyone in the auto industry who thinks this statement makes sense: for every car put on the road by Uber / Lyft (or any similar service you invest in), how many net new car sales will you see? (hint: their passengers may no longer need to have a car of their own) I hope that this is just them putting their spin on the story and that when it's all said and done they realize their future depends on minimizing how much they have to shrink rather than maximizing how much they can grow. Kodak believed that the move from film to digital represented an opportunity. It would have been for them, had they been realistic as to the size of the opportunity.

ghaff 8y ago
There are a lot of countervailing forces at play and it's by no means obvious where things end up in 2 or 3 decades. - An increase in urbanization among certain demographics. - New safety/autonomy systems that may drive faster upgrade cycles - Will most people still want to own their own cars for a variety of reasons? - When does self-driving actually happen in a widespread way? - What happens with Uber/Lyft when the subsidies eventually run out? - Does self-driving actually increase mileage driven and therefore car replacement cycles? - Does peak demand at certain times of the day mean you can't actually reduce the number of cars that much? The list goes on. I think we can be certain that there's going to be a lot of change but it's not clear to me that all of the "conventional wisdom" around things like car sharing will actually play out to the degree many think it will.
ghaff 8y ago
By all accounts, Kodak wasn't a particularly well-managed company. But when you have a consumables business that was once big enough for Kodak to own their own chemical company, you're probably going to have problems when that business falls off a cliff. They actually were into digital fairly early on. Fujifilm took a somewhat different tack and came out OK in the end. But they were also much smaller and had a pretty rough period too.
- blihp 8y ago
  That's my point. The auto companies had spectacularly poor management for decades (2 out of 3 of the American big auto companies went bankrupt during the crash... the crash didn't do them in, the 30 years prior to the crash did.) I'm skeptical that they are really that much better managed now. And Kodak was very well positioned (as you say, they were in quite early), the auto companies aren't (they're playing catch-up on all fronts: ride-sharing, driverless, electric.) I'm not saying that good management and execution won't work, merely that their future isn't likely to be one of growth. If they think it is, they run the risk of ending up in the same situation as Kodak. If they plan today to be much smaller enterprises 10 and 20 years out, they could come out the other side in good shape.
  - ghaff 8y ago
    I don't really disagree with any of that. Even if you don't think that vehicle sales will fall off a cliff and even if you have confidence that the big automakers and their suppliers can get to self-driving and electric by the time there's a sizable market for them, it's hard to see a scenario where the market for consumer vehicles increases or even stays flat. I actually dumped my auto stocks fairly recently. It's a lot easier to imagine downsides than upsides for the industry as a whole, much less individual companies that, as you say, don't have a great track record in recent decades.
    - blihp 8y ago
      Exactly. I'm not suggesting that it's all going to come crashing down or even happen overnight, just that the trend line for them isn't up and to the right. I sincerely hope the auto companies realize this and plan accordingly even if they won't say it publicly.
- catdog 8y ago
  > They actually were into digital fairly early on. But they had fears it would cannibalize their existing business so they chose not to go that route; newcomers in the space were able to take over. Sounds a lot like car manufactures, they stick to what they are doing and are good at despite being able to innovate. A lot of them may still do it the old way until nobody wants to buy that anymore, just like Kodak.
romed 8y ago
More importantly, how many _American_ cars will be put on the road by Uber and Lyft? I think I've taken my share of Uber rides and I can't recall any that were in a domestic car. The drivers are obviously very sensitive to the economics and they are all driving Toyotas.
- redisman 8y ago
  In Seattle Uber/Lyft drivers drive 95% Toyota Priuses. High gas mileage == you can actually make a profit in the job.
  - xyzzyz 8y ago
    This hasn’t been my experience at all, unless you mean airport pickups, which indeed is mainly priuses due to regulations by the airport. However, for regular trips in town, you rarely get to ride a prius (because they are too busy serving these profitable airport routes)
  - Greed 8y ago
    95% is a bit of an exaggeration, it's more like 30-40% inclusive of ALL Hybrids including the Prius. The one factor you're missing here is that many drivers consider a somewhat expensive non-hybrid luxury vehicle as an investment because they're able to solicit higher tips.
    - deleted 8y ago
      [deleted]
- thrower123 8y ago
  Depending on the model in question, a "foreign" car might be manufactured in Tennessee, or an "American" car in Canada or Mexico. The old labels are becoming somewhat meaningless.
  - romed 8y ago
    Yeah but we’re talking about actual Detroit I think. Their interests lie in particular makes.

by blihp 8y ago

ghaff 8y ago

There are a lot of countervailing forces at play and it's by no means obvious where things end up in 2 or 3 decades. - An increase in urbanization among certain demographics. - New safety/autonomy systems that may drive faster upgrade cycles - Will most people still want to own their own cars for a variety of reasons? - When does self-driving actually happen in a widespread way? - What happens with Uber/Lyft when the subsidies eventually run out? - Does self-driving actually increase mileage driven and therefore car replacement cycles? - Does peak demand at certain times of the day mean you can't actually reduce the number of cars that much? The list goes on. I think we can be certain that there's going to be a lot of change but it's not clear to me that all of the "conventional wisdom" around things like car sharing will actually play out to the degree many think it will.

ghaff 8y ago

By all accounts, Kodak wasn't a particularly well-managed company. But when you have a consumables business that was once big enough for Kodak to own their own chemical company, you're probably going to have problems when that business falls off a cliff. They actually were into digital fairly early on. Fujifilm took a somewhat different tack and came out OK in the end. But they were also much smaller and had a pretty rough period too.

blihp 8y ago
That's my point. The auto companies had spectacularly poor management for decades (2 out of 3 of the American big auto companies went bankrupt during the crash... the crash didn't do them in, the 30 years prior to the crash did.) I'm skeptical that they are really that much better managed now. And Kodak was very well positioned (as you say, they were in quite early), the auto companies aren't (they're playing catch-up on all fronts: ride-sharing, driverless, electric.) I'm not saying that good management and execution won't work, merely that their future isn't likely to be one of growth. If they think it is, they run the risk of ending up in the same situation as Kodak. If they plan today to be much smaller enterprises 10 and 20 years out, they could come out the other side in good shape.
- ghaff 8y ago
  I don't really disagree with any of that. Even if you don't think that vehicle sales will fall off a cliff and even if you have confidence that the big automakers and their suppliers can get to self-driving and electric by the time there's a sizable market for them, it's hard to see a scenario where the market for consumer vehicles increases or even stays flat. I actually dumped my auto stocks fairly recently. It's a lot easier to imagine downsides than upsides for the industry as a whole, much less individual companies that, as you say, don't have a great track record in recent decades.
  - blihp 8y ago
    Exactly. I'm not suggesting that it's all going to come crashing down or even happen overnight, just that the trend line for them isn't up and to the right. I sincerely hope the auto companies realize this and plan accordingly even if they won't say it publicly.
catdog 8y ago
> They actually were into digital fairly early on. But they had fears it would cannibalize their existing business so they chose not to go that route; newcomers in the space were able to take over. Sounds a lot like car manufactures, they stick to what they are doing and are good at despite being able to innovate. A lot of them may still do it the old way until nobody wants to buy that anymore, just like Kodak.

romed 8y ago

More importantly, how many _American_ cars will be put on the road by Uber and Lyft? I think I've taken my share of Uber rides and I can't recall any that were in a domestic car. The drivers are obviously very sensitive to the economics and they are all driving Toyotas.

redisman 8y ago
In Seattle Uber/Lyft drivers drive 95% Toyota Priuses. High gas mileage == you can actually make a profit in the job.
- xyzzyz 8y ago
  This hasn’t been my experience at all, unless you mean airport pickups, which indeed is mainly priuses due to regulations by the airport. However, for regular trips in town, you rarely get to ride a prius (because they are too busy serving these profitable airport routes)
- Greed 8y ago
  95% is a bit of an exaggeration, it's more like 30-40% inclusive of ALL Hybrids including the Prius. The one factor you're missing here is that many drivers consider a somewhat expensive non-hybrid luxury vehicle as an investment because they're able to solicit higher tips.
  - deleted 8y ago
    [deleted]
thrower123 8y ago
Depending on the model in question, a "foreign" car might be manufactured in Tennessee, or an "American" car in Canada or Mexico. The old labels are becoming somewhat meaningless.
- romed 8y ago
  Yeah but we’re talking about actual Detroit I think. Their interests lie in particular makes.