GM CEO Mary Barra’s key presentation was one of the best, not to mention the child website GM offers to support CES. The speech included numerous announcements, from the new electric battery technology the company is developing to 30 new vehicles based on three EV platforms and a new automated delivery platform called BrightDrop. However, behind the presentation are some changes that will affect not only GM but also the rest of the automotive industry.
First, the company expanded the OnStar system from a vehicle system to a mobile application, making the service a part of a consumer’s life, not just a mobile service. In addition, OnStar now offers direct coverage to consumers, basically eliminating the need to use third-party insurance services. The company also announced that it would offer vehicles directly to consumers — a model that Tesla pioneered. Tirias Research expects that direct service to consumers will not fall too far behind – which will completely eliminate agents. In addition, Tirias Research believes GM will likely offer a car-sharing service similar to those of Ford and Toyota. This will cut demand for car hire and 3rd party services such as Zipcar.
While this transfer point of the market offers opportunities for traditional OEMs like GM, it also brings many challenges. The biggest challenge is the shift in production. Design and manufacturing challenges are the main reason why we see so much collaboration between EV and AV in the automotive industry. As GM pointed out, its new vehicle platforms will be manufactured at a former GM refurbished facility, used by Cruise, a self-driving car startup that GM acquired in 2016. Basically, GM is turning to a startup to make the transition, because not only the design but also the production of an EV or AV is different from what the company has done.
At the same time, startups such as Tesla and Nio are successfully entering this market. While these startups offer a fresh start in business models such as selling and serving vehicles directly to consumers, they also face more challenges. These challenges include meeting design safety requirements, working with government agencies to address new regulations, building a brand that is reliable to consumers, and becoming a manufacturer. As Tesla CEO Elon Musk said: “People don’t understand how hard it is to produce something.” Therefore, traditional OEMs still have an advantage, but over time, these startups will be competitive enough.
Recent announcements by GM and other auto suppliers, as well as new business models emerged from automotive startups, point to a very different automotive value chain in the future – a value chain that many traditional technology, product and service providers will no longer exist without partnering with OEMs and/or offering an extremely unique value solution and proposal.