What Future for the Global Auto Industry?

**An upcoming Chicago Boyz group discussion**

There is much media and analyst discussion lately concerning possible sea changes in the auto industry..which would, of course, likely have major impacts throughout the economy and on society as a whole.  Some of the driving factors worth considering include:

–The government incentives put in place in many countries…in some cases not just incentives but absolute requirements…in favor of electric cars

–The emergence and growth of ride-sharing services such as Uber and Lyft

–The development of partial ‘autopilot’ functions for cars, and the anticipated development of full automatic driving at some future point

–The apparent reduction of interest among young adults and older children in driving and automobile ownership

–Technological factors, including the continued improvements in battery energy storage capacity–but still very limited in comparison to liquid fuels…the continued incremental improvements in internal-combustion engines…and the emergence of new manufacturing technologies, including 3-D printing aka ‘additive manufacturing’.

I’d like to have a group discussion of the possible future direction and shape of the industry…let’s do this sometime next week.  If you’re interested in participating, here are some links that are worthwhile thought-starters.

Vitaliy Katsenslson is a fund manager; his blog is Contrarian Edge–I generally like the way he thinks.  Concerning electric cars in general and Tesla in particular, he says:

You don’t really know the company until you buy the stock. It has happened to mea few times. We did hundreds of hours of research, bought a stock, and that act of buying activated new senses. I started seeing new angles. Something similar happened to me with Tesla, except I didn’t buy the stock, I bought a car.

His ownership experience, and the thoughts triggered by the “activated new senses”, are captured in an 11-part series of posts.  You can get it emailed to you by signing up here.


Concerning self-driving cars, here are three articles reflecting various degrees of enthusiasm versus caution:  from Forbes, from Investor’s Business Daily, and from Road/Show.  Also this Financial Times article, which is about the difficulties involved in the interaction of automated systems with humans in other cars or with human pedestrians.

An interesting general discussion of AI misinformation and hype…not primarily focused on driverless cars although it does touch on that subject.

Concerning battery technology, here’s a link on the trends in $/kWh and the future possibilities.  See also my 2017 post on battery materials constraints.

Homework:  Please take a look at the above articles, at least the ones that aren’t behind paywalls..  I’ll put up a post as a place for discussion sometime next week.

20 thoughts on “What Future for the Global Auto Industry?”

  1. “The apparent reduction of interest among young adults and older children in driving and automobile ownership”

    IMO that is just because too much of the media lives in liberal city bubbles where they cannot afford a car (and parking space) while public transport is an option (or for US cities: Uber/Lyft). I work with a lot of young IT consultants and nothing gets them more excited than their company car.

  2. Looking forward to the discussion.

    I’ll believe in electric cars when three things happen

    1. No government subsidies
    2. Societal commitment to developing electricity primarily by nuclear power
    3. I can recharge a dead battery in less than 5 minutes or have an 800 mile operating radius.

    Obviously, if we ever reach peak oil, I’ll reconsider.

  3. Freddo…”I work with a lot of young IT consultants and nothing gets them more excited than their company car.”

    Do they get especially cool cars, or is it a status thing?

  4. Can’t promise any spoons now or later in the week.

    Couple more interesting things I came across since the last I’ve written on this heavily.

    One is social. Part of a US car’s potential life cycle is being stolen and sold whole in Mexico, or in parts in the US. Situation in Mexico obviously has some impact on this, and there’s limits on what the automobile makers can do if US buyers refuse to cooperate by purchasing.

    I’ve learned a little more on the technical side. 1) Radars are one sensor being investigated for these automotive applications. Two implications are greater hardware access for interested hobbyists, and that the automobile designers may not be considering the wealth of knowledge developed in defeating and manipulating radars. 2) There’s also a ‘what about our fundamentals in computer science’ question. Mathworks is developing Sensor Fusion and a couple of other Matlab toolboxes to support the self driving development process. More established types of engineering software packages have a deeper foundation in engineering practice. See a bunch of the CAD packages; engineers have long done mechanical drawings, or calculated analytical or numerical solutions to a PDE. You had prior art in engineering designs to compare the results of the tools to. What happens in the development of a new design process when you start with an automated tool? Could you wind up with the equivalent of giving a highschooler or humanities major a fancy CAD tool that is safe when used by a type-of-problem experienced engineer? What about subtle design flaws in the tool, that are not obvious without a well understood process, or engineers already skilled in that particular design art?

    So, still a huge skeptic of the wisdom of politically dictating that engineers/manufacturers will develop and produce a particular technology. Even setting aside my distaste for the flavor of the political activists.

    Similar issue to houses; They tie up capital, and government bureaucracy can force changes that might cause an unexpected loss of value. Houses, the energy savings changes potentially could decrease value do to mold contamination. Building a new may well be less energy efficient than accepting some operating loss in exchange for longer service life.

  5. The government incentives put in place in many countries…in some cases not just incentives but absolute requirements…in favor of electric cars

    I assume incentives will be more successful in warm countries. In fact, this should be a good incentive in the used car market. I gave my daughter a 1996 Nissan truck. A year ago, I asked her if she still had it. It was very low mileage (about 60,000) and I was thinking I might take it back. I was disappointed to learn she had sold it.

    Part of a US car’s potential life cycle is being stolen and sold whole in Mexico, or in parts in the US

    I live in Tucson now. A friend had his car stolen a couple of years ago. He had installed LoJack and went to the police station to turn it on. The car was 60 miles into Mexico. That was about an hour after he realized it was stolen.

  6. @David: I live in the Netherlands; (for tax reasons) a company lease car is fairly common for IT engineers/consultants that spend their time at client sites. For junior people usually a small city compact car, but often it will be their first (non-clunker) car.

    The visions of the additional freedom provided by the mobility, driving places on the weekend and taking quick holidays abroad makes them usually very excited.

    IMO any article headlined “Young people less interested in car/house ownership” should probably be subtitled “government successfully nickel&diming peoples dreams”.

  7. I found myself recently in a doctor’s office, waiting for someone. Flipped through some auto-related magazines — and almost needed medical attention myself when looking at used automobile prices. Used 5 year old pickup trucks with an asking price over $50,000 ! Used 3-year old non-prestige Japanese models going for $40,000 ! And yet government statistics say there has been no inflation in car prices over the last 20 years — after hedonic adjustments, of course.

    Even used cars have simply become too expensive, especially for young people who either are stuck in low-wage jobs or are saddled with large college debts. The big issue is whether politicians will allow regulatory roll-back to help make automobiles affordable again.

    As for the future — China is now the world’s largest automobile manufacturer, focused on domestic Chinese demand. When that demand starts to falter (which may be happening now), expect to see a flood of good quality lower price Chinese cars hitting European and US markets. It is not a good time to be a German.

  8. Outside of niche cases, the success of EV’s will come down to two factors: range and cost.

    Range includes the obvious trade off between ease of charging and capacity. Both are showing improvement with time and might be subject to some sort of breakthrough. Overnight charging requires a huge investment in infrastructure both for the chargers and to supply power for them. Night time charging also directly conflicts with the availability of renewable sources other than nuclear ( Mrs. Davis said it first).

    Cost has to include both resale value and eventual disposal as well as initial cost. My impression is that present EV’s are built around their batteries, making replacement anywhere from uneconomic to nearly impossible. Since the batteries degrade with use, resale value is hard to figure until a base of experience is built up.

    Tesla solved the range problem by ignoring the cost problem. This worked for their first buyers that either didn’t care how much they cost or for whom the high price was an attraction of its own. They also seem to have ignored service to the extent that service is very sparse and parts stocks non existent. This might work for a boutique product for the well to do virtue signaler that has a choice of several other cars while his Tesla is waiting for repair but is less acceptable for the masses that just want transportation.

    Fully autonomous vehicles are at the point where all of the easy problems have been solved, I don’t expect to see actual cars driving themselves for at least 20 years. This will be especially bad news for Uber and Lyft.

  9. I don’t expect to see actual cars driving themselves for at least 20 years.

    I could see trucks but in their own lane. It will be expensive but I could see adding a lane to interstates for the self driving trucks.

  10. I think that trucks might be an even harder problem than cars. The utility comes from having no human involved after the truck is staged for entrance to the highway. How often can you drive even 100 miles without some sort of construction? Any disruption would cause dozens or hundreds of trucks to back up until they could be individually guided around an obstruction.

    If we are willing to rebuild the roads to accommodate, guide and segregate autonomous vehicles from everything that disturbs them, we could have these soon, if not tomorrow. Considering the time frame of highway construction, I’d still bet on technology, even if it take 20 years.

  11. I drive from Tucson to Orange County about every three months. I used to commute to Phoenix twice a week. Both routes use I -10, which is heavily traveled by trucks. On week days in summer, I try to use I-8 because it is less used by trucks. There was construction near the I-8,I-10 junction for about a year or two but it is over and when it was going on it only reduced the lanes for about 5 miles. A truck lane for I-10 running from Texas to CA could help traffic a lot and I think it would work with the self driving trucks. What screws up traffic now is one truck passing another for a marginal speed advantage. A truck lane would avoid that and the overall travel rate would be about the same.

  12. What screws up traffic now is two classes of vehicle traveling at different speeds on the same road. A dedicated lane for the self driving trucks would be fine for the self driving trucks, but all of the other trucks would still be in the other lanes. What would help most would be more lanes, period.

    Then there’s the chicken and egg problem. How many miles and for how many years would we have to build these truck lanes until there were enough trucks to use them? For all this time, voters would be creeping along next to these pristine, deserted boondoggles. If you want to see civil unrest, try setting these lanes aside from existing highways.

    The scenarios for self driving trucks mostly assume that they will be traveling from one freight depot to another. The majority of full truck loads are from one scattered point of to another scattered point. Either or both of these points can be hundreds of miles from any likely dedicated route.

    Finally, most trucks are owned by their drivers. If they didn’t like driving, they would be doing something else. These dedicated lanes would be great for operations operating from depot to depot with company owned trucks, but I don’t see the rest of us paying for it.

  13. The scenarios for self driving trucks mostly assume that they will be traveling from one freight depot to another. The majority of full truck loads are from one scattered point of to another scattered point. Either or both of these points can be hundreds of miles from any likely dedicated route.

    I can’t see self driving trucks doing local routes. I would think they would only be useful for long distance runs like those I see on I 10. If a truck lane is built, I would expect all trucks to be required to use it. For example, in California the right two lanes in a four lane freeway have thicker concrete and that is why trucks are required to use those lanes. With the collapse of law in California, I don’t know if those laws are still enforced.

  14. I’m not talking about local routes. The loading and unloading locations are often 1-2,000 miles apart, same truck, same driver throughout. This is the way that oranges can be loaded in California and unloaded in New York in time to be distributed before they rot.

    I don’t see the dedicated lanes being able to tolerate conventional trucks any more than the railroads allow uncontrolled trains on their tracks. Anything that would work with near present technology would require a level of integration and communication between the trucks and roadway that make them much closer to railroads than highways.

  15. I don’t have a ton to add but as a consumer I want a self driving car SO BADLY. I spend an hour plus in my car every day. It drives me crazy when I think of the hundreds of hours of lost productivity I have every year. I was once of the opinion that it would happen before I was dead (I just turned 51) but alas, that doesn’t appear to be the case. The roads are just not uniform enough, they still don’t know what to do with Winter/snow, and I feel that a cabal of insurance companies, drunk driving attorneys and the cops will unite to create resistance. Maybe in 50 years it will be done, but I won’t see it.

  16. Dan: “I spend an hour plus in my car every day.”

    I used to have a 30 minute commute each way every workday — weekends too, when the work piled up. Someone introduced me to the Great Courses series of CD lectures from the cream of (generally non-Politically Correct) university professors. I got to explore history, language, science, philosophy. The commute became my favorite part of the day!

    Now in a different job with no significant commute. (Yeah!). But I miss that enforced attendance at fascinating lectures.

  17. Re: opportunity cost of commute. I recall hearing an engineer tell the tale of how he had a long commute, and decided to spend it practicing mental arithmetic. Wound up that all that practice made him excellent at mental math.

    There’s another factor that will prevent adoption earlier than insurance, that kind of attorney, and cops.

    Right now the approach to the AI is throwing a lot of complexity at the problem. Which means that an implementation will have a large attack service, and need many updates/patches. a) There’s a lot of vehicle life, potentially, to be counting on that kind of tech support. b) Cars are valuable enough to be worth the cost of engineering fake patches for the purpose of theft. c) The theft tech can also be used for remote murder. Between the financial cost of issues, and the safety cost of issues, the general public’s tolerance will run out very fast, barring the engineers behind the cars being smart enough to address the causes I mention.

    Now, I may simply be very stupid and ignorant, but it is not clear to me that the software engineering know how to deliver the necessary reliability exists. Nor that the best software engineers are really great at integrating that with the the tradeoffs in vehicle engineering. You may say, ‘that is why we have systems engineers’. I don’t think there is such a thing as an engineering discipline that is perfect, that can be simply trusted to solve problems within its domain without any external questioning.

    We can only say for sure that cops, insurance, and drunk driving lawyers will be fastest if we can nail down answers to questions that look open to me.

    Anyway, details redacted for privacy, but in RL I just heard ‘some guy’ mention the estimates of batteries as an example of an interesting topic. I would be a ways from being able to pass on his thoughts, if that were ever an option.

  18. The mental math would be good right up to rear ending someone while trying to find the cube root of his license plate.

    At work, I was having a discussion about automating a manual process. One of the approaches under discussion was to use an arm with many degrees of freedom to mimic the operator. I pointed out that changing the process to make it easier by providing simple fixtures and machines could be considerably cheaper since arms capable of both fast and precise movement are considerably more expensive than the entry level ones they were looking at. There is a real risk in that by the time you’ve made automating it easy, there isn’t enough direct labor involved to make finishing it worthwhile.

    As an example, systems following a buried, signal emitting cable have been around for a long time. Something like that would be immune to visibility problems and could be retrofitted to existing roadways. Roadways could be marked out in other ways that are easy for sensors to see while being all but invisible to humans. The whole thing is an old idea called smart roads. I expect it went nowhere because of both high cost (there are a lot of miles out there) and the chicken and egg problem. This, of course, doesn’t address the problem of other cars and drivers.

    I would resist using Tesla as an example, the evidence is that their engineering is especially poor and they are too willing to introduce something not well thought out or tested.

Comments are closed.