9:05 am, March 6, 2015
Professor of Innovation Mike Wade, from the top-ranked IMD business school in Lausanne, Switzerland, predicts dependence on gasoline-fuelled cars will end sooner than most people think. He also predicts the downfall of the oil and gas industry. He writes for Car Dealer from the perspective of a professor of innovation but also as one of the first Tesla owners in Switzerland.
I have always been a car guy, and I’ve always loved technology, so when the Tesla Model S came out, I just had to have one. It was quite simply the first fully-electric car without compromises. Unlike most of the golf carts out there that masqueraded as roadworthy, the Model S’s size, range, and performance were all at acceptable levels.
So I bought one of the first 20 cars to be sold in Switzerland. It was, in retrospect, an insanely risky decision. At the time, in 2013, there were almost no charging stations in Europe, the news was full of stories of battery fires, and no-one knew what the car would be like after a couple of years. If it was anything like my iPhone 5, I wouldn’t reach the end of my driveway before the batteries died.
As a car guy, I belong to a group of enthusiasts who meet early on weekend mornings for drives into the mountains. I showed them the Model S and they nodded politely, but I think they saw it as a curiosity, and secretly rued the absence of a big, throaty engine.
Yet today, that has all changed. Porsche, Cadillac, and Ford are all developing fully-electric vehicles to compete with the Model S. At the Geneva Auto Show, many of the major manufacturers are showcasing prototypes or plans for fully-electric or hybrid models. If that wasn’t enough, tech giants like Apple, Samsung, and Google have all announced electric vehicle projects.
So does all this activity harken the end to the fossil-fuelled car? I think the answer is yes. Yet the real answer is ‘sooner than anticipated’. After all, there are solid scientific reasons that fossil fuels are called ‘non-renewable’. However, the reason for the change, I believe, is something much more practical: convenience.
Electric cars are simply more convenient than gasoline cars, and will only become more so. My electric car is always full. This is because I plug it in every night. It has no engine, so I have mountains of storage space. I almost never have to take it to the garage, because upgrades/fixes are downloaded overnight. The other day when I started the car, I noticed that there were lines in the rear camera to help me reverse.
We are not at the tipping point just yet. The battery range needs to be improved, so that motorists (an antiquated term) can travel long distances without recharging – I think the magic number is 1,000km (621 miles) on a single charge. We still have a few years before we reach that number.
What about the current car giants? Will they be the same companies in the future? I think that probably the answer is yes, but not all of them, and the market will be redistributed. Automobile manufacturing is a high fixed-cost business, and not an easy one to enter. Tesla is one of the very few exceptions, and a lot of their success can be put down to timing, luck, and chutzpah. I recently took a tour of their manufacturing facility in Freemont, California (yes, they have only one factory worldwide) and learned they picked up their factory essentially for nothing. These opportunities are few and far between.
Most of the car companies will survive, I believe, albeit in different forms. The basic structure of an automobile will not change that much, unlike the motor. I would worry more about the oil and gas companies, whose lifespan, which was already finite, will likely be reduced.
- Michael Wade is a Professor of Innovation and Strategic Information Management at IMD. His interests lie at the intersection of strategy, innovation, and information management. He is co-director of the Orchestrating Winning Performance (OWP) which runs from June 21-26, 2015.MORE: UK car market has now experienced its longest-ever period of growth
