“The automotive industry needs to join the giants of technology”
Thursday, 15 de February de 2018
In the second part of his speech in Trento, Italy, Sergio Marchionne, CEO of FCA, talks about autonomous vehicles and how the group is preparing “for the next revolution”
In addition to the prospects regarding electric cars, the second area I want to address is that of autonomous vehicles. There are many benefits along the way, including improvements in safety, reduction (or elimination) of accidents caused by human error, less traffic, more free time, and a new level of independence and quality of life for the elderly and the disabled through the expansion of individual mobility.
According to the US Centers for Disease Control and Prevention, 30 people die every day on US roads in accidents involving drivers under the influence. This translates into one death every 51 minutes and an annual cost of more than $ 59 billion due to alcohol-related collisions.
Another study estimates that, on average, almost two hours of additional time per day would be made available for other tasks, if we were not behind the wheel. Many are working to make the benefits of this technology a reality: not just automakers, but outside revolutionaries as well, including some tech giants.
There are two different approaches to the challenge of developing autonomous vehicles. The first, which we might call “evolutionary”, consists of a progressive evolution through the five levels of autonomy which range from non-automated to a fully autonomous vehicle. To ignore progression and work directly with fully autonomous vehicles is another, “revolutionary” approach.
At FCA, we believe that the appropriate approach is a combination of the two.
On the one hand, we are realizing our own development of evolutionary technologies; on the other, we are working on a revolutionary project with Google to accelerate the learning process related to total automation. Engineers at FCA and Waymo – the automotive project for autonomous vehicles at Google – worked together last year to integrate standalone driving technology into the Chrysler Pacifica hybrid minivans.
There are many predictions as to when and how fast we will achieve full autonomous vehicles. Frost & Sullivan predicts that over the next eight years, vehicles with semi-autonomous systems could reach six million units per year in Europe and the US, while the fleet for fully autonomous vehicles would be less than 100,000 units per year. McKinsey estimates that fully autonomous vehicles will account for a share of 0 to 15% of the market by 2030, largely depending on the resolution of external factors such as regulatory and legal issues, as well as cost.
We believe that fully autonomous driving will begin to emerge in the next five years and that, in the medium term, systems for advanced driver assistance will play a crucial role in preparing regulatory authorities, consumers and corporations for the reality of autonomous vehicles.
Over the past 50 years, the global automotive industry has been hit by economic and financial crises due to stepped up regulations and mismanagement. It was subjugated, it faced bankruptcy and had its traditional landmarks increasingly destroyed. The automakers that managed to survive did so because they changed their approach. However, all this seems to be a childish game compared to the revolution we face today.
The combination of these two main driving forces of innovation – autonomous driving and electrification [link para texto anterior] – will result in a complete paradigm shift that will transform transportation as we know it. In a few years, engine and transmission assembly lines – which have become one of the key skills left – will be eliminated as a differential for mass-market brands. In addition, well-capitalized “intruders”, the new entrants, are prepared to play a revolutionary role in the industry. The pressure from these revolutionaries will be relentless, especially in the automotive world, which has traditionally been conservative and slow to react. What is happening now, we have already seen in other sectors – such as tourism, music and even the political world – where traditional models were thrown out during the crisis with the arrival of new entrants, new intermediaries and new platforms. Nowadays, the automotive industry is in the midst of a radically similar transformation.
Once this process of disintermediation reaches a full circle, it will leave automakers exposed to some very basic existential questions: What are we and what exactly will we offer our customers? Is there any value associated with a brand? Why should customers care? There are few strong enough brands that are unlikely to be affected, or partially affected, by this technological revolution.
I am speaking of brands like Alfa Romeo and Maserati, whose essence is the driving experience. I’m also talking about Jeep, a brand that has always represented freedom and adventure, with its unsurpassed off-road capability. And I mean, of course, brands like Ferrari, which has everything to do with excitement in the driving experience. As for the mass market, however, a brand will no longer have the same importance.
As for the design, engineering, and construction of an electric vehicle, the plant itself will not play a significant added value role because it will buy batteries and electric motors from outside suppliers. Similarly, for a passenger in an autonomous vehicle, the propulsion system becomes somewhat more or less irrelevant. At the same time, the development and execution of the algorithms that govern the autonomous driving process require skills that are not currently part of the automaker’s DNA. Most importantly, they will probably be developed faster and with a higher quality by the “intruders.”
Despite the chronic economic inefficiency of the automotive industry in the last thirty years, our very existence has never been threatened by innovation. Since the beginning of the motorized era, the automotive industry has managed to control its own destiny. For sure, we have been subject to regulations regarding emissions and safety, which have played an increasingly important role in business.
We were also affected by the consequences of our own inadequate choices. Many times we die and resurrect, as a consequence of bad business decisions or because of our negligence to intervene soon enough as a preventive way in non-economic processes; and by refusing to give up our independence in order to reduce the costs of executing what we do, simply because of ego issues.
But that was the results of our own choices.
We were responsible for our failure, just as we are responsible for our own rebirth. Despite this, we have never been threatened by the outside. Now, we are suffering with the speed of innovation, transformation and revolution which is rewriting the rules of engagement in the automotive industry. Nowadays, competition includes companies that come from outside the industry and are adopting completely different formulas for success.
An immense new frontier is opening up before us, but the transition will be painful for many. The biggest mistake we can make is to imagine that our historical ability to survive is guaranteed in the future. We do not know exactly how long this process will take. In fact, we do not know who will want these new vehicles or how much they will cost. We do not know how long it will take to develop the necessary infrastructure. We also don’t know the role that governments around the world will play in the future by promoting the adoption of electric vehicles or by drafting the rules for autonomous vehicles.
However, one thing is clear: change is coming.
Change is approaching fast. It will reach all areas of the industry. And it will be disruptive. The market presented us with a variety of options: We can try to be part of Silicon Valley, we can decide the level of interface to be established with these “intruders”, we can bet on one or more revolutionary developments and even acquire one of them with the hope it becomes the right bet and generate billions in value, or waste billions and go straight into bankruptcy. We can choose consolidation, sharing technical knowledge, investment and risk with another major automaker.
Some of these alternatives may not be viable. But now more than ever, we need to be open to all the alternatives. We cannot delude ourselves by believing that we will be able to replace or alienate the giants of technology. We need to be attentive to these intruders, even to receive them and benefit from their knowledge. At FCA, for the last thirteen and a half years, we have been preparing ourselves every day.
We have experienced difficulties and have learned to live with uncertainty. We are ready to deal with anything that comes our way.
If there is something that makes us different, it’s no doubt the commitment to always see the future and the unknown as an opportunity and welcome the challenge of the new. Our leadership is composed of men and women who understand the need to live the culture of change. We do not hesitate at the idea that revolutionary technologies are reshaping the competitive environment, as well as the automotive sector itself.
More than once, we have refuted external predictions of ruin and darkness. We have already shown that we have the courage to face and overcome adversity. We developed a natural instinct for adapting to unexpected market events and, if necessary, even transforming ourselves.
I could give you many examples, like the time when Fiat was on the verge of failure in 2004, yet we managed to turn things around and obtain the highest revenues in its history; or, how in the midst of the global crisis, we partnered with Chrysler, which was on the verge of bankruptcy, and transformed the company to then merge with Fiat and create a top level global automaker; or when we lifted the Jeep brand from a few hundred thousand units a year to a world powerhouse with record sales for five consecutive years, exceeding the one million mark sale in the last three years; or the time we launched an ambitious strategy to expand Maserati’s product portfolio, transforming its modest presence into a brand with a full-fledged luxury market, and got its moderate profits to become the best results in its history of more than one century.
I could also cite the speed with which we responded to the changing market demand and how we modernized our factories in North America to produce more Ram pickup trucks and Jeep SUVs. And, of course, I could talk about the development of technologies for autonomous vehicles in collaboration with Google in the United States and with BMW, Intel and Mobileye in Europe. We did all this without big ads or advertisements.
This is our way: to stay focused, to achieve goals, and to let others judge us from the results. This is how we plan to continue, even as we prepare to face the next revolution: through our actions.
* Sergio Marchionne is CEO of Fiat Chrysler Automobiles. The title of Doctor in Mechatronics Engineering was awarded on October 2 by the Università di Trento, Italy, in recognition for his contribution to the automotive sector, his role in reformulating Fiat, the alliance with Chrylser and the merger between companies, to create an important and relevant global automotive group. The first part of his speech can be read here.
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