Mark Wakefield has a radical idea about how legacy automakers in the West will be able to survive, and possibly prosper, in the future.
The global co-leader, Automotive & Industrial partner & managing director, AlixPartners, thinks these OEMs need to create new companies.*
Not new brands. Companies. Operations that can operate independently of the mothership, working in nontraditional ways.
A primary factor behind this are the ways that new Chinese vehicle manufacturers, companies that have little in the way of legacy thinking, operate.
Companies like BYD and Geely, which develop and produce vehicles in ways that are different than what is the existing norm in automotive—and yes, this includes Tesla.
For one thing, they do it blisteringly fast: as few as 20 months, which is half of what global traditional automakers do it in.
Fresh Take
This allows them to have fresher vehicles in the market on a frequent basis.
An analysis of best-selling brands in the Chinese market found that while some of them are more than five years old on average (e.g., products from Nissan, VW and, yes, Tesla), there are Chinese NEV (as in “new energy vehicle”)-dedicated brands with models in the market for just 1.6 years (e.g. BYD Qin Plus, Aito M7, BYD Song Plus).
This speed-to-market means that consumers get fresher products, not yesterday’s proverbial news.
So which would Chinese customers be more likely to buy—an aged VW or a new BYD?
Looks Good & Has Stuff
Then there are the areas the Chinese NEV OEMs concentrate on: things like styling, software and infotainment. In Western companies there is still a bias toward mechanically oriented things, like ride and handling.
Its not that a superbly handling vehicle is bad, but much of that superb handling is experienced at the limits—places where typical drivers never go. This engineering adds time and cost to the vehicle. Which many consumers would probably like spent on screens rather than shock absorbers.
Vertical
Chinese NEV companies tend to be more vertically integrated than Western companies. This helps them reduce the price of the vehicles to the consumer.
Everyone has heard about the BYD Seagull electric vehicle and its ~$10,000 starting price in China. According to a recent study by Cars.com, the least-expensive EV in the U.S. is the Nissan Leaf, with a starting MSRP of $29,280.
Vertical integration can help keep costs low.
Mindset Matters
Wakefield suggests that there needs to be a mindset change among those developing and producing vehicles in the West to keep up with the Chinese NEV companies.
And existing OEM structures aren’t conducive to thinking and doing in new ways.
Thus, the need for a break.
A New Apporach
At CES 2021 General Motors announced a new company, BrightDrop.
It was a company dedicated to producing innovative electric vehicles for commercial operations.
In the 2021 letter to shareholders GM CEO Mary Barra wrote: “Some of the world’s largest fleet customers, including FedEx Express, Merchants Fleet and Walmart, are adopting BrightDrop’s electric vehicles and technology to make their delivery operations more efficient. All told, we have more than 25,000 production reservations for BrightDrop cargo vans.”
GM was able to boast in September 2021 that it had completed production builds of its EV600 van: “The build completion is the fastest vehicle program to market in General Motors’ history and comes amid global supply chain delays and shortages,” GM stated.
Innovation & Agility
Travis Katz, then BrightDrop president and CEO said, “This is a strong statement to the market of how our unique operation setup, which marries the cutting-edge innovation, agility and focus of a technology startup with the scale and manufacturing might of a major automaker, can deliver real value to both customers and the planet.”
It was a 20-month development time.
And It Quickly Fades
In the fall of 2023 GM announced that BrightDrop was going to be rolled into GM Envolve, its operation for commercial fleet customers.
Last week GM announced that BrightDrop EVs would become part of Chevrolet.
“With the addition of BrightDrop to the Chevrolet lineup, we are combining advanced EV technology with the dependability and widespread accessibility that only Chevrolet can offer," said Scott Bell, vice president, Chevrolet.
For those counting, Chevrolet was established 110 years before BrightDrop.
Maybe it makes sense from an organizational perspective to put a Chevy bowtie on the BrightDrop vehicles. And maybe financially, too.
But think about what Wakefield said about competing differently and Katz’s quote about the BrightDrop approach.
Seems that this is a prime example of traditional business-as-usual thinking.
For a moment GM execs decided to “Think different.”
Then they evidently changed their minds.
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*You can watch an interview with Wakefield on “Autoline After Hours” here.