Nothing new under the sun
I had a sense of déjà vu reading an article in Autocar magazine last week by Hilton Holloway (unfortunately no online link available) describing a concept that would allow an ICE car to be repetitively leased and refurbished by the manufacturer with a planned life cycle of up to 25 years. By extending the life of the car and refurbishing and reusing parts removed, the life cycle environmental footprint assuming a Euro 7 engine was less than that of a BEV today. The familiarity derived from a concept called IndeGo which I developed with colleagues whilst at AT Kearney and with valued input from some industry heavy hitters including the late Martin Leach, Professor Jonathan Brown (one of the founders of ICDP), Gordon Murray who was at the time working on his iStream concept and Andrew Walmsley who spent many years learning how to be nimble in automotive engineering and manufacturing with Lotus. That concept was itself covered in Autocar in July 2004.
IndeGo was clearly long before BEVs came onto the scene as the supposed answer to all our environmental issues, but the basic ethos was that the average customer would care much more about peace of mind, predictable costs and the convenience of some value added services than they would about whether the car was so finely engineered that it was a few seconds faster round the Nürburgring (which was certainly the case for any of the cars that Martin Leach had a hand in). We described the industry as “upside down” in that most of the capital investment and the headcount was associated with engineering and manufacturing cars and anything after the factory gate was somehow less important despite the fact that manufacturers then and today produce most of their profits from selling parts and vehicle finance. Our concept shown in the illustration above was that you would have a flow of customers (both new and returning) and a flow of vehicles both new build and refurbished. Supported by analysis of the customer enquiries and usage data and vehicle condition and usage data (coming via telematics which was not at that time a standard fitment on any car), the flows of customers at particular price points and cars that could be made available to match would be aligned. Cars would be refurbished and potentially adjusted in specification between users and then recycled at the end of life so the system was entirely closed with all revenues and profits coming through the business.
Feedback from very senior industry figures around the world was positive but qualified by the fact that they were so heavily invested in the legacy business model that it was not feasible for a traditional manufacturer to transition to an IndeGo model. I believed in it sufficiently to leave my comfortable and lucrative consulting job to try to make it happen for real and pragmatically that meant we had to start with something rather than from a genuinely clean sheet of paper. The best match in terms of both the product architecture and the light manufacturing footprint was smart and we engaged with Daimler at the time to acquire smart with private equity backing and turn it into IndeGo. Unfortunately for us this coincided with Dieter Zetsche replacing Jürgen Schrempp in the top job and he decided to retain smart despite the accumulated losses to date.
The point of this walk down memory lane is not to try and rekindle interest in IndeGo as such but as Hilton Holloway demonstrated in his own similar thought piece, almost 20 years on, there are some relatively radical approaches to providing cars where the answers have not fundamentally changed. This is because the underlying problems have not been addressed by the industry. Even with the emergence of BEVs, a legacy built around ICEs is being replaced by a new legacy built around EV powertrains and software. The focus is still on producing highly-engineered – some might say over-engineered – products that have short term showroom appeal rather than products where the focus is pushed much more towards lower cost of ownership, an extended life and the most sustainable solution. The customer focus is on the relatively small number of new car buyers, rather than the much larger number of potential customers who could be addressed and deliver continuing profits by offering the product as service over an extended life.
We're starting to see some indications that this perspective might be changing, for example with the commitment to factory refurbishment by Renault and Toyota, though in the short term this appears to be more about supporting their used car business and residual values rather than genuinely changing the business model. Some OEMs are moving to offer their own insurance which is an important element of a retention strategy for crash repair work, notably Tesla in some parts of the US and it forms part of the Stellantis digital strategy. Volvo and others have launched subscription services or have separate mobility arms which provide a bundled, flexible car lease. We also see product upgrades in service through the connected cars. However, these are all silo approaches which may offer some benefits individually but they do not reinvent the business model. I suspect that when I read Autocar in 2040 there might be another article suggesting how the industry can be reinvented…
If you're short of bedtime reading and would like a copy of the original IndeGo overview, please get in touch
Image: IndeGo Consulting