Increased Emphasis on Technology Changes The Needs of Car Manufacturers
Car manufacturing is undergoing rapid change that is resulting in car companies needing to adjust the way in which they do business. These changes are coming in several forms including self-driving and electric cars to merely increased connectivity. This creates the need for new employees with backgrounds in technology as well as new resources such as superior batteries, to increase the distance that an electric car can travel. These new processes are driven by changing consumer attitudes, as well as companies competing with one another to not fall behind in the technology race.
Both manufacturers and consumers have exhibited changing attitudes about technology and cars. A recent study conducted by AAA found that 63% of American’s would be afraid of riding in a fully self-driving car, down from 78% last year (https://www.consumerreports.org/autonomous-driving/consumer-confidence-in-self-driving-technology-is-increasing-aaa-study-finds/). Americans are rapidly becoming more accepting of the idea of fully autonomous vehicles with bills in both the House and the Senate moving to reduce restrictions on self-driving technology. On the manufacturing side, there have been significant moves towards new technology with Volvo declaring that after 2019 all of their vehicles will either be hybrids or fully electric (https://www.nytimes.com/2017/07/05/business/energy-environment/volvo-hybrid-electric-car.html).
The adoption of these new technologies requires immense process changes from capital intensity to hiring and staffing requirements. On the capital side, a fairly recent development has been the creation of Tesla’s battery factory. As Tesla and other car manufacturers continue the push towards viable electric vehicles for the average consumer one of the most pressing concerns lies in the shortage of quality batteries. To combat this, Tesla created their own battery factory that Elon Musk claims already produces more batteries than any other factory in the world (https://electrek.co/2017/08/08/tesla-gigafactory-battery-cell-production-elon-musk/). Ford has also recently made acquisitions in the tech space in a likely move to acquire new personnel that have a focus in tech (https://global.factiva.com/ga/default.aspx?imt=2&ao=14&aod=13727939) . As Ford attempts to compete with tech giants to produce driverless vehicles it must seek out employees that have the appropriate capabilities. In both the case of Ford and Tesla serious process analysis was necessary. For Tesla, it was necessary to determine their previous battery making capacity and decide on the appropriate need for expansion. For Ford, it was necessary to evaluate the human capital that they had at the time and seek out ways in which to improve their competitiveness.
My favorite part of this story is how the industry’s demand side is having a clear impact on its supply chain. When I had previously thought of resource flexibility in operations management, I had thought of industries that required a workforce with diverse skill sets, or companies with factories that manufactured many goods. In this example, however, a changing tide in consumer trends and market focus is driving alterations in the workforce and manufacturing capabilities. On the whole, auto manufacturers will end up with more diverse workforces as increased coding and artificial intelligence knowledge leads to new hires. Meanwhile, the introduction and expansion of electric cars mean that many companies will pivot production strategies. Through this, some will increase their resource flexibility as they obtain the ability and necessary equipment to produce both electric cars and gas-powered cars. Others, such as Tesla and Volkswagen, however, will end up with nearly identical resource flexibility as their gas-powered capabilities will be replaced by new electric capabilities.
I found the most interesting part of your post to be the fact that Tesla has created a facility to create their own batteries. I immediately identified this as a capital asset, which is part of the process strategy called capital intensity. If Tesla can make their own batteries to ensure there is never a shortage, it can have a leg up on its competition. In addition, this move to capital assets can probably cutting costs that would have gone to a battery manufacturing plant, whether those extra costs are for the delivery, packaging or other extraneous costs. Those would be eliminated if Tesla has an in-house battery manufacturer, and I agree with this change in process analysis for the company.
What I find remarkable is what Tesla has managed to do to customer opinions of electric vehicles. Go back less than two decades and people’s opinions of electric cars were that they were impractical, unattractive, and unreliable. They often did not meet many of the main order qualifiers of consumers when buying a car. Now, however, more and more people are beginning to see the potential benefits of electric cars thanks to Tesla. They built one of the first classically attractive electric cars and outfitted it with some incredibly impressive features including self-driving. For the first time consumers felt there was an electric car that met many of their standards. Although other order qualifiers like low cost of purchase are still left to be desired it seems the general public are beginning to move with the electric car trend, and other car brands like Ford are seeing this and are trying to get in on the action. A lot more will need to be done before gas vehicles are fully off the road but in countries outside the US Tesla has had remarkable success. For example in Norway there are laws that give tax breaks and other benefits to those who drive electric vehicles and as a result there are Teslas in abundance in Oslo. This goes to show Tesla has made a huge impact not only on the future of the car industry at home but also abroad. I predict electric cars of the future will begin to satisfy more and more order qualifiers and potentially be an order winner for more people.
I think a really remarkable aspect of this process transformation is the new type of skilled employees required to build these cars. As consumer demand continues to skyrocket for fuel efficient and practical electric cars, car manufacturers like Tesla and Ford need new teams stocked with engineers who have skill with the newest age of technology. The workers will have to still be knowledgeable about how gas driven cars operate, but also possess an extreme grasp of future technology and a keen sense for innovation. Even more so, in a few years when these cars fully hit the market, your regular everyday mechanic will need to have some background in this new technology. I think it will be really interesting to see how small shop mechanics keep up with this fast moving technological trend.
The automobile industry has recently done massive PR campaigns in order to rebrand themselves as transportation companies that are friendly to the environment, with most major producers declaring they will become fully electric or sustainable by a certain date. This is going to cause huge changes in all of the manufacturers process structure. Recently customer involvement in all of the companies have caused huge changes for what these giants will require in the future all requiring new levels of Resource Flexibility, Capital Intensity, Layout and many other facets to production. Tesla is the company that seems to be searching for this correct layout and model the most aggressively, losing $8,000 dollars every hour just to stay in business. (https://www.bloomberg.com/news/articles/2017-11-21/tesla-is-blowing-through-8-000-every-minute-amid-model-3-woes) Many seem to be utilizing it as a marketing campaign with much of their focus still remaining in gas powered vehicles. All of these companies are striving to quickly become the first to come up with improvements to progress towards change the fastest. It is very interesting to see which ones survive the change and find the correct process layout to succeed to the next level of automobile technology, whether that is driverless electric or otherwise.
It is evident that through Elon Musk’s and now other efforts by other companies, electric, self-driving cars are a product that presents considerable customer involvement and capital intensity. From the passing of bills to drop more restrictions against self-driving cars in the White house, to the popular demand among those who can afford Musk’s newest electric cars, customers were very much involved in their opinion and demand of the product. This has obliged companies, such as Ford, to reconsider and improve their processes and product demands to stay relevant and draw in more customers as they hop on the wave of more eco-friendly vehicles and technology. This type of car and technology are capital intensive due to the fact that an enormous amount of capital was needed as an input to even conceptualize and begin manufacturing, and that labor for knowing how to improve and operate these technologies is also being demanded more.