WHY IS THE FOXCONN ANNOUNCEMENT SO INTERESTING?

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Like many young engineers, I wanted to build my own road car. I began to plan out how much it would cost, where I would buy parts, what would I use as a donor vehicle, how would I manufacture the bodywork and especially and most importantly: what engine would I use?!

I didn’t just want to make just another kit car, it had to be scaleable with my own engine. And that’s where I ran into trouble. If you look at most low volume specialist cars today they use an engine from one of the top OEM’s, for example Lotus uses Toyota engines.

This makes the internal combustion engine an important part of an OEM’s differentiation in the market and a large barrier to entry for new would be manufacturers.  The shear number of requirements for the development of an internal combustion engine today is enormous: €500m would be a good round number to start with in the bank!

But what happens when the internal combustion engine is removed from the equation as with an electric car? Electric motors have existed for over 100 years and they are in almost every common house hold device from a fridges to an air conditioner.  The old barrier to market entry is reduced by a large margin.  The design of a vehicle, although complicated and complex, it is not too dissimilar to designing a modern high end SMART Phone.  It is still difficult, but not an insurmountable challenge and many large companies would be very capable.

This change in the market will allow new entrants and possibly the disruptive change in the automotive industry perhaps to the same level as other industries that are described in great detail in Clayton Christensen’s The Innovators Dilemma.  The recent announcement by Foxconn is an interesting move by one of the world’s largest manufacturers and it could be the start of more movements by Apple, Google and others into one of the oldest markets in the world: transportation.

With the added innovations through driverless capabilities maybe the new entrants change the market as fast as SMART phones did in the mobile market?  Initially we don’t think this is likely just because of the higher capital intensity of a car compared to a phone and the shear number of vehicles that would have to be replaced throughout the world.  But with 80m vehicles being produced every year, it is not unfathomable that new competitors could make a dent in urban markets in the Mega-Cities of the world.

Our belief is that transportation will develop in a trajectory driven by Urbanisation: this is well described in Frost and Sullivan’s Mega-Trends study.   The resultant changes in the industry will move towards mobility becoming a service: i.e. Mobility as a Service.  At this point it is highly possible that vehicles become a set of “devices” on a network integrated by overall mobility integrators: similar to the telecoms integrators such as Vodafone and Telefonica.  These mobility integrators will operate different devices on the network which could be provided by existing and incoming device manufacturers such as Foxconn.

Is this move by Foxconn just the start of something far larger?  We think so and have been working on Integrated Transportation studies with the University of Oxford and Oxford Brookes University in a Technology Strategy Board sponsored feasibility study in Oxford, UK, called the Oxford Transport Laboratory. click here

The Amlin Aguri Formula E car in China's Beijing Mega-City
The Amlin Aguri Formula E car in China’s Mega-City Beijing

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