Should cars be manufactured like iPhones?
Modern cars share similarities with consumer gadgets like iPhones and could potentially benefit from adopting similar manufacturing strategies such as outsourcing final assembly to improve profitability and market value.
Takeways• Cars increasingly resemble consumer gadgets due to complex electronics.
• Outsourcing production, like consumer electronics firms, can improve carmakers' profitability.
• Learning from consumer electronics is crucial for car firms transitioning to EVs.
Cars today contain thousands of semiconductor chips and millions of lines of computer code, sharing similarities with consumer gadgets like iPhones. Consumer electronics firms outsource all manufacturing, while carmakers design, assemble, and market their vehicles; farming out final assembly would allow carmakers to escape 'production hell' and improve profitability. Comparing car companies to firms like Apple and Hewlett-Packard reveals the potential benefits of outsourcing production, including increased revenue, reduced R&D spending, and higher market values.
Similarities between Cars and Consumer Gadgets
• 00:00:00 Cars now contain a significant amount of electronics, with electric vehicles having more than half of their component value in batteries and electronics, making them similar to consumer gadgets like iPhones. This technological shift suggests that car manufacturing could potentially benefit from adopting strategies employed by consumer electronics firms. Consumer electronics firms focus on design and marketing while outsourcing manufacturing.
Financial Benefits of Outsourcing
• 00:01:17 Outsourcing production, as demonstrated by Hewlett-Packard in the 1990s, can lead to substantial financial benefits for car manufacturers. HP doubled its revenues by outsourcing PC production, while also reducing R&D and capital expenditure. Toyota or Volkswagen adopting a similar approach could free up billions in cash flow and potentially double or quintuple their market values.
Reinventing Car Manufacturing for EVs
• 00:02:46 As car firms navigate the transition to electric vehicles, learning from the success of consumer electronics becomes crucial. Outsourcing strategies can help car manufacturers improve their financial performance and market value. Understanding what made consumer electronics successful is a good starting point for car firms.