‘At this site, the company he chairs plans to build highly customized vehicles starting at $35,000, by outsourcing just about all aspects of their construction to suppliers whom he consolidates on this spot. If successful, BTO can post net profit margins he estimates at between 15% and 20%, unheard of in an industry where the bottom-line margin ranges from zero to 3%. BTO will have 400 employees, excluding suppliers.’
Interesting. The standard specs, modular OEM construction, and integrated supply systems the auto industry is using to reduce costs may prove to be their undoing. Agile micro custom assemblers that leverage these new capabilities could eat their lunch.
IF (this is a big if) this is true, the only way out for the car industry is to continue to focus on brand in the short term (and all that means: local service, etc.). As the big brands crumble, the best defense may be to focus on the car of the future’s microprocessor heart: the fuel cell fly-by-wire chasis (more) — which will be important within the decade. The huge R&D budgets necessary for this will keep small players at arms length. Unfortunately, this will also likely mean there is only one winner in the end. The market for these chasis, given the expense of producing them may yeild a natural monopoly. [John Robb’s Weblog]
Or, the car-by-systems-integrator strategy (which Amory Lovins touted in his early hypercar papers) may be able to give the ‘natural monopoly a run for its money, on account of greater agility and [much] smaller economies of scale.