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Rapid advances in electronic, digital tech, leave car makers searching for new strategies

Rapid advances in electronic, digital tech, leave car makers searching for new strategies

THE rapid advances in technology and digital elctronics is forcing car makers into a quandary.

The question is how can they meld traditional practices — earning back investment on expensive tooling, production and distribution, while keeping pace with fast-moving trends and innovation in the digital age?

Already, various studies and surveys show that new car buyers, the millenials, are more fond of their smartphones and electro-trickery gadgets than they are of cars, let alone driving them.

With connectivity the operating buzzword, car makers are now faced with the problem of introducing the latest technological wizardry into their products’ cockpits as frequently as possible without interfering with the economics of selling cars:

While this is possible, car makers have traditionally followed a seven-year cycle for their various models For example, the rapid release of ever more advanced mobile phones, compared with a turnaround of about seven years for new car models.

Executives at the Geneva show said in a Reuters report that car product cycles will not tighten much below six years.

“I do not see a reduction in the product cycle for the car,” said Klaus Froehlich, BMW board member responsible for research and development.

Volvo Chief Executive Hakan Samuelsson said: “It’s about how effectively you use capital. Shortening the product cycle too much means you won’t earn back the money and you will not be profitable.”

For example, the cost of a high-end stamping press for making body panels costs about €40 million (RM180 million). That investment needs to be recovered over years, even for manufacturers of premium cars.

“We are very cautious about whether we should accelerate the life cycle of a vehicle. Seven years is an established time frame,” said Daimler board member Thomas Weber, who is responsible for group research and Mercedes-Benz cars development.

“Time to market should be as short as possible, but even here many companies make mistakes. Making a product perfect takes time.”

Nearly all car makers are seeking to shorten the time it takes to develop a car and introduce interchangeable parts and modular platforms for chassis and engines that can be updated in a “product refresh” while sticking to the seven-year product cycle.

Carmakers were “moving away from a trend to build a brand new car from scratch every seven years. Carmakers are now working with modular systems, with some components in use over two generations of vehicle,” said Wolfgang Bernhart, a partner at consultancy Roland Berger.

Philippe Klein, of Nissan’s global product planning operation, said: “The name of the game is how can you refresh your product without having to reinvest everything. The industry is capital intensive; you need to amortise the investment over time.”

A key reason to keep the seven-year cycle is to avoid introducing next-generation products before customers have had time to pay for existing cars.

Narrowing that gap is crucial, given how mobile phones and cars have become increasingly integrated, not to mention the advances in computer software and processing power that will be key to making self-driving cars a commercial success.

The new Mercedes-Benz E-Class, for example, can activate accident-avoidance braking systems far earlier than any other Mercedes model, thanks to a doubling of the performance of radars, the stereo camera and processing power.

Tesla, a loss-making producer of premium electric cars, has set the pace, adapting the strategy of improving its products as soon as is possible, using software updates and by making changes to the hardware.

To help keep their products up to date, Mercedes and BMW are now focusing on shortening the software product cycle while keeping expensive components on the market for six to seven years.

“We see different potential for optimising hardware and software. Hardware, steel, the engine, the crank case, the transmission should have long life cycles, while software will be updated in a more dynamic, frequent manner. And processors are ordered with potential upgrades in mind during the life cycle of the vehicle,” Daimler’s Weber said.

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