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For Automakers, a threat from Tech Giants on road to Autonomous Cars

Companies are spending hundreds of millions of dollars to keep up with consumers' demand for driverless vehicle technology.

DETROIT -- When General Motors Vice Chairman Steve Girsky slid into a Cadillac SRX luxury crossover specially equipped to drive itself, his reaction echoed that of many consumers as more self-driving technologies are rolled out.

"It's a little unsettling at first when you take your hands off the wheel and then it's one of these 'Oh wow' moments," Girsky said in a recent interview about the vehicle he test drove over a year ago.
While consumers may envision a George Jetson-like future where cars steer themselves as "drivers" read iPads, that reality is still years away for mass production cars.

What most automakers and suppliers see near term is cars equipped with "driver assistance" features that help in unsafe conditions, prevent accidents and take a lot of the stress out of driving.
These features will be stepping stones towards a fully- driverless car.

One of the first situations mass-production cars can handle without a driver is bumper-to-bumper traffic. Some cars are already equipped to steer themselves into a parking space. Others warn drivers if they are over the speed limit and brake the vehicle automatically to avoid a collision.

Companies are spending hundreds of millions of dollars to keep up with consumers' demand for such technology. Get it right and car buyers will pay thousands of dollars for the added features, analysts said.
"If automakers build it and can explain the value proposition, consumers will come," said Gary Silberg, national auto industry leader for consulting firm KPMG, which released a study Thursday about consumer attitudes toward self-driving cars.

KPMG found most Americans surveyed were receptive to the idea of a driverless car. The results raised red flags for the auto industry as consumers ranked Google, which has a self-driving car program, and Apple as brands they would trust most for such vehicles.

While that raises the question whether tech companies could become industry rivals, Girsky and other executives said automakers were just as likely to partner with tech companies as compete with them.
The KPMG report was in line with global studies that show a growing number of people are receptive to the idea of self-driving cars.

Earlier this year, Cisco Systems, the world's largest network equipment maker, released research showing 57 percent of global consumers would ride in a car entirely controlled by technology. Cisco is working with German auto supplier Continental AG to develop connected vehicle technology.

In North America, U.S. technology research firm ABI Research sees the first fully driverless vehicles appearing at the beginning of the next decade and reaching more than 10 million shipping annually in 2032.

Moving fast

"It's moving faster than even I imagined," said Larry Burns, GM's former research chief and an advisor to Google, which expects to release its driverless technology in the next five years. "Every board of every major auto company needs to be asking their leadership, 'What are you doing about this whole phenomenon?'"
Among the latest automakers to make predictions were Nissan Motor Co. and Mercedes-Benz parent Daimler AG, which both said they plan to start selling self-driving cars by 2020.
Elon Musk, electric carmaker Tesla Motors Inc.'s billionaire CEO, sees autonomous cars handling 90 percent of the driving within three years. However, he said the idea of building a car that controls itself under all circumstances was too ambitious.

GM believes semi-autonomous cars will be available later this decade, but fully self-driving cars are much further out. In his test drive, Vice Chairman Girsky got a taste of a feature dubbed "Super Cruise" that is capable of fully automatic steering, braking and speed control in certain highway driving.

KPMG, which previously forecast self-driving cars hitting dealers in 2019 with a more developed infrastructure in 2025, found consumer interest jumped significantly if the car included the ability to turn that technology on or off, and it meant significantly lower commute times due to dedicated highway lanes. Those surveyed were willing to pay a premium of about 15 percent, or almost $4,000 on a $25,000 vehicle equipped with such technology.

Some executives say automakers are held to a higher standard for their technology than other companies.
"The consumer will accept that Siri on the iPhone works half the time, but if you put something in the car they want it to work 100 percent of the time," said Delphi Automotive Chief Technology Officer Jeff Owens. "That is the dichotomy we're facing."

With liability issues to iron out -- no automaker wants to be blamed for a driverless car accident -- auto executives said no car in the near term will be fully self driving. In other words, the consumer will be sitting in the driver seat, ready to take over.

"We don't want people to think that it's OK to drink and drive, or read papers while driving," Toru Futami, Nissan's engineering director of advanced technology and research said last week. "Ultimately, the responsibility lies with the driver."

Another finding in the KPMG study should scare auto executives: engines, transmissions and styling ranked at the bottom of the list of things that most mattered in a self-driving car.

With car performance and quality becoming almost uniform across auto brands, driver assistance technology has become a factor that can make one vehicle stand out from another.

As this moves forward, and cars become loaded with driver assistance technology, it remains to be seen whether outside players like Google and Apple could directly compete with automakers on driverless cars.
Ford Motor Co. Chairman Bill Ford worries about the impact on car manufacturers if consumers love the technology in the vehicles more than the vehicles themselves.

"As we've added more and more convenience and cool stuff in cars, we've taken away their ability to love the car," he said in June 2012. "There's no turning back the clock and that's where we're going and that's where we should be going, but it's one aspect that I actually feel a little sorry about."

Next-generation Mini could have up to 10 variants

The Mini brand is about to enter a new era.
Unlike now, future Minis will be underpinned by parent BMW's new UKL (an acronym for the German words Unter Klasse) front-wheel-drive architecture, which will be shared with entry-level BMWs.
Peter Schwarzenbauer, BMW's board member in charge of Mini, shared his view on the brand's future with Automotive News Europe Editor Luca Ciferri.

How many Mini variants will there be in the future?
With the new ULK architecture, we currently have in mind eight to 10 models.

Will all seven current Mini derivatives be replaced and do you have some fresh ideas for future Mini buyers?
Both options are possible right now.

BMW plans Mini production at the former Mitsubishi plant in the Netherlands now owned by Dutch contract manufacturer VDL. Which cars will be built there?
It is not decided yet in detail but it's basically additional capacity for us when we meet capacity restrictions at the main Mini plant in Oxford, England.

Will VDL begin with the third-generation Mini hatch?
This is one option.

Will it be a full-service production plant or assemble knockdown kits?
Complete production with press shop, body-in-white, paint shop and assembly. The engines will be made elsewhere, as happens with many plants.

What will Mini's total capacity be, including Oxford, VDL and contract manufacturing by Magna Steyr?
If I told you that I would be revealing exactly what our growth plans are. What I can say is that last year we produced and sold 300,000 units and right now we are expanding that capacity.

BMW and Mini models will be built on the same ULK architecture, so you now have the opportunity to build Minis in BMW plants in countries where sales volumes do not have to justify local production, such as the U.S., China and Latin America. Is that something you intend to do?
For the next couple of years we will focus on the three Mini factories we currently have [Oxford, VDL and Magna Steyr].

Schwarzenbauer: 'There will be electrification within the Mini brand, including a plug-in hybrid.'

Is Magna a long-term production center for Mini or will VDL meet all of your overflow capacity requirements in the future?
We are quite happy with the cooperation with Magna, which will remain a long-term strategic partner for contract manufacturing of BMW Group products in the future. It's also worth noting that we've invested 750 million euros in England, primarily in Oxford, to expand our capacity there.

Oxford last year built 210,000 units. How many cars will you be able to build there after the expansion?
Our maximum capacity in Oxford will be up to 240,000 units a year. As in all our plants, we can very flexibly adjust our actual production volume to the market demand, for example, with different working times and shift patterns.

Will the new three-cylinder gasoline and diesel engines be just for entry-level Minis or will they be offered in every model?
It's very difficult to predict the mix now. I think that consumers will be very surprised, and in a positive way, by the three-cylinder's performance, so I would expect that its share will go up quite a bit. But we still will see consumers asking for the four-cylinder engine. It would be wrong just to concentrate on the three-cylinder engine, even though it is a very attractive option.

Will Mini sell electric cars or leave that niche to the BMW i subbrand?
There will be electrification within the Mini brand, including a plug-in hybrid for certain. We're still investigating pure EVs.

Roughly how many Minis are diesels? And is diesel just for Europe?
Diesel accounts for 41 percent of our European sales. On a global basis, this share drops to 24 percent.

U.S. demand for diesels in German premium cars is rising. What will Mini do to take advantage of this trend?
I think that the U.S. market is ready for diesel engines now and this is something we definitely have to consider also for Mini.

Last year Mini sold a record 301,000 units. Will the changes to the core hatchback model permit you to set new sales records in 2013 and 2014?
For 2013, yes, that's my assumption – provided nothing strange happens in world politics or economy. In 2014, we want to continue to grow. But it will be a year of change, which will see the phase-out of the current generation and the ramp up of the new one.

Does Mini need to build cars in China, where many other premium brands are growing rapidly?
We have no plans for a factory in China. We will see how the premium subcompact segment develops there. Only about 10 percent of our global volume goes to China, which is still a very small proportion when compared with mainstream brands.

Why is the premium subcompact segment still in its infancy in China?
The Chinese market has developed in a different way to the rest of the world. Normally you start with mass-market production cars and then, slowly but surely, the premium brands come in as the market develops. In China it has been exactly the opposite, starting with premium brands and now slowly developing a more mass market. We are just at the beginning for Mini in China, but we do see a lot of potential for us there in the longer term.

When will there be full availability of the new-generation Mini?
It will go on sale in spring in both Europe and U.S., but as always the ramp up will be slow and full availability will probably be around summer.

Source: autonews.com

How the European Automotive Industry markets to the US

Europe’s upmarket carmakers are changing perceptions in the US by providing consumers with the opportunity to drive iconic European cars on the streets they were designed for

Historically, there’s been little love between US consumers and the distinct styles of Northern Europe. In the 1960s, a foreign car would stick out like a sore thumb on America’s sprawling highways. Detroit’s auto giants reigned supreme, and Americans had little interest in opening their borders up to the slick designs of Northern European manufacturers. With the advent of the jet age, that attitude began to change. Iconic European brands like Mercedes-Benz, Saab and Volvo, desperate to get a foothold in the booming American retail market, decided to pursue a new strategy that could show Americans exactly what it meant to buy into a European brand. The best way to do this, they decided, was by paying for American families to go on their first European vacation.

The concept itself is quite clever. Upmarket brands like BMW, Porsche and Mercedes tend to emit the aura of a distinct European lifestyle – a certain je ne sais quoi that aptly reflects a mix of European decadence and ingenuity. In the 1960s, that message was difficult to convey in America; therefore, brands developed specialised European delivery programmes that posed US buyers with offers that were simply too good to refuse. Upon the point of sale, dealerships began offering Americans the chance not only to customise every aspect of their new car, but to actually pick it up straight from the source.

If my customers have the time to pick up and travel, I tell them it’d be stupid not to go

Carmakers provided each American buyer with free flights, a stay in a luxury hotel and a private appointment to pick up their one-of-a-kind car personally from the factory in which it was built. From there, Americans were free to take their new car out on the autobahn and through as many quaint European villages as they wished. When they were ready to return home, all they had to do was drop their new car off at a designated dealership, and the company would then pay to ship it back to America – where the customer would then pick it up for a second time and drive it home. Needless to say, plenty of American families jumped at the opportunity, and soon the country’s highways were dotted with European cars.

Branding to buyers

Over the last decade, several automakers have shut down their overseas delivery programmes. Yet upmarket brands continue to market the once-in-a-lifetime vacations to American buyers. Last year, around 5,000 American families flew across the pond to pick up their new cars. Tom Clark, a US dealer who specialises in luxury brands, says the schemes are an invaluable selling point because they reinforce a distinguishable brand identity.
“BMW, Audi, they’ve been successful here for a reason: in America, owning a slick, one-of-a-kind European machine says something personally about you,” he says. “Now, what it says about you is entirely up to you. Maybe you’re particularly bold, or maybe you’re cosmopolitan, you identify with European innovation. Some people don’t even know that about themselves until they’ve actually been there, in the factory, driving on German streets.”

That’s certainly the message Europe’s carmakers would like to convey. BMW describes the experiences American buyers have at its factory as “intensely personal and emotional”, and have thus become as accommodating to customers as humanly possible. In October 2007, the carmaker spent nearly €500m on its new BMW Welt centre, where European and America buyers are razzled and dazzled before meeting their new purchases for the first time. Mercedes-Benz recently gave its customer centre in Sindelfingen a massive overhaul too. The two factories play host to several hundred customers each day, all of whom drive their cars home straight from the factory. For overseas visitors like Americans, home isn’t an option – so carmakers sweeten the deal by giving them a home away from home.

Too good to be true

European delivery is not free; however, brands certainly pile on the perks in order to convince buyers to take them up at the point of sale. First and foremost, it’s worth noting that most dealers are willing to give customers a noticeable discount on the car if they take up the offer – in many cases, around five or six percent. With that saving in mind, the potential expenses of any extra time spent on a European vacation are immediately subsidised. On top of that, a complimentary one-night stay in a luxury hotel comes standard, as do several free meals. Volvo actually goes above and beyond by paying for the buyers’ flights to Sweden, and BMW tosses in 14 days worth of zero-deductible comprehensive insurance so that Americans can test out their new rides at a minimal cost. According to Clark, the deals are almost too good to be true.
“If my customers have the time to pick up and travel, I tell them it’d be stupid not to go,” he says. “I’m authorised to give buyers a huge discount, usually about two grand, if they opt for European delivery. The arrangements for the trip usually cost $800-900, so they’re still saving big money and getting a VIP vacation on top of it. Why would you say no to that?”

Driving tourism

The trips benefit local areas across Europe too. Volvo’s delivery centre and museum in Göteborg is among the Swedish city’s top attractions, and has helped to slowly bolster its tourist trade. Over the last three years, the number of foreign visitors venturing away from Stockholm and into industrial cities like Göteborg has increased by more than a million. The same can be said of BMW’s colossal factory, the Welt, outside of Munich. The factory plays host to thousands of visitors per day, and is the city’s fifth most-visited tourist destination. From their launch point at the Welt, American drivers go on to explore the hidden crevices of Bavaria rarely happened upon by veterans of Oktoberfest or the scores of Americans that congest Europe’s waterways on river cruises.
“There’s so much freedom on these trips,” said Zack Evans, who drove across Bavaria for two weeks after picking up his new BMW at the Welt. “I drove through little medieval villages where people didn’t even speak English, which you don’t come across often in Germany. So many amazing experiences, real culture, you can’t find anywhere else. I would jump at the chance to go again.”

Losing to gain

To an extent, European carmakers offer these vacation packages as loss leaders. They know they’re losing out on a few extra dollars by marketing the deal to consumers, but in doing so, they’re sending a powerful message of brand identity to potential buyers – and as American titans like Ford finally begin to experience a resurgence of sales across North America, that message is more important than ever. Everyone knows Porsche is an upmarket brand. Yet the VIP treatment its customers receive while picking up their new car at Zuffenhausen is somehow more dramatic than any experience a buyer may have getting a bus up to Ford’s factory in Dearborn, Michigan. Everything about European delivery screams class, and nothing excites Americans more. As US dealers continue to push the offers, it seems the programmes are serving European automakers well.

Last year, the number of buyers taking up European delivery offers skyrocketed by over 20 percent. Simultaneously, North American sales are booming for Europe’s institutional car manufacturers. BMW’s American sales surged by more than 10 percent in June alone, and sales for the first half of 2013 were up 9.2 percent on last year – American sales at Mercedes have jumped by 18.8 percent this year too. While it would be naïve to assume those figures can be attributed solely to strong marketing budgets, such a high volume of sales would simply be unachievable without these European brands maintaining an intensely loyal customer base. Above all else, those consumers stay loyal because they believe in the brand’s product, as well as its message. For dealers like Clark, that loyalty keeps sales pouring in.

“From a marketing point of view, these programmes are perfect. They give Americans the chance to personally experience what these cars are all about, what they stand for,” he says. “I don’t think anything could build more brand loyalty than that. Everybody, from dealer to supplier to the customer, wins with these deals.”

Source: europeanceo.com

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