:talkingfuture.com Come and learn about the future…

Martin: In the past we have discussed the future of cars and come to the conclusion that the future for most people is a hydrogen fuel cell car. You fill it up like a normal petrol car, but it makes its own electricity and makes glorious, silent and almost god like progress down the road. The only drawback is that I can’t buy one yet. While we are waiting I thought we could talk about who might make these cars.

The automotive industry has just had one of its toughest years ever. Just as a recovery is starting to sprout they are reaching the biggest technological crossroads they have ever faced. Peak Oil and emissions regulations mean that the end of the internal combustion engine is within sight. Every car manufacturer who wants to stay in business needs to be working on alternative propulsion – NOW. Because there will be such a step change in technology this may be the ideal time for some other players to enter the car industry and compete with the big guys.

The most obvious and realistic scenario is that we see the existing dominant car makers make newer models that gradually introduce alternative forms of propulsion. We are already able to buy several hybrids, Nissan has just announced a battery car called Leaf and Honda makes the FCX clarity. We should see Ford, VW, Mercedes, BMW etc following them along and gradually transitioning their product lines to batteries, fuel cells or magic fairy dust power.

But, what if some new start ups were jump straight into electric cars and steal the market from the slow moving giants of the car world?

Thomas: The change to a hydrogen power source is going to be hugely disruptive to car makers. I expect the changes we’ll see will parallel those that took place in the technology industry when the internet really took off. I expect GM will be like IB

M, struggling to turn to anything new too quickly for fear of disrupting its core money making business. Honda are more like Microsoft, they’re heading in the right direction and faster than anyone else currently in the business of making cars. That leaves just enough room for a Google equivalent to barge in and change the rules of the game for everyone else. Who’s it going to be? Tesla, Aptera, or someone else?

Martin: Sticking with existing manufacturers for a moment. I find it strange that Honda and Toyota have been so vocal on their plans for the future whilst the biggest players in the automotive technology world, “ze Germans” have been surprisingly quiet. It wouldn’t surprise me if Mercedes was to sweep the rug out from under Honda’s feet on hydrogen cars, they are just keeping their cards close to their chest until they are nearer to launching something special (perhaps an S-Class Zeppelin edition for example).

Getting back on track, I think the start ups like Tesla and Aptera have a really good chance of taking a large share of the market. They lack the inertia of the big firms, they can do something radical without worrying about upsetting their existing customers. Imagine if Audi or BMW suddenly made a car that was aimed at the caring, sharing, hippy peace-nicks that buy the Prius!

The only downside I see for the start ups is that they lack the massive resources of someone like Mercedes. Perhaps the solution is for another company with money to buy in and run them as a separate brand. Lets ignore the obvious (fruit based candidate) and think about what would happen if Microsoft or GE or Virgin were to buy into a start up car company?

Thomas: A wholesale buyout by a company with a load of capital would be an entrepreneurs dream come true, but I don’t think they’ll be queuing up to take the risk. What is more likely is the car companies will start to emulate technology companies. Microsoft don’t have a factory in Seattle making Zune HD’s, everything is outsourced to the far east. I can see a time when the manufacturing plants are no longer owned by the car brands and all the work is simply subcontracted. This might lead to the interesting situation where you would see a Ford Fiesta coming off the line in the morning and an Alfa 159 in the afternoon. The would remove a lot of the financial overhead from the brands and they can wring a bit more value out of the production line by putting the deals out to tender..

From what I understand Tesla are already moving in this direction. As a small start up they would find it difficult to build the car themselves, so they buy in a part baked model from Louts and simply add the motors and electricity.

Martin: The ultimate expression of this idea is already being designed by the designer of the Mclaren F1, Gordon Murray. He has designed a super-efficient and ultra-compact city car that he has little to no intention in building. Instead he wants to sell his production system and flexible vehicle architecture to other companies so they can sell and market the vehicle. Essentially with this idea the engineers behind the car, the manufacturer of the car and money behind it all can be three separate companies.

Either way I think we will see some changes in the car industry in the next few years. There is a good chance that whether your next car is sold to you by Mercedes or Microsoft it will be very different to your last one.