A former client of mine who used to run a Tier 1 automotive company involved in the production of emissions components and assemblies, and now a full virtual integrator handling the outsourcing of complete assemblies containing a number of products from diverse Tier 2 suppliers, recently told me about a rash of automotive activity currently underway. This surprised me given the state of the automotive industry. However, some shifts in a series of underlying trends probably has a lot to do with the innovation occurring in this industry which will likely impact other industries too.
From an innovation standpoint, the move toward hybrid and electric vehicles has already driven massive changes throughout the power train supply chain and its web of companies. New awards such as this from SAE International highlight the new emphasis on this critical automotive system. Despite the economy, innovation here remains alive and well.
The trend of product substitution based upon soaring commodity costs last summer may seem irrelevant today. But history has shown that what goes up, comes down. And as is the case with many metals, they are too far down from their normal price range. Many metals currently under the marginal cost of production will not remain at current price levels indefinitely (e.g. aluminum). Product innovation as we have previously reported will only continue. This press release by Nissan late last year suggests the company (one of many) seeks to improve efficiency, and limit the amount of precious metals used in catalyst converters.
We will make mention but not discuss in any detail here at the moment the shift in automotive navigation systems toward full automotive systems with a graphical user interface (GUI) and software. This trend has spurred interesting partnerships and joint ventures with players such as Google vying for share.
Sometimes innovation comes as a result of public policy. Last week Obama hinted at some of the policies he is considering around automotive emissions. One of these measures will apply a national standard for all tail pipe emissions. A second measure will mandate minimum miles per gallon. Both will spur new ways of doing things with different materials. Both will impact the metals industry.
But perhaps the most interesting innovation play involves the convergence of several of these trends. As an example, the driver of a hybrid or all-electric car receives a signal that he/she is within 35 miles of the end of a battery charge. The navigation system immediately suggests battery re-charging way-stations based on the driver’s route. Automotive OEM’s originally pursued product substitutions as a means of cost reduction. Now, they become dual-purposed for cost reduction and energy efficiency.
As they say, necessity is the mother of invention ¦.