Short Turn
Weekend Special
What If Car-making Went the Way of Consumer Electronics?
The Economists
The automotive industry has undergone a significant transformation, evolving from traditional petrol-powered vehicles to technologically advanced models that resemble consumer electronics. Modern cars, even those with powerful V8 engines, now incorporate extensive electrical systems, thousands of semiconductor chips, and millions of lines of code. This shift is particularly evident in electric vehicles (EVs), where batteries and electronics account for over half the component value, compared to just a tenth in conventional cars. Foxconn, a leading electronics manufacturer, aims to leverage this trend by becoming a key contract manufacturer for carmakers, similar to its role with Apple. The company recently introduced new EV reference models to help automakers streamline production and focus on design and branding.
As the automotive sector grapples with the challenges of manufacturing and innovation in the EV era, the comparison to successful consumer electronics companies like Apple becomes more relevant. While car manufacturers have traditionally invested heavily in fixed assets and R&D, they could benefit from adopting outsourcing strategies similar to those used by Hewlett-Packard in the 1990s. By reducing their capital expenditures and R&D spending, major automakers like Toyota and Volkswagen could significantly enhance their cash flow and market value. However, this approach faces obstacles such as labor union resistance and the inherent complexities of the automotive industry. Ultimately, as carmakers strive to adapt to the electric vehicle landscape, learning from the successes of consumer electronics may provide valuable insights for their future strategies.
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Bar Recommendation in Toronto, Canada
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