AAH #685 - The Affordability Crisis and How the Industry is Dealing with It
Mar 8, 2024
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Discussions on vehicle affordability in the automotive industry, focusing on electric vehicles, shifting car preferences, and the debate on car transmissions. Strategies for lowering car prices, exploring affordability challenges and innovations in mobility, and the importance of offering innovative features amidst market stagnation and regulatory influences.
Innovative material choices like cast steel for camshafts aid in reducing vehicle costs while maintaining performance levels.
Challenges of de-globalization, supply chain dynamics, and demographic shifts impact automobile affordability strategies.
Embracing sustainable materials, energy-efficient components, and cost-effective manufacturing approaches is vital for balancing vehicle affordability and sustainability in the automotive sector.
Deep dives
Efforts to Lower Vehicle Costs through Material and Design Innovations
To reduce the costs of vehicles, innovative approaches like using materials like cast steel for camshafts instead of steel ones have been implemented. This design change resulted in cost savings per engine while maintaining performance levels. Similarly, advancements in electric motors have led to using peak coating on wires to prevent cross-shorting, ensuring efficiency while reducing overall expenses.
Challenges in Automobile Affordability and Current Industry Trends
The discussion around making cars affordable delves into various challenges such as the impact of de-globalization on strategic industries like electronics that influence the auto sector. Uprooting supply chain dynamics due to geopolitical factors and addressing energy and labor considerations are critical aspects to consider. Additionally, the evolving demographics in countries have implications on workforce availability for automobile production, amplifying the need for cost-effective manufacturing approaches.
Addressing Cost Parity and Total Cost of Ownership in the Automotive Industry
In the pursuit of cost parity and understanding the total cost of ownership, strategies like offshoring to countries with lower energy costs are being favored to mitigate production expenses. The shift towards sustainable and efficient material choices, coupled with technological advancements in energy-efficient components, illustrates a concerted effort to balance vehicle affordability with sustainable manufacturing practices in the automotive sector.
Implications of Cost Innovations on Car Affordability
The podcast delves into how innovations in cost can impact the affordability of vehicles. It highlights the difference between cost and affordability, emphasizing that reducing costs doesn't automatically translate to increased affordability. For instance, car companies like GM faced challenges in pricing due to features like four-wheel disc brakes, which aimed to provide value but added to costs. This discussion underscores the complex interplay between cost reduction strategies and offering affordable vehicles in a stagnant market.
Impact of Generative AI and New Players on the Auto Industry
Another key point discussed is the significance of generative AI and new market players in the automotive industry. The introduction of generative AI is predicted to revolutionize processes such as quoting in the supply chain, significantly reducing time and improving accuracy. Moreover, the entry of new players like NIDEC into electric vehicle motor production showcases a shift in the market dynamics. These advancements signify a potential shift towards greater cost efficiency and technological innovation within the automotive landscape.
