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Disruption ahead

Auto show panel discusses how technology is changing the industry


May 28, 2018
Michael Power

The panel from left: Ted Lancaster, Kia Canada Inc.; Don Romano, Hyundai Auto Canada Corp.; Joni Paiva, Nissan Canada Inc.; Brian Fulton, Mercedes-Benz Canada; Edwin Ulak, autoTRADER.ca. Image: Michael Power

From the April 2018 print edition

Now is a turbulent time for a number of industries. So-called disruptive technology is causing businesses to rethink how they operate. Industry 4.0 is changing how manufacturing and other fields perform. Perhaps no more so is this true than in the automotive industry. Autonomous driving, ridesharing, electric vehicles and the connected car are converging to transform the way people drive and their relationships to vehicles and mobility.

As part of the Automotive Intelligence series, which debuted at Toronto’s Canadian International Automotive Show in February, a group of experts discussed what the future of the automotive industry, as well as the driving experience, will look like. The panel, entitled Driving in the Age of Autonomy, featured the following participants: Don Romano, president and CEO, Hyundai Auto Canada Corp.; Joni Paiva, president, Nissan Canada Inc.; Ted Lancaster, vice-president & COO, Kia Canada Inc.; Brian D. Fulton, president and CEO, Mercedes-Benz Canada; and Edwin Ulak, chief product officer, autoTrader.ca.

The group began by discussing disruption, with Romano commenting that the word is most often used to describe a product. But that’s not the only place disruption is going to come from—disruption also happens in the way in which people acquire products. Amazon sells products just like department stores do, but the company does so in a different way, Romano said. With today’s technology, industries have become displaced because other companies have come up with different ways to engage people. He cited his company’s push to make it simpler and easier to buy its products. “We’ve been selling and servicing cars in the same way for 100 years,” he told the audience. “But with the technology today we’re seeing a lot of companies get displaced by companies that have found better ways to engage with their customers. And I think we as an industry have to move in that same direction.”

Innovation and technology are bright spots in the future of the automotive world, said Lancaster. But while all the major automotive players are investing in these areas, innovation in design is also important. People want to feel and look good in their cars, he noted. At the same time, consumers want to feel that their purchasing choices are environmentally sustainable. Manufacturers therefore must be able to deliver on several fronts can enhance their experience with the vehicle. “If we continue to do that and get feedback from consumers I think it’s going to be a robust future for the auto industry and I think it’s going to help us be as connected as we can to consumers,” Lancaster said.
AutoTrader.ca’s perspective is unique, said Ulak. The website connects people with the cars they’re looking to purchase so responding to changes in the way people buy those cars is important. For example, the company used to be a printed product but is now a mobile app and website. If that change wasn’t made, the company wouldn’t have been on the panel, he noted. There have also been changes in the way in which people interact with dealers, Ulak said. These days, about two thirds of people simply show up at a dealership unannounced. Those consumers are better informed than ever, and some of their pain points in buying include that the process takes too long, is difficult, not transparent and that they don’t have enough control. “The existing value chain, the way it’s constructed, needs to evolve to meet consumer needs,” Ulak said.

Free trade benefits
The panel agreed that the North American Free Trade Agreement (NAFTA) was important to the industry and economy. Paiva noted that if NAFTA were radically altered or even cancelled, OEMs would adapt and continue to “play by the rules.” But at this point, what the landscape would look like without NAFTA remains guesswork. While none of the OEMs on the panel build cars in Canada, those companies source parts here while assembling vehicles in Mexico and the US. “There are huge stakes in place, so whatever happens is pure speculation at this stage,” he said. “I feel optimistic that things will end well for all parties. So we will adjust and adapt to the rules.”
Lancaster agreed that in the face of potential changes to NAFTA, car companies would work within the rules. President Donald Trump’s main concern is to see the percentage of domestically made parts increase. At the same time, there are options for free trade with other countries, such as existing trade with Mexico and an alliance with Korea. While it would be “sad” if NAFTA disintegrated—such a situation would mean risk to the US and Canada alike—there are ways that Canada can continue to have positive trade with its partners. “I’d like to see NAFTA stay, I think trade amongst partners is fantastic and it leads to healthy economies locally and globally, but we’ll find a way to make it work,” he said.

Our electric future
The panel also touched on vehicle electrification with Ulak noting the increase in interest in electric vehicles has been “phenomenal.” At the same time, some of that interest can be chalked up to hype. As well, barriers remain, he said. Those barriers include not only price but also the availability of charging stations and range anxiety among consumers. But interest will pick up as those barriers fall, Ulak said. For his part, Paiva remarked that the future is no doubt electric. The electric engine has existed for over 100 years, and the auto industry is working hard to make the technology efficient and cost effective. Several factors are spurring the growth of electric vehicles: the price is improving, the range is growing and there are more charging stations available, Paiva said.

While the electric car isn’t comparable or competitive with the gas engine, that gap will close, said Romano. With the auto industry pouring $50 billion into this technology, it will continue to improve. Eventually, the combustion engine will “go the way of the horse and buggy,” he said, noting that the automotive industry one day will be able to produce an electric vehicle that charges in the same time it takes to fill a gas tank and travels the same distance as a gas engine. “At that point, game over,” he said.

Among other trends the panel touched on was the future of the traditional sedan, which has declined in popularity recently as demand for the SUV has picked up. The trend appears sustained and long-term, Ulak said, with sedan searches on AutoTrader.ca dropping while those for SUVs have increased in the last few years. But while many people are buying SUVs these days, they are still considering the sedan as an option. “Is the sedan dead? Do people not want them any more? No, they still hold that place in the consumer’s consciousness,” he said.
Fulton agreed that sales will likely skew towards SUVs this year, but the passenger car will remain important. As well, the ubiquity of all-wheel drive in SUVs remains a consideration for consumers, noted Lancaster. The Kia Stinger, for example, is a performance vehicle but still has all-wheel drive since that feature is important for Canadian driving. Consumers consider both comfort level and fuel prices when vehicle shopping, he added. And while SUVs are synonymous with all-wheel drive, Lancaster said he doesn’t see the sedan disappearing any time soon.

As technology evolves, so too will the definition of what a sedan or SUV is, said Romano. Segmenting vehicles into categories will become difficult in the future as the automotive industry works to adapt to what consumers are looking for. “There are certain things they want and a lot of those things can be brought into what we call a sedan today or brought into an SUV,” he said. “We’re going to see all that morph in the near future.”

Overall, the panel gave an insightful look at what’s ahead for world of cars, trucks and SUVs. It’s sure to be a turbulent yet exciting future for the automotive industry in the years to come.

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