Tuesday, June 02, 2009

Non-Creative Destruction


The demise of stage coach companies and of the rail barons was arguably "creative destruction" at work. Companies that didn't see the future, and didn't invest in the next generation of technologies, were eclipsed by air carriers and auto manufacturers.

It may be a sign of the future that GM and Chrysler are in bankruptcy. That there's little interest by other companies in acquiring them. That nobody's trying to start a new major automotive manufacturing concern to take their place. Arguably, the world is ready for the successor to the automobile.

But there's no successor technology on the horizon. GM and Chrysler succeed or fail in a market that's going to keep producing cars and trucks, pretty much the way they have for the past half-century.

It's not clear what product will replace the car in the era of $4, $5, $8/gallon gas. Perhaps we'll be looking at alternative fuels, electric cars, new hybrid technologies, etc., as many people project. But I have a sense that any auto company that isn't prepared for that future, even those that are currently comparatively strong, should consider itself on reprieve.

4 comments:

  1. All of the options in your last paragraph are still "cars" they just happen to be cars with a different power source.

    Actually, given the rise of the "middle class" in China, India, and elsewhere, it will be interesting to see what the future international market for cars looks like.

    Will we see "export only" (or locally produced) US automobiles that are smaller, lighter, cheaper, much less "green", and less safe than the US market would stand?

    The divergent design requirements of "safety" and "fuel economy" are going to make for some interesting choices domestically as well. If you want to maximize the milage or the performance of your hybrid/ele ctric/whatever automobile you need to make it small and light . . . not things that sell well in the US historically (See SUV and Full Size Truck . . .)

    CWD

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  2. You're right - I wasn't clear enough. I mean that auto makers (or companies that want to succeed them as the dominant providers of transportation technology) need to be looking for a transcendent technology, not merely an update to the status quo. It's possible, though, that the transcendence will come in the drivetrain, not in the general look and feel of a car, just as we went from having horse-drawn carriages to having internal combustion engines.

    I could joke, maybe we'll have horse-drawn cars. But I'm not sure that would be funny.

    There are ways to build SUV's that are a lot lighter than the present generation of vehicles, but the technology and materials are more costly (and are also the subject of anticipatory patents - you may have to pay somebody to license the technology).

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  3. interestingly, those teeny tiny Smart Cars are quite popular in San Francisco, where parking is at a premium. At city speeds, safety is less of an issue.

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  4. Concur re: really small/underpowered cars being better suited for city than higway travel . . . but on the other hand, metropolitan areas are better suited to mass transit than rurual/suburban ones and may wind-up being areas where we see less of "any" type of car in the future.

    Will we wind-up with more of a "two class" system with "city only" cars vs. cruising sedans? As gas keeps going up, it will be interesting to see what happens.

    Chris

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