Arturo Zapata
President
Corporación Zapata
/
View from the Top

How Will Technology Change the Industry?

Fri, 09/01/2017 - 09:15

Q: How soon can electric vehicles become a relevant player in the automotive market?

A: All new automobiles sold 10 years from now will be electric but I would dare say it will be even sooner than that. Combustion engines are extremely inefficient, as only 35 to 37 percent of the fuel’s potential energy is transformed into kinetic energy, while the other 63 to 65 percent is released into the atmosphere as heat and gases. An electric motor is lighter, smaller, encased, does not overheat and has an efficiency of approximately 70 percent. The only thing holding back the transition between these two technologies is battery development. Current battery technology is still similar to that available 15 years ago, which means that cars are essentially powered by a pack of cell-phone batteries, which represents almost 30 percent of their total cost.

We made a significant investment about 10 years ago in a battery development technology that was theoretically brilliant. Unfortunately for us, the technology proved to be no more than just beautiful theory. That being said, this is only one of hundreds of similar theories being or already tested. The objective is to be able to store energy in significant amounts and at lower costs. For now, electric vehicles remain a luxury, targeting people who can afford them.

Q: How will electric vehicles impact the traditional dealership business?

A: Our current distribution model is sustained on two pillars: income from new car sales and income from auto parts, maintenance and repair services. Electric vehicles require much less maintenance and body work aside, vehicles would only need to replace brake pads, tires and lubricants for the first three to six years. Maintenance technology is also evolving and now most failures can be detected through the car’s own computer. As sales become more digital, the current distribution model will have to evolve. 

Q: What other trends have you detected that could potentially pose a threat to your business model?

A: Vehicle ownership will be threatened as technology develops, especially if we add autonomy to the equation. In fact, we are already detecting a change in the market as new generations are choosing not to buy a car. The shared economy concept is now a crucial element of mobility. Uber is a pervasive alternative and Mexico City has become the single largest market for the company. On-demand driver alternatives do not require any special infrastructure or added investment from governments and self-driving technology will only add to their efficiency.

Of course, there will always be people who want to own a car. The advantage may be that instead of buying two or three cars for every family, you will only need one self- driving car that adapts to everyone’s schedule. Vehicles will become extremely efficient and they will extend their usefulness by avoiding being parked most of the day. I expect autonomous technology to become accepted and prevalent within the next five to eight years.

Q: How easy will it be for self-driving technology to enter the logistics and transportation segment?

A: There are laws and mindsets that need to change before self-driving technology can fully permeate the heavy- vehicle industry. If a car hits another on the way to pick someone up, it is an inconvenience. But, if a truck without a driver hits another vehicle, the magnitude of impact, linked to the fact the vehicle is owned by a corporation looking to reduce costs, could result in substantial liability issues.

Q: To what extent will technology developers participate in the evolution of the self-driving car?

A: Integration will change the relationship between carmakers and technology developers similar to how computers are now sold. Previously, consumers chose a certain PC manufacturer because of the reliability the equipment could offer but today we all choose them based on their operating system. The technology developers’ role in the adoption of self-driving technology and the design of new vehicles will be crucial in the future.