Car industry risks ‘Kodak’ death

ROBERT GOTTLIEBSEN
March 29, 2017
The Australian

Despite the Australian motor manufacturing closures, the Australian motor industry is actually booming as older Australians emerge as major buyers of new cars. 

But longer term prepare for “Kodak style” collapses in surprising areas because of the fundamental changes taking place.

This week I attended a State of the Nation Breakfast with Morgan Research focusing on the broader automotive industry and longer term it was scary.

The next few years may continue strong but over time many large groups will fail because they don’t adapt to the fundamental changes that are looming. Those changes are led by car sharing and later driverless cars and they will be adopted by those aged between 18 and 34 — the so called millennials who are now lifting their use of car sharing as well as bikes.

Accordingly, among the millennials car ownership is on the decline. Just when the driverless car invades the motor space is not easy to determine but when it does happen, Australia will become a very different place. Morgan Research names 16 industries in the broader motor sector that are now in the danger zone and in line of a “Kodak” event.

The industries include car makers, car dealerships, auto insurers, transport companies, fuel companies, fuel retailers, grocery retailers, taxi/ limo companies, accident repairers. auto financiers, discretionary retailers, parking garages, car classifieds, car rental companies, outdoor media, and motoring associations.

Right now many of these industries are doing extremely well. The lesson from other industries like newspapers and photography is that during these times of prosperity companies need to prepare and experiment with totally different business models. One of the anecdotes that came out of the breakfast was that the US Kodak board had before it a business model that would have been the forerunner of Youtube. It required an investment of $100 million but a rival proposal was to invest $1 billion in a new camera plant in China. The camera plant won the day and Kodak became a failed company.

In the meantime part of the requirement to prosper in Australia today is understanding that the Australian population is now a much more divided market that it was a decade ago.

I am just a bit older than a baby boomer but I have a lot of baby boomer friends. Their children or grandchildren are often aged between 18 and 34 — the so called millennials — and they have totally different attitudes to their parents and grand parents.

So selling goods and services to older Baby Boomers is going to require total approaches to marketing to millennials. Lots of companies will get it wrong.

In all there are five million millennials and 3.7 million Baby Boomers in Australia, so both are huge markets.

Millennials are not big readers of newspapers and their television watching is in decline but they are huge users of social media. That’s where they obtain much of their news so their views are very different to their parents and grandparents. By contrast, the Baby Boomers are the foundation of newspaper and television audiences.

When it comes to technology, according to Morgan Research a third of millennials are early tech adopters compared to just 4.3 per cent of boomers who are having difficulty in keeping up with the pace of change. Almost a million or 18 per cent of millennials have Uber on their phone or tablets and they are using it. Only one per cent of boomers have downloaded Uber. Nearly 200,000 Australians are now using car sharing services and over half of them are millennials. The Baby Boomers basically ignore the car sharing service.

But Baby Boomers are in fact driving more and are major buyers of new cars, particularly as the additional safety features and easier driving technologies have particular appeal. So the Baby Boomers are really important in car ownership.

The motor industry is an enormous one. How the companies manage the different markets in today’s environment and for those in the danger zone how they remodel their business for the future will determine the long term structure of the industry.