Baby You Can Drive My Car

The three-day weekend gave us a chance to attend the New York International Auto Show. If interest in personal transportation is on the wane, an ever-popular theme in newsrooms, then someone forgot to tell the thousands of people who paid $17/head to drop by the Javits Center. The place was busy when I arrived at 1pm on Saturday and absolutely packed by 3:30 pm.

Here are a few observations from the show:

#1: There were (almost) no autonomous vehicle concepts on display; the one exception was Kia’s HabaNiro compact SUV. Its windshield can double as a large screen so occupants can watch video content while the Kia drives itself. Hyundai/Kia does have technology partnerships with Russian company Yandex and Amazon/Sequoia-backed Aurora to develop autonomous vehicles, but they are not often mentioned as industry leaders in the space. So, cool idea but not likely for sale any time soon.

Otherwise, the total lack of autonomous vehicles from the world’s automakers is an important signal that this technology remains years away from widespread rollout. Car companies are quite purposeful in what they choose to display at consumer auto shows. If they aren’t showing AVs, it is simply because they are not yet ready for prime time.

#2: Tesla wasn’t there (they never are), but they did host an investor “Autonomy Day” on Monday. Elon Musk may be feeling “Uber-envious” of a potential $100 billion valuation for the ride-sharing company when TSLA’s market cap is less than half that ($46 billion). Fair enough: Tesla does have more real-world autonomous driving data than anyone else. If they can’t be first to market soon, it would signal (as with Point #1) that AV technology is further away than many analysts think or hope.

#3: The first thing you see as you walk onto the main floor at the Javits Center is the Rivian booth, an Amazon-funded electric vehicle startup. They have 2 products on display – a full sized pickup truck (the R1T) and a large SUV (R1S). Both are built off the same platform, a skateboard design with a battery pack running the length of the vehicle and 4 motors (one at each wheel).

There was a lot of traffic through the display and we had an instructive chat with one of the company’s employees. Rivian bought the former Chrysler/Mitsubishi plant in Normal, IL, a facility we toured in the 1990s. A few points:

  • The plant was a UAW shop when Chrysler/Mitsubishi owned it, and it would be difficult for Rivian to ramp up production without the union asking to represent the workforce once again. Rivian seems OK with that, mostly because it means access to the 1,000 skilled former workers who remained in Normal after Mitsubishi closed the plant a few years ago.
  • In its former life, the plant produced passenger cars, not large pickups and SUVs. This is especially relevant when it comes to the paint booth, which is currently too small for Rivian’s products. After trying several shortcuts, Rivian realized they needed to expand this line. Paint booths are ferociously expensive (up to $500 million), so it’s good that Amazon just plunked down $700 million for its stake.
  • You can see Rivian’s offerings here: https://products.rivian.com/suv/

In the end, Rivian is a very important EV startup because its large truck and SUV products sit at the heart of US automaker profitability. The vehicles themselves are attractive and perform better than any gas-powered alternative (0-60 mph in 3 seconds). If the company can leverage the Normal plant to produce high-quality vehicles with competitive range, it will be a formidable competitor to not just Tesla but GM, Ford and Chrysler.

Summing up, as a veteran of more auto shows than I care to remember, three things really stuck out to me:

  • The dearth of autonomous vehicle presentations is fundamentally out of step with general market perceptions that this technology is close at hand. Car companies are hype machines when they want to be. But on the subject of AV, they remain mum when it comes to presenting new products to the public.
  • Despite all the buzz, there are still very few full-electric vehicles for sale. Audi, Mercedes and Jaguar have competent small SUVs, but they were hardly stars of the show. There were plenty of concept EV cars around, but it will be years before they see a showroom floor.
  • The US personal vehicle marketplace is an inherently conservative one, both in terms of consumer preferences and corporate managements. It is not the same as the market for consumer electronics, for example, whose products carry lower price points and where the industry encourages greater disruptive innovation.

That’s not to say that the global auto industry is immune from disruption – far from it. It will just take longer than many investors – public and private – may realize.

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