Newco Motors

Innovation has been on my mind. Let's look at the other side of it.

The motor vehicle industry is struggling. Even the good ones are having a tough time. If you are honest with yourself, how often does the average person need to buy a new car? Buying used cars help dealerships, but they don't justify manufacturing more new vehicles. There is an overcapacity of auto manufacturing. If an auto manufacturer goes bankrupt, I do not expect to see the company return...unless...some insightful new organization is ready to change the game.

That means a company or group of companies that are ready to change the way we look at the cash flows related to automobile ownership.

Imagine you purchase a Newco mobile. At Newco, they have models that look like your standard cars, but the deal is different. For the price you pay they bundle in certain things that link you to their big organization. In addition to the standard warranty, they include maintenance and insurance for X years. Newco provides you with some additional services (think OnStar) that are bundled into the price of the car. Maybe they bring some other services to the table that car buyers have to purchase or have demonstrated that they will pay for over time.

Newco is an organization setup by an insurance company, a finance company, possibly an oil/fuel station company and a major auto repair organization. They sell the cars to make real money off the services. It is similar to the way companies sell printers to make significant profits from the ink replenishment. The same way that the profit is in the razor blade sales much more than the razor sales. The difference is that their auto industry profit is bundled into the purchase terms.

Changing the game happens, but often we miss the key moment that tips the scales. Look at how you spend the part of your household budget called communications. Thirty years ago, this was mainly a black telephone and its related service that was tied to your home. Now it is a combination of home service w/o equipment, mobile phones for almost everyone, and internet. It is also likely a larger percentage of your budget than the black phone was in the 1970s.



The next big industry shift is moving fast. Do we see it?