auto industry Archives - Steve Sammartino

Why petrol cars will not exist in 10 years

Posted on July 3, 2015 by Steve Sammartino

If you haven’t already realised, cars are no longer machines, but rolling computers. This also means that cars will move from being powered by fossil fuel engines to electric motors. It’s already started, and it is going to happen much more quickly than we anticipate. I’d go as far to predict that there will hardly be a petrol car on the road in 10 years. Here’s why:

When cars transition to rolling computers, the Law of Accelerating Returns applies. Innovation goes from incremental and factory-based to curve-jumping and technology-driven. You’ve probably heard of Moore’s Law – the maxim that states that computing power will double roughly every 18 months while prices halve. This maxim and many other accelerating technology laws will apply to the production of cars, laws which make the end product better and cheaper by significant degrees. The revolution which transformed smart phones, cameras, laptops, solar panels and flat screen TVs is about impact the auto industry. Let’s take the pricing example of the Tesla Electric car range:

1st car – Tesla Roadster: $109,000 (released 2006)

2nd car – Tesla Model S: $75,000 (released 2012)

3rd car – Tesla Model 3: $35,000 (projected – release due 2016)

Not only has each model been progressively cheaper, but also far better in terms of range (distance per battery charge), safety and features.

It’s the same pricing pattern we saw during the personal computing revolution. Here is where we get an entire curve jump. The Tesla model 3 is so cheap that an electric car is no longer a plaything for Silicon Valley types, but a viable new car option for everyone. This is because the switching costs get very close to zero. Why? Because the running costs of having a Tesla Electric car does not include the cost of petrol. (Tesla already have 453 free super charging stations and the cost to fully charge the battery at home is around $3). This means the average consumer can use their saved petrol money towards acquiring a brand new car without increasing their weekly expenditure. For example:

Model 3 Tesla

Cost to buy = $35,000
Avg petrol p.a. = $3,120
New funds available = 8.9% of purchase price.
Avg Cost new car finance = 6-7% unsecured interest rate.

When the Model 3 arrives, it only takes some creative financiers to change the landscape of the auto industry virtually overnight.

Want a new car at no cost?*

*Just give us your weekly petrol bill and drive away in a sexy new high tech Tesla!

It’s when this happens that we transition to an all-electric car world. The transition will be as swift as the smart phone – in a few short years, non-electric cars will be a lot like feature phones.

This is exactly how disruption happens. It’s not the product itself, but often the change in the business model around it which leaves industry incumbents blindsided. When there’s an opportunity for consumers to get into a superior product with low or no switching costs, they will always take it.

Buckle your seat belt.

Loving your customers – celebrity style

Posted on July 8, 2014 by Steve Sammartino

At Tomcar we seriously love our customers. It’s a highly personal interaction at this early stage in the business, so we both take it personally, and make it personal. We care about how our cars perform for them, and how they make their working lives better. We’ve recently been documenting the delivery of our vehicles and making some short films about it.

Yes, we know it doesn’t really scale as a business model.

Yes, we know that major car manufacturers would never do this.

Yes, we know that it makes us seem like small fry.

But here’s something else we know: Doing things which do not scale in the short term, is what gives startups a chance at scale later.

Here’s a little video of one such unscalable activity. Oh, and if you buy a Tomcar, you’ll get your personal movie made too.

[youtube=http://www.youtube.com/watch?v=BQIrWHeU1UM]

– – –

So a question you might want to ask is this – How can you treat your customers like micro celebrities of your brand?

Am I a Startup? – Tomcar

Posted on August 24, 2013 by Steve Sammartino

I was at a startup party in Melbourne a little while ago. It was organised by Ned Dwyer as his startup ‘Tweaky.com‘ had just reached profitability. In usual fashion the local startup illuminati were all gathered talking about their latest idea, site or app. Who is moving to Silicon Valley, who got funded and who just pivoted. It’s kind of a strange scene. If you’d just arrived from mars you would think that the only type of startups on earth were web related. In some ways it is an absurd form of closed mindedness. It’s as if there was no such thing as a ‘new business’ before the internet and silicon valley arrived.

Then I got talking to a guy called ‘David Brim‘ – only because we happened to be standing next to each other. He then offered to buy me a beer – seemed like my kind of guy.

He asked me what I did, and I went straight into startup mode and told about my ‘web’ stuff. (I’m one of the guilty souls from the first paragraph) But when it was David’s turn he surprised me. I asked what do you do? And his response was nothing I expected. He said, I’ve got a car company. I had to ask the question again and clarify if he meant he worked for a car company, was helping a car company or he genuinely owned a car company. After it was clarified that he actually owned a car company he surprised me even further to say that the cars were being made here in Australia, in the heartland of Melbourne in South Oakleigh. He went on to tell me that he’s been working on his startup for 8 years…. and only started selling the cars this year…. and that he had invested several million dollars through private investors and personal funding. I was totally blown away. After this he said:

“Am I a Startup?”

My reply was something like: ‘Of couse. Man, you’re the real deal…. were moving around 1’s and 0’s, bootstrapping ideas cheaply and hoping something sticks. Where as you’ve bet the farm and your life on something big and crazy.’ It’s the kinda of thing we don’t hear about much in Australia – especially when the local car industry seems to be closing down, rather than starting up.

His company is called Tomcar and it is different to every other car out there. Firstly they are not made for the road. But specifically for the Mining Industry, Farming and the Military – you can read more about it here tomcar.com.au. They are the most versatile all terrain vehicle in the world and I feel like they are about to become pretty famous. They eventually plan to sell the cars on road too – it will be a bit like Hummer (sans negative environmental impact) – a cool car with off road cred’ kinda thing. Anyway – for me it just makes me proud that we’ve got more than web startups happening. It should also remind us that there is an entire underground of ‘other non digital’ startups that we need to welcome into our community to cross fertilise with. More so – merge our skills as part of the startup revolution…. Digital meets physical, or shall we say hardware on steroids!

Tomcar have done all sorts of cool things too – like all their computer systems, bill of materials etc is cloud based (Google Australia even use them as a cloud use case study), cell based manufacturing, everything is outsourced for lean manufacturing, but all done locally. It’s seriously mind blowing. They’ve taken the digital ethic and transposed it into manufacturing.

Australian Government: They also told me the government have never given them 1 cent / handout / or any funding…. while they throw millions to other auto players for zero return and exits from our country! A classic story of our government not having a clue about where to allocate votes which will actually benefit our country, rather than buying votes.

This surprise meeting taught me a few things:

Go to events: you never know who you’ll meet. You might be surprised. Chance meetings and lessons like that never happen while we’re sitting at home watching TV.
Don’t try to network: just talk to who is near you. Listen, learn and remember that one valuable discussion is more worthwhile than a number of cheap handshakes.
Open your mind to the revolution: this re-organisation of capital and society around digital is impacting all forms of commerce. Startups are a symptom of something bigger – the maker revolution is next, new methods of manufacturing and niche products replacing legacy industries. It’s bigger than the web.
Help others: Which is what I tried to do with David and the marketing of Tomcar… given I was so inspired by the company.

Since our chance meeting, I have shared an espresso a few times with David – and he then asked me to join the Tomcar team as member of their advisory board. A pinch hitting CMO if you like – to help them let the world know they’re here. And it is going to be super fun.