Race toward a digital future ep(32)
Nemanja: This is chair place where we discuss innovations and today we are going to talk about automotive industry and what this industry brought to us in the last 10 years and what it will bring in next 10 or 15 or 20 years, and its really disruptive. So about this subject I think I have a great guest here today, Miloš Stefanović managing director for Adriatic Jaguar and Land Rover so Miloš welcome to Chair!
Miloš: Thank you very much for having me
Nemanja: So first I want to ask you about the situation in automotive industry as I see it, as most of us are seeing it there is a crisis there that happened a couple of years ago. So can you tell me how did this crisis happen and what are you going to do to resolve this?
Miloš: It’s a bit hard to explain. It started with corona definitely. Nobody expected the pandemic. But now, two years after the the first wave of pandemic there are consequences, and a couple of things led us to the to the crisis that we are in now that is chip shortages. Everybody’s talking about chip shortages right now: “How can that happen?!”, “ Why don’t you build another factory?” and similar questions. In a plain view of a normal person that will be a logical question to ask. But corona led to everybody putting an emergency-brake regarding investments, regarding stocks, regarding supply and everything else basically. In a normal way of doing business you’re going to strive for the model that let’s you have just in time logistics. If if you need anything to build anything you will see that you don’t have it in stock because you will have your own resources put into that you will have a stock of something. But for chips, most of the factories did have just in time logistics. So, in a nutshell, if I need a chip for today it’s the best thing that it can arrive yesterday evening. Nobody expected that we will be in a lockdown, nobody expected the rise in demand of all kinds of electronics that can be used from home. In order for them to work you need that small thing which is called a chip of course and its also in the cars, they have thousands of them for different modules.
Another couple of things happened in the meantime so that whoever got the orders first and whoever got the contracts for that or was the client of the chip factories, which are basically you know couple of main players in the in the world, got the chips and got the supplies on time. Now everyone else is kind of waiting in line, so that’s why now we have a crisis of various products. The factories cannot supply and deliver the cars and to ease the demand which is high.
Nemanja: There were so many different theories on why this happened and somebody mentioned crypto and mining and that it’s all interconnected.
Miloš: It is. First of all you know you cannot just build a chip factory because it’s a very complex factory to be built. The chips are produced in almost sterile, not almost but basically even more sterile environment than in an operating room. So it’s not an easy factory to be built. Bosch is building now a factory which it takes time, but let’s say you cannot build it in a couple of months it’s year or year and a half. You mentioned the crypto mining, definitely you know another supply another demand of all kinds of electronics and the second and third things are that there’s also been a fire in one of the factories that’s producing chips and a huge demand of water is needed to cool down the chip factories, so more or less it’s not just one thing it’s series of things.
Nemanja: And hopefully it will come to an end right? Is it stable stabilizing right?
Miloš: Well today when we talk about it there are a couple of theories. There’s a theory that it will last throughout 2023. even to the 2024. My opinion is that that it will be stabilized maybe half of the year we will see more stable production and deliveries of the chips. But then again the manufacturers of the cars have pulled some moves in order to consolidate what are they offering right now
Nemanja: So let’s try to move on from the crisis and from COVID and everything that has been around for the last two years and talk about the future and when is there is any talk about automotive industry there is of course two subjects: fully electric cars on one hand and self-driving cars. So first I want to ask you about electric cars, 10–15 years ago it was science fiction. In that time for Musk, most of the people would put him in the basket with the lunatics but now they’re talking about him as a genius. So what do you think is needed and when is the world going to become fully electric or is it going to be at all like that?
Miloš: That is definitely a good question and an ongoing subject, even in our market here in Serbia but of course globally. I think that we are behind of Europe and the rest of the world because of the infrastructure here so maybe we will see that fully electricized market let’s say like that in couple of years. But mainly because of the infrastructure and the buying of the electric car needs to be more subsidized by the state. My opinion is that we’re not going towards that, we are here right now. I’m generally speaking about adriatic region here and then we can touch globally. Here maybe the best solution would be a plug-in hybrid right now because it gives you the possibility to drive on the electric power alone for some mileage and then you can just turn on the engine and drive. Because of the again if infrastructure mainly. Plus in order to be fully, to go fully electric you need the supply and everything that is producing that electric car and everything behind and what’s producing electricity to be green. It’s hypocritical to discuss about how you’re driving an electric car which is being made on coal.
So in order to be fully electric, for me that will be the the most honest answer. Going back to the subject, definitely we are here, everybody is going there all the manufacturers are going there it just depends how we here will compensate that couple of years that we are behind.
Nemanja: And what do you think, who will win the market race? Chinese, Silicon Valley or some incumbent because there is so many companies right now rising in this domain?
Miloš: It’s a good question! My money is on both of those, I have a share of Chinese companies and then again I really like Musk and Tesla. The Chinese market is huge market and there is a huge demand for electric cars. There are a couple of major players like three to four major players in China that are now slowly coming to Europe. But Tesla is Tesla, it’s kind of a hyped on that but I don’t see who will win it’s anybody’s game.
Nemanja: You mentioned Tesla, we talked about this a few months ago actually. How you see Tesla because it defined the market at least at the beginning
Miloš: Well yes. A couple of theories regarding Tesla, that it’s a state project, that all the money from the state has been given to the guy and how he became what he is. Definitely a specific and eccentric person, somebody who is not in line with standards and I think that he’s definitely driving the company. But how Tesla started it didn’t smell like it will come this far but I think that the biggest strength of Tesla is basically information, gathering of information and if everything is basically online. Every car has cameras that are picking up drivers behaviors, pedestrian behaviors, drivability of all other cars and that’s their strength. I think the most important strength that they have is the information that basically every Tesla car is doing the the job that of collecting the information and sending it to the base camp. So the strength of tesla is basically information.
Nemanja: There’s a saying that Tesla is not an automotive company but rather a data company right?
Miloš: Yeah, if you scratch beneath the cars and the surface, if you read more about it or somebody has an interest into that you will see their research and development is totally in in all kinds of directions. For example very interesting fact that that they will take over the insurance market at least in the states because of the insurance premiums. They know the behavior of their drivers, they know the behavior of their cars, they can calculate in how many accidents a tesla was involved in. So basically why not just have Tesla insurance when you know that your car won’t hit anybody or break when it needs to break or whatever it’s very interesting subject and should read about it’s very very interesting and they will just undermine everybody else.
Nemanja: So let’s move on to autonomous driving. Now the the biggest technological companies in the world Google, Apple and many others are producing their autonomous driving cars, and since I know that you’re a passionate driver and a great driver actually. I want to ask you, do you think it’s possible that machines or self-driving cars are going to become better drivers than humans? Are we going to become obsolete in driving?
Miloš: Well thanks for the kind words! There’s a strong possibility and definitely a future for what you stated. Autonomous driving is already here but not in that sense that the cars are driving themselves. The test cars are driving themselves, Tesla is driving itself but nobody will tell you and claim it that the car is driving itself, that’s technically for now now another thing that will help you in your driving or maybe assisting in driving, but mainly because of the legislative in that sense. because we are reading here and there
that some test car hit this or unfortunately even had collision with another passenger. But that’s because of the legislations. First you need to have everything consolidated and everything that is responsible if autonomous car is involved an accident.
Nemanja: I think a few weeks ago there was something about the Tesla accident in Belgium or somewhere they landed the whole fleet.
Miloš: There are levels of autonomous driving. What we have see in modern cars for almost five even ten years is cruise control then adaptive cruise control then lane keeping and then all kind of systems mixed together. Tesla is using cameras and it’s measuring and loads of algorithms are doing their thing. Some cars are using radars some, cars are using the multiple system cameras and radars but again in order for that to be fully autonomous we will need first to have everything legal. So the car can drive your uber tomorrow.
Personally, I believe that in some point we will be safe to do that, maybe we are right now. But then again the whole subject is not strict and not everything is defined for what makes a car fully autonomous, but we’re slowly coming to that.
Nemanja: So we mentioned Tesla and we talked about self-driving car and electric vehicles, but can you disclose some inside information from Jaguar? What’s going on there?
Miloš: Definitely! Jaguar as a brand is going to have that reimagined strategy and I think that we are slowly going to towards that. We have i-pace which is a fully electric jaguar, but I think that in terms of jaguar land rover it will definitely become a fully electric brand. I think that there will be no new models that will be plugged-in hybrids and that every new Jaguar model will be fully electric.
Nemanja: and how about uh autonomous driving what you’re doing in that field?
Miloš: That too! But I think that we will have to wait to see Jaguar Land Rover autonomous driving since it’s not on priority list definitely. But there is still a market for normal driving cars but with systems that will be upgraded. All kinds of systems like adaptive cruise control and emergency braking, collision warning, back collision warning. Those kinds of systems will be upgraded and will eventually become autonomous.
Nemanja: So still on the subject of autonomous driving. Because it’s a big thing now and I’m thinking about how it’s going to change commuting, how do you see it from your perspective?
Miloš: When you get older you’re starting to realize that time is something that you don’t have and then that time is precious and what you need to spare. So in order to do that you need not to worry about those kind of things. For example this morning I came from Budapest, pretty tired and I wouldn’t mind a car driving me, believe me! But I think that will be the the major thing, if I would like to drive the car I will press the button and I will drive the car but if I need to read an email or send the email or just have an app, I will press a button and then the car will drive me. I won’t mind that at all!
Nemanja: Whenever there is a subject on automotive industry mobility jumps up and things around it. What are the key technologies that drive the future of mobility?
Miloš: When you say mobility there’s also synonyms to that and how are you describing mobility. I mean generally I think that everything that we discussed and we’re discussing now is tied to the generally
making our life easier even mobility. Car sharing, e-mobility even all kinds of things we see that y scooter is being shared. I think that even the manufacturers are maybe pushing too high for us not to be owners of the cars. But to share the car, to lease the car, having options is not a bad thing for me I’m just not seeing it yet in full comprehensiveness. Everything is definitely going towards that. You will pay a monthly fee for the car like a subscription for Netflix or Amazon. I hate to say it but we are hearing it a lot now, that every new car is kind of similar to the older version and if you’re not so enthusiastic about it, if you imagine a car is point A to point B thing then it’s a good thing, and most of the people are like that. You will pay a subscription, so that you can have a car for example that if you don’t need 4x4 you have a small city car. If you need your subscription can be 15 days per year or you can have a 4x4 or even 50 days per year you can have a convertible. So in your subscription you’re driving a small city car and 15 days of your 20 or a month of vacation you will have a convertible or nice little or a sports car maybe and 4x4 for winter or something like that.
Nemanja: You mentioned earlier when we talked about Tesla and insurance how this is going to influence insurance industry.
Miloš: Well I mean we will see how they implement that but I think that they will take over the market at least in the USA. They’re really strong about it and when you put two plus two it’s really a great thing because it’s their product. If I was Elon Musk, it’s my product, I know what my cars are doing, I have all the data, the information from all of my cars all around the world. For example one percent of the of the fatalities, three percent of hitting the bumper or this or that, I’m just now babbling as an exam example but I know that I can give you the best possible price because I’m sure that my car won’t hit the other car or won’t be in a total crash or something like that, in that sense it’s brilliant.
Nemanja: We talked about the future and we talked about what we have right now but can you explain to me a how the automotive industry works? What are the dealerships what are the manufacturers what is the relationship between them? Because when I started to investigate for our chair talk, Iwas a bit confused with that.
Miloš: Automotive industry of course starts with the manufacturer, with the product itself. But in terms of a manufacturer being in a market that’s a totally different thing. A lot of manufacturers are choosing not to be present in some market or region but to be represented by a company. For example if we are talking about the Adriatic region most of the manufacturers are dividing this region into Adriatic region. The Adriatic is basically ex-Yugoslavia with with Albania. A lot of my friends and family don’t understand that chain, let’s say who is the manufacturer, who is the dealer and who is the importer? In the Adriatic region most of the manufacturers are giving a company importing rights for a region. So you have all the rights and obligations with that to be a distributor for a region.
Nemanja: so you can you can use the branding?
Miloš: Everything
Nemanja: And you have all the responsibility that it’s coming with it?
Miloš: Yes. So they’re choosing that because of the let’s say regional varieties or cutting the costs. But for example Adria region has EU and non-EY. every market has its own you know taxation, legislation, customs, drumarina, trošarina, this and that. So in order for a big manufacturer not to cope with that they’re just giving it to someone else. Of course you have a bidding process. For example tomorrow you would like to be a representative of a brand you have a bidding process you’re being called to. So that they can determine if you can handle that, are you capable, financially solid do you have a history and so on and so forth. So you have the manufacturer, you have an importer for certain region and then you have dealers. Dealers are the retailers basically in the market which have their own dealerships. Basically importer is a wholesaler, dealer is a retailer. So when the dealer says he will call the factory it doesn’t necessarily mean that they are cooperating directly with factory but with an importer. which is okay for a normal person who doesn’t need to know that because important in the region has all rights and obligations to implement and to enforce the brand.
Nemanja: So basically you started from Adriatic region and explained how it works. Is it same thing on the bigger scale
Miloš: Well in some markets yes in some no. In some the manufacturer is present we call that NC’s or NCI`s or varieties of that. You have a strong presence or the presence of the factory itself somewhere the factory is a joint venture. But most of the manufacturers are speaking about the agency model which is a very tricky subject right now. The agency model will be so that you, as a normal consumer of a product, should be able to go online click to see your car or preferable configure the car and stuff. But the pricing should be equal. I still see the the role of importer in that but let’s go back to the subject. So every market, every car that is priced in our region should be the same. Or for example in Serbia you have three four five ten dealers of the of some brand, the pricing should be same. So you go online, you pick the car or you go to the dealership you see you have a test drive and that’s it. You order the car and there is no “can I get a better price here in Belgrade or in Novi Sad or in Čačak?”, no. The prices is dictated by the manufacturer, so you as a dealer get the fee to basically sell or to deliver the car. The fee that’s basically covering your costs of doing the test drive have the car in showroom. The agency model is going to also, that extent that the dealers will not have their own test cars, but the manufacturer will provide them. So they will have no costs but they will have a fixed fee. That’s something that’s now a pretty popular subject on all fronts and all manufacturers. But I think that in the Future we will see in some kind of mix agency slash importer models.
Nemanja: So a fixed price wherever you’re buying it sounds strange it sounds like the manufacturer is dictating the price from the beginning, doesn’t that sounds like a monopoly?
Miloš: When you put it like that yes but no it’s a contrary to that. They are trying to minimize the hustling from the importers and dealers and everybody. So you will have the price which is transparent price, that’s the price of the car in and everybody should have that price, Which is fairly good. There’s no point of them losing time and going to this dealer or that dealer or importing the car from that market or that market. The manufacturers is putting the price and price label on the car and that’s it. Is it realistic again, for our markets so so because you have a taxation. You cannot have the let’s say same price for one model let’s say range or sport in all the markets here it’s because of the taxation and customs and everything, but the point of agency model is contra to what you’re saying. It’s not monopoly but controlling of the price to the retailer. So the retailer should have all the data and all the transparency of the price, that’s the most important thing and everything else is controlled in the process.
Nemanja: We will se if it works in the real world
Miloš: Well igave you the plain agency model and it’s pure content but, as I said, I don’t see it in a pure way which is good on paper and the paper can have it excel sheet is one and the reality is different
Nemanja: So I want to move on one specific subject. I know that you’re a big car enthusiast and even though you’re working for Jaguar and Land Rover know about your Gotham project. Can you explain to me how this thing happened and how it started and where is it right now, what is the Gotham project?
https://www.youtube.com/watch?v=V3_Ri3fXzzI
Miloš: Gotham project is basically a hashtag that I put on an instagram post when I started to work on BMW 6 series. Basically factory e24, it’s 1985, but it’s kind of modified with an m5 engine of the newer generation. As Igrew up it grew with me and. But it’s a mainly a track day car it’s now a racing car but my passion towards cars goes long before I even knew how to drive. So it makes sense when you say that I’m working in the automotive industry and being surrounded by cars I have more of that modern classic. So i spend all my spare time around them.
Nemanja: It was very interesting to me that that car of yours became a movie star right?
Miloš: Well yeah, it’s a regional blockbuster Južni Vetar. It’s a funny story my friend called me and said yeah they’re looking for some car and nobody knew that that movie would be that big. I didn’t know if it would explode so I gave my car for the for the filming like 10–12 days and now it’s a synonym for the BMW 6 series. So now it’s the part of the history
Nemanja: From history let’s go to the future what do you think the streets are going to look like let’s go 15 years from now?
Miloš: Another excellent question and I think that it will be a mix of everything that we discussed. It will be self-driving cars, it will be even self-driving helicopters because there’s a company called Archer Aviatics they’re recently listed on New York stock exchange that are now doing the commutes. Their main businesses they are building basically smaller aircrafts that’s why I’m not choosing to say choppers because they’re not choppers and I really really believe in that project. You’ll need a half a day or a day but not not as a chopper you’re in the chopper now you’re here but as a as an affordable commute you know small things that you know can carry up to 10-15 passengers. The future will be a mix it will be flying cars flying saucers flying choppers everything, but I still see streets as they are because it will be a shame not to have internal combustion engine. Engines with the normal petrol that can be driven as pleasure cars or something like that.
Nemanja: This was so interesting, thank you very much for taking a part of this conversation you’re welcome and for you out there subscribe hit subscribe hard and see you next Thursday when we talk about some other innovations!
<iframe width=”560" height=”315" src=”https://www.youtube.com/embed/RRb7aXCJ1IM" title=”YouTube video player” frameborder=”0" allow=”accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe>
Keep up with us:
