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Revolution of the car industry
Car factories of the future will be smaller and cleaner, and not all
owned by car companies. The car business has a serious problem: it is producing too many cars. This over- capacity is resulting in fierce competition. Each manufacturer is competing in every segment of the market, with a huge range of models to attract different consumers. And models are frequently updated to keep interest fresh. This is making the business complex and expensive. So how can companies cut costs and increase their profit margins? To offer so many different models, car companies need factories that are completely flexible. They need to switch quickly from making one model to another to meet changing demands. Honda was first to do this, organizing its factories so that any one of them could make any model of car. They can switch to a new model overnight, simply by changing the software in the robots. Delivery is another issue that affects margins. For years, companies have tried to cut the time between a customer placing an order for a car and taking delivery.Manufacturers now operate a just-in-time production system. The components for each car arrive at precisely the right moment then they are needed for assembly line. Such production methods have cut the cost of holding components in stock, and have resulted high productivity. Most makers are now able to assemble a car in just 18-20 man hours. But once the car is finished, it usually stays in a distribution centre for 40-80 days. A shorter order-to-delivery cycle would lower the costs of holding stocks of finished cars. Moreover, most of these vehicles need to be discounted to get people to by them. With big discounts on sale price, there is no guarantee of profits even then the factories are busy. The magic answer to all this could be «build to order» (BTO). Instead of following the sales department’s forecasts, cars could be quickly assembled to the customer’s orders. Nissan has calculated they could increase profit by as much as $3,600 a vehicle in this they. But some people in the industry predict that the shape of car manufacturing will change even more radically. One view is that today’s manufacturers will disappear. In their place will be vehicle brand owners (or VBOs). They will do only the designing, engineering and marketing vehicles. Everything else, including even final assembly, will be done by the parts suppliers. The future of the car industry is kit cars. Or make that cars designed and built using elements of common kit architecture. Currently, there are two families of erector kits which can be assembled into all kinds of cars at Volkswagen. They have Teutonic names like «Modularer Querbaukasten» (MQB) and «Modularer Längsbaukasten» (MLB). Porsche is developing a «MMB» (Modularer Mittelbaukasten) for Mittelmotor (mid-engined) cars, or possibly a MSB (Modularer Standardbaukasten), which could be the Mutter of all Baukasten. Audi is already working with the MLB architecture. This coming year, Volkswagen will start using the MQB. Says Automobilwoche: «The Modulare Querbaukasten will provide at least 43 models of Volkswagen, Audi, Skoda and Seat with the same components: Underbody, axles, drivetrains. Europe’s largest automaker wants to become more flexibl, wants to react faster to changing customer demands and wants to save 30 percent of costs. Michael Macht, chief of production, calls it a ‘milestone’». Success and failure of a car company will be decided in the emerging markets. This is where the growth is. But this is also where a lot of small cars change hands andthe smaller the car, the bigger the need for creative cost control. VW chief Martin Winterkorn said: «In the car business, staying power is built on a better cost structure». The new kit architecture «is more than a new technology, it is a strategic weapon», said Ulrich Hackenberg, chief of Volkswagen’s Research and Development. It also allows to build niche cars and to react to regional differences without reinventing the wheels. Audi alone will increase its model count from 38 today to 50 by 2020. A new production engineering is inherent to the kit architecture. Volkswagen plants worldwide are being currently changed to accommodate the kit, and to become nodes in a larger production kit architecture. If people think of badge engineering, then they are misguided, says Hackenberg: «The creativity of engineers and designers of the different brands remains unencumbered. In the contrary. It is more welcome and more demanded than ever before». Such changes to the way the industry organized may be necessary if companies are to survive.