Technology is ever-changing and evolving in a pursuit to make human lives easier. Most of the new technologies start from a smaller set of early adopters before penetrating into the mass market. Automobile industry is no different. Advanced technologies first appear in luxury car segment dominated by early adopters looking to try out new technologies, be it for safety, comfort, or eco-friendliness. Thus, luxury automobile players tend to spend more on innovation to come up with new features to appeal to their target segment. A higher spend on R&D, thus, enabled luxury carmakers to play a vital role in bringing breakthrough features to the industry.
These features are first launched in the flagship models for the early adopters. Once the feature is well received by them, other models of the luxury OEM receive the feature. Later, when there is enough awareness about the feature and its utility, premium carmakers incorporate the feature in their models and eventually, when the feature becomes cheaper owing to the economies of scale and localisation, even mass market carmakers offer it in their models. Take the price of airbags, for instance. In 1976, the feature used to cost around $1,500 (adjusted to inflation), the average cost now is around $500 making it affordable even for the mass market players. A closer look at the evolution of features in a car also tells the same story, most of the ingenious features are conceived by the luxury carmakers.
Mercedes and Volvo are in the front line when it comes to developing revolutionary safety features in a car, such as three-point seatbelt. Volvo developed this feature in 1959, which is now a basic feature even in an entry-level model car. Mercedes-Benz added airbags to the car to develop supplemental restraint system in 1981. Leveraging the same airbag technology, Volvo with an intention to protect the pedestrians developed pedestrian airbags feature in 2012 which might also become a standard feature in the future. This leadership can be seen in braking as well. Mercedes-Benz introduced the electronic Anti-Lock Braking System (ABS) in its S-Class model of 1978. Building on this technology, it later came up with Electronic Stability Control (ESC) and brake assist system in 1995-96. These braking technologies now are among the standard technologies in any car. Volvo coupled these braking technologies with sensors to introduce autonomous emergency braking in 2008.
Comfort and Convenience
In addition to the pioneering technologies in safety, some of the small yet effective improvements in a car are also developed by luxury carmakers. For instance, control buttons on steering wheel and auto radio scanning technology are now seen in any car, but it is Mercedes-Benz which first introduced these features in its S-Class model. Even though these are minor upgrades to the already existing infotainment setup, they are major improvements for a driver who need not distract himself from the road to switch to a different radio channel.
In making environment friendly cars, Tesla is leading the way by completely changing the way a traditional car is designed. From extensive innovation in battery technology to high performance motors, Tesla is benchmarking the specifications for an electric car. As a result, other luxury carmakers like Daimler and Mercedes-Benz are using Tesla’s technology in their electric cars.
Parallels from other industries
Similar technology adoption scenarios can be found even in other industries as well. For example, bezelless smartphone displays launched by Samsung in 2017 were only part of models priced above $800. In 2 years, this feature is also part of smartphones priced under $280-$300. Similarly, in televisions, the LED screen technology, when introduced by Samsung in 2009, was only part of models priced above $1800. However, now it is a must-have display technology in any television, even in the ones priced below $200. Recently launched technologies like foldable smartphones and OLED display technology for televisions, which are currently limited to high-end models, might become a standard feature in the future.
Feature assessment framework
Luxury carmakers continuously innovate and introduce new features, however, the possibility of a feature eventually penetrating the mass market can be assessed by evaluating it in the light of three broad parameters: acceptability, affordability, and compatibility.
Acceptability: A feature that solves a crucial problem or interacts directly with the senses of the customer has higher potential of getting accepted in the mass market. Some features which are basic hygiene in a luxury car can act as a differentiator in mass market car due to their high perceived value in that segment.
Affordability: To evaluate whether a feature can be made affordable, it is essential to understand the major cost constituents. If development cost is the major component, then the scale achieved in mass market segment will bring the cost down. However, if the cost is due to any specific material being used, it is relatively difficult to achieve affordability for mass market cars without further R&D or finding a substitute.
Compatibility: A feature should be able to give the same utility given the constraints of mass market car—be it design architecture or on-board computing resources. The availability of ecosystem required for a particular feature also determines the benefits that can be realised.
It is, thus, evident that luxury OEMs play a crucial role in initiating this virtuous cycle of innovation. The technology developed by them can be brought to mass market cars, making them safer, convenient, and eco-friendly. However, a thorough evaluation of various factors will help us understand the key features which can easily penetrate the mass market and achieve the desired impact. Rationalising taxes on luxury cars will stimulate sales in this segment and eventually lead to revenue-neutral or even revenue-positive outcome for the government. This will also provide them enough volumes to localise advanced technologies and thus helping in achieving the objective of self-reliance.
Views are personal. The author is principal and division head – business performance improvement (auto, engineering, and logistics), Nomura Research Institute Consulting & Solutions.