Thread by @jpr007

The ‘Osborne Effect’ Confronts Automakers With Potential Obsolescence

The hoopla they are making about their plans is exceptionally risky

Every time the automakers signal their intentions, they increase the potential of the “Osborne Effect"
themobilist.medium.com/in-a-rising-th…

The “Osborne Effect" is a commercially deadly phenomenon that could leave them with billions of dollars in losses

In an Osborne outbreak, consumers are blasted with the advance announcement of a mind-blowing coming breakthrough in a product like a popular electronic device

The new version is due in six months, a year, or perhaps a bit longer

The consumer, now aware that what’s on the store shelf is going to be outdated, waits to buy the new version

The one on the shelf keeps sitting there, unbought, losing the company a lot of money

In the case of Adam Osborne, a computer pioneer for whom the effect is named, he announced a super-upgrade of his computer in 1983, a year before its actual release

Sales of his current version ceased

Two years later, he was bankrupt

Reilly Brennan, a Silicon Valley venture capitalist, told me that’s what threatens the automakers

"Car companies do this insane thing of showing you concept cars six years in advance,” Brennan said

“Dealers have hated concept cars because they want to sell 2021 cars, not 2025"

The Osborne danger is on two levels :

1. An important fraction of the auto-buying public could delay a planned vehicle purchase, waiting for a hard look at the flood of 2024 or 2025 EV sedans, SUVs and pickup trucks, all priced about the same as their gasoline-run cousins

What happens next will depend on the consumers’ mood :

- they may buy mainly combustion and a trickle of the EVs, as they always have

- or they could make a purchases of EVs

- whichever they do, there could be a lot of 2022–2024 combustion models left unsold on dealer lots

2. The second level of impact could come in the second half of the decade, well after cost parity is reached, when the price of EVs may be even below that of combustion

Most automakers will not have fully made the transition to EVs, and will be to a large degree still reliant on conventional vehicles, which will now be in danger of Osborne obsolescence

"Most people haven’t even driven an EV,” Brennan said

"The real Osborne Effect will be at total cost parity and the real experience in which a person’s peer group owns one and they’ve been able to drive one. It’s a matter of what the industry calls, ‘getting butts into seats'"

Some have cast doubt on the Osborne thesis, contending that the computer company died because of an entirely different blunder

Possibly so, but there is no doubt that once-proud products have been made obsolete by newer models

Think the sleek Nokia 8210, a phone about half the size and weight of a deck of cards, which cost about $400 when it came out in 1999 and made people swoon just like the iPhone did starting in 2007, when Nokia fell off the sales map

Or how about the Kodak Instamatic, the must-have film camera owned probably by every second or third household in the United States through the 1960s, 1970s and much of the 1980s

We all know what happened next

Obsolescence comes in many forms

There has been a multi-year slowdown in U.S. automobile sales :

They have gone from 17.5 million vehicles sold in 2016, to 17 million in 2019, 14.9 million in the Covid-19 year of 2020, and are on track to sell roughly 16.8 million this year

Consumer habits and tastes are in motion

That another mind-shift to EVs could occur — just as has happened on Wall Street and in Silicon Valley — seems indisputable