New Sustainable Business Model for Low-Volume Car ManufacturingTue 28th Apr 2015
Mass car production is the world’s largest manufacturing sector, yet its historical development is poorly understood. Research undertaken by Cardiff Business School’s Paul Nieuwenhuis and Peter Wells has addressed this gap in industry knowledge, leading to a new understanding of the nature of economies of scale in the automotive industry. As a result it is now understood, particularly in Europe and North America, how low-volume car manufacturing can be economically feasible, while mass car production profitability is under pressure. Building on this knowledge, a new business model for more sustainable low-volume car making, Micro Factory Retailing (MFR), was developed. This model has benefited a number of low volume UK car makers – e.g. Morgan, Gordon Murray, and Axon – as well as car manufacturers elsewhere, including Local Motors in the US.
Research focused on two areas: a reassessment of the historical development of mass car production and new business models. Through engaged scholarship with industry – involving Alcan, Corus and GE Plastics, amongst others – the research identified the importance of the all-steel body in the economics of mass car manufacturing. Historical research led to an appreciation of the importance of the work of Edward G. Budd to the innovations that introduced this technology. For example, Henry Ford, seen hitherto as the father of mass car production, was unable to mass-produce car bodies for the Model T. Budd’s innovations allowed the mass production, for the first time, of complete cars, albeit at a very high investment cost which came to determine the economics of mass car manufacturing. Thus ‘Buddism’ was coined for the current mass manufacturing model, a term which is gaining increasing currency. Later work on this theme was carried out from 2001 and focused particularly on the US and France where manufacturers such as Dodge and Citroën pioneered these technologies enabling the spread of this paradigm. Publications in 1997 and 2003 led to a series of invitations to speak on this new understanding at industry conferences, while a number of academic conference papers started the dissemination among academics.
Alongside new understandings of the historical development of mass car production, new insights were also developed into the economics of low volume car production. Early beneficiaries of these new insights include the Morgan Motor Company, which had been categorised as operating an inviable business model by consultants, being steeped in mass production but lacking the insights contributed by our work. Parallel work on business sustainability combined with this new understanding of the economics of low-volume car production then led to the development of a new business model for this method of manufacturing.
Benefits and impacts
This Micro Factory Retailing (MFR) concept shows how an integrated business model, combining assembly – based on post-Budd modular car concepts – with retail, service, repair and upgrading, can enhance customer-focus and market responsiveness. Additional advantages are:
- Eliminates waste and over-production, making it more sustainable both economically and environmentally
- Lower overall costs
- Provides greater job content and enhanced employment, greater integration in local economies,
- Reduces impacts of plant closures, rendering it more socially sustainable
This latter aspect of the research has had considerable impact on the work of Gordon Murray Design (GMD), a design and engineering consultancy led by its former McLaren Formula 1 designer namesake. GMD has developed a light-weight more sustainable concept car, the T25, and an electric version, the T27, currently the most efficient electric vehicle in the UK. This car is linked with a business model that draws heavily on the MFR concept, and Nieuwenhuis and Wells were invited to join GMD’s external advisory committee in 2010.
The ‘Buddist’ model was particularly appealing to low volume car manufacturers, with the Morgan Motor Company being a notable beneficiary of the insights of Nieuwenhuis and Wells’ work.
Nieuwenhuis, P. (2014) Sustainable Automobility; understanding the Car as a Natural System, Cheltenham: Edward Elgar.Nieuwenhuis P & P Wells (2003), The Automotive Industry and the Environment – A technical, business and social future, Cambridge: Woodhead ISBN 1 85573 713 2 and Boca Raton FL: CRC Press ISBN 0-8493- 2072-0.