Furthemore, compared with other industries that have big product development budgets, the automotive industry has to invest in products that have a much shorter lifecycle and (usually) lower profit margins, further raising costs.
The FCA report breaks down development costs. It suggests that the R&D and tooling for a vehicle hoovers up 75% of the budget. R&D for the powertrain and the powertrain tooling accounts for another 20%.
The contention is that as much as 45-50% of the money invested in product development is in technologies and components that are “undiscernible to the customer”.
Moreover, there is now almost a complete overlap in powertrain and transmission offerings between mainstream makers, a situation intensified by the various brands having to meet the same CO2 and other pollution targets.
The report suggests that, in the medium term, car makers need to ditch traditional approaches and work towards major R&D and production integration, sharing platforms, transmissions and even factories across the industry.
The approach would be similar to non-Apple mobile phone production, where processors and software are shared across many different brands but the products are built by third-party factories.
Automotive brands would remain separate entities and concentrate on differentiation through design and branding.
The downside of an industrial-level merger is that it would take probably a decade to align product development on a single platform and powertrain family.Currently, the average car maker has 18 different platforms in its portfolio, 20% less than in 2004, and about 3.3 different ‘top hats’ (body styles) per platform, 30% higher than in 2004.
Reducing the number of individual architectures is a major concern for the entire car industry, with Volkswagen spending huge sums to roll out its MQB front-drive architecture and Toyota recently announcing its own TNGA (Toyota New Global Architecture) project.
The report quotes Raj Nair, Ford’s vice-president for global product development, as saying that the brand currently has 12 global platforms, will cut that to nine by 2016 and wants eight as a “long-term target”.
Automotive analysts have been highly sceptical that such wide-ranging mergers could become a reality. However, the financial pressure on mass makers remains intense.The report is described as a “dispassionate look at the industry from the outside using insider knowledge”.
FCA denied it was an indication that the company was “up for sale” or that achieving a mega-merger was a “matter of life or death” for it.
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