The increasing commoditization of mass-market vehicles is the biggest change coming to the automotive industry in the next 10 years, Aston Martin CEO Andy Palmer said in an interview with Business Insider on Tuesday.
In the long run, he said, mass-market cars will increasingly resemble pods as autonomous-driving technology evolves to the point where vehicles require less human involvement. That inflection point, Palmer said, would happen when self-driving cars reach Level-4 autonomy.
Making his case for how a high-end brand like Aston Martin could maintain its relevance in such an environment, Palmer highlighted some well-known automotive market theory: “If you’re an entirely rational brand, then you’ve got to compete on price,” Palmer said. “In the car business, the margins are really, really, fine, if not zero.”
But Palmer said luxury vehicles have an emotional appeal that allows manufacturers to charge higher prices and collect richer profits. “There’s nothing rational about buying an Aston Martin,” he said. “You’re appealing to the heart, and the margins in that business are much greater.”
Under Palmer, Aston Martin has expanded its luxury brand beyond cars and into products like high-end condominiums as well as yachts and submarines.
“Right now we’re a luxury company that happens to do automotive and happens to do tech,” he said.
As Palmer sees it, in this forthcoming new world of commoditized mass-market pods, luxury sports cars — like horses in the earliest days of the automobile — will eventually be seen as recreational products used primarily for leisure.
But that future may be over a decade away, as Palmer thinks Level-4 autonomy, which means a car can drive within prescribed boundaries without human assistance, isn’t likely to arrive until around 2030.
Level-5 autonomy, which means a car can drive itself under any circumstances with no human intervention, may not arrive in his lifetime, Palmer said.