The Business World: Cars could tell the truth about their drivers

To help the new EU recycling laws, we now have electronics that could `tell' a car when it's time to exterminate - and report to HQ exactly what that vehicle `knows' about the driver

THIS WEEK the European Union will confirm a plan to make any manufacturer selling a car in the EU take it back at the end of its life, at no cost to the owner, and to recycle a high proportion of its parts.

A nuisance for the car-makers? Maybe. An example of Euro-hypocrisy, for though there may be no direct cost to the owner, buyers of new cars will have to pay for the additional work? Of course. A golden opportunity for manufacturers to transform themselves from being on-off sellers of a product to becoming long-term suppliers of a service? Absolutely.

We still think of the economy as being divided into manufacturing and services. Manufacturers make a product and sell it to the customer; then they make another and sell it to someone else.

Service providers create some service and in doing so usually generate some sort of long-term relationship with their customer. Or at least they hope they will. If you buy, say, a new television set, you certainly do not feel you have any long-term relationship with Sony or Bush. If, on the other hand, you open a bank account with Barclays or NatWest both you and the bank assume the two of you will be dealing with each other for a few years at least. But this line between manufacturing and services has long been becoming more blurred. Financial service companies talk of "manufacturing" new products and many makers of goods earn a substantial proportion of their profits from selling spare parts and post-sales service.

There have been several practical barriers in the path of manufacturers eager to build a relationship. They do not know much about the person buying their products - and those irritating "guarantee" forms in 10 languages they put in the package with the CD player are hardly designed to encourage further communication.

They do not know how long the original purchaser keeps the product before selling it on to someone else or leaving it on the tip. They do not even know whether their product is actually being used much. Many people buy a video recorder, use it for a couple of reels, get bored with watching the junk they film, then forget about it. That is what happened to us.

As a result, selling a product to what is in effect a new customer each time becomes an expensive business. Every time a new product is developed, the manufacturer has to persuade new people to buy it.

But when a service industry has a new product it has a stream of existing customers who may add it to their shopping list. A bank or a phone company knows the name, address and a lot of information about every customer. A soft-drinks or a washing-machine company knows little. So when there is a new bank account or phone service it is easy to find the potential buyers. When there is a new cola or a washing-machine the seller has to start more or less from scratch.

Now consider the position of the car-maker. If the company has to take the product back at the end of its life one of two things can be done. The car-maker can set up a recycling facility and tell anyone with one of its cars that he or she can turn up and get rid of it. That would presumably satisfy the EU bureaucrats but it would be a negative response.

Alternatively the car-maker can fit its cars with the appropriate electronics to give a lifetime report of its condition - when it has been serviced, what parts have been replaced, how it has been driven, etc - so when it is brought back for recycling the manufacturer knows whether it can be refurbished or at least what bits can be used again.

Take this one stage further. If the car "knows" everything about its own condition, it ought to know a lot about its driver. The car can report this information back to HQ, for it is in the interests of the manufacturer and the owner to communicate with each other. If there is some software update or new servicing procedure that makes the car run more efficiently, then the owner should know about it.

Instead of the grudging acceptance (or worse, the refusal) of a warranty claim, mediated through often incompetent dealers, the manufacturer could use a direct relationship with the customer to improve the performance of the product and to sell new ones where possible. Ideally, the car-maker should not be selling just a car, but a long-term vehicle mobility service.

Why have they not done so? Partly a lack of imagination by manufacturers, but more the inability of technology to deliver the goods. Car companies have added electronics to vehicles but usually for simple tasks such as adjusting engine settings or inane ones including telling you the doors are open. The technology to maintain a long-term communication with the owner has not been there.

Now, suddenly there is the technology and the need. The technology is the Internet, the mobile phone, and the mini-computer. The need is being supplied by the European Union's recycling requirements, for if you are responsible for a product's entire life-cycle, you need to know how it is being used.

This does not apply solely to cars. Other complex products could also become a means to build up a long-term relationship between maker and buyer.

Companies which make things have to find ways of selling more than just one item. They need to solve people's problems, not simply flog them the latest thing off the production line. The more they are prodded into establishing a long-term relationship, the more secure their own business will become.

Sounds a bit old-fashioned doesn't it? Get close to your customers, keep them satisfied, build trust. That is exactly what good companies used to do before such policies became too expensive to sustain. But now the technology is racing forward, making it possible to maintain relationships that would have been unthinkably expensive even five years ago.

And the more the regulators expect manufacturers to take lifetime responsibility for their products the more the wisest manufacturers will see that it is wholly in their self-interest to do so.