Phil Biggs covers the automotive industry for NewsTalk 1340 WJRW
DETROIT, MI – Cultural changes. Market changes. Ideological changes. As we move through this decade, the one constant we can expect is rapid change. In our current political climate, it has become a given. For the automotive industry, perhaps more than others, change is a daily requirement. Automotive leaders have learned to be more receptive than ever to volatility and change. With the continual barrage of on-board electronic content, a wider array of powertrain variants, and global demand that is dynamic by region of the world, this presents a complex path from which to forge new strategies and operating plans. Here are several industry predictions that will offer either opportunities or obstacles ahead:
By the end of 2016, U.S. sales volume is likely to exceed 18 million vehicles. Looking ahead to 2017-2018 it may go even higher. This is both an opportunity and an obstacle. It is heartening of course to see volumes at record levels. But it also represents a critical challenge for the supply base as they pivot to adjust to extreme in-vehicle content demand while absorbing sharp volume increases. The average growth rate for suppliers the remainder of this decade is projected to be 20%, while OEMs are expected to grow at 10%.
What we don’t know is what the impact of warranties, infrastructure requirements, or maintenance will be as demand for electric cars, fuel cell vehicles and eventually – autonomous cars – grows later this decade. What this means is that there will be higher expectations of the supply base and more pressure on them to perform. In the face of challenges such as workforce preparedness, greater technical content, and global logistics, this is no small task ahead.
As we hail the arrival of the connected car this decade, here’s what else lies ahead: According to Pike Research, here’s a slice of current mobility state and future societal changes:
9 billion people on the planet by 2050 / Significant increase in wealth in Asia this decade / Today 250 million vehicles in the U.S. / 3 trillion miles driven on 4 million miles of roads / 170,000 gas stations / Today 92% of American homes own a vehicle / Over $1 billion daily oil spend in the U.S. / 2.8 gallons used per day per person / Another 300 million cars in service globally by 2030.
We’re seeing the convergence of telematics and GPS, consumer enablement, car-sharing, personal rapid transit, mass rapid transit, increased duty cycles and extended ranges. The cost of automotive batteries is expected to drop 50% by 2020 which should drive the demand for all-electric vehicles to over 1 million on the road.
Planning cycles are shifting profoundly. Today a 5-year horizon is extinct, as automakers and suppliers must make investment forecasts in 3 to 4-year category planning cycles, vehicle changeover in less than 2-year cycles, and technology introductions occurring sometimes every 9 to 12 months. On top of global reach and technological waves, societal changes must be addressed. Worldwide there are now over 20 megacities (urban areas with over 10 million in population), and projections of 35 megacities by 2050, according to Navigant Research. New York and Los Angeles currently have megacity status, with Chicago, Atlanta, Dallas, and Miami likely U.S. candidates over the next thirty years. In the U. S., the demand fracture between Baby Boomers and Echo Boomers will continue to create yet another planning and design layer as OEMs seek to meet the fickle tastes of both these buying segments. Not for the feint of heart.
More complexity, less time to market, more mobility options ahead. OEMs will need to attract new car buyers while keeping existing ones, and do so in a compelling and effective manner. “Subscription services” that enable a driver to lease a mix of vehicles each year, unique by region of the world, is one way to enable the OEM to remain relevant and viable as everything changes. The auto industry is evolving into a shared ecosystem, with autonomous vehicles being built via OEM-tech company partnerships, proliferation of shared mobility (Lyft, Uber, et al) and in-vehicle technologies setting the pace of change. The arrival of Telsa, Google and Apple has caused more industry change – and is in turn transforming the way consumers view their mobility needs.
Ride-sharing will likely become a huge and lucrative market opportunity for the automakers and their tech alliance partners in the coming decade. Morgan Stanley estimates that today there is a $1 trillion annual car manufacturing opportunity in units sold…contrasted with a $10 trillion ride-sharing opportunity calculated in miles driven. Any major OEM entry into this ride-sharing segment that secures just a 2% share would be disruptive.
Other coming attractions: Consulting firm McKinsey & Company predicts we will see energy shortages by different regions of the world, more collaboration on a global scale, symbiotic relationships between OEM and dealer as well as suppliers, plus the rise of the middle class in Brazil, Russia, India and China. New mobility packages will seek to integrate vehicles to ever-increasing population densities and consumers’ greater connectivity requirements. Unique options such as concierge services which enable a driver to plan and navigate the linking between car, train, bus, and other transportation modes will emerge. Car platooning, zero crash capability, autonomous driving, intelligent voice command systems – all are being introduced later this decade.
All of this creates a cauldron of formidable risk and reward that has already started to bubble over, with potential for great opportunity, or failure, in the coming years. The global automakers and the towns and communities that support them are doing their part to face these unchartered seas and sail smoothly in the midst of gusty winds of change.
Phil Biggs is Executive Vice President for the Nashville, TN-based technology company, NeXovation.
