The outlines of the future of the auto industry are becoming clearer as recent news developments underscore determinative trends that finally are reaching critical mass. These trends include a gathering global slowdown in sales, shifts in the traditional rivalries among the Detroit Three automakers, and the quickening realignment of interests around autonomous and electric vehicles.
At a time when tariff wars, strong consumer confidence, rising interest rates, quiescent gasoline prices and other factors also are playing roles in reshaping the U.S. market, here are three ways in which the auto industry has been rapidly evolving, underscored by the latest headlines:
Sales may be stalling: It finally looks as though 2019 may introduce the first truly significant decline in U.S. auto sales in at least a decade, as February results reported Friday showed an estimated 2.8-percent decline last month compared with a year earlier.
After hanging around the 17-million level for each of the last four years, analysts are looking for a 2019 dip to maybe 16 million to 16.5 million new-vehicle sales in the U.S. this year, as rising interest rates and increased prices squeeze more Americans out of the market.
“The sales pace finally has shifted into a lower gear,” said Charlie Chesbrough, senior economist for Cox Automotive.
The prospect of material softening in the American market is concerning for automakers especially because the United States has been the sole global bright spot among major regions as sales in Europe and Latin America have struggled and the Chinese market has cooled considerably.
Detroit Three are jockeying: Fiat Chrysler was the first of the traditional Big Three automakers to abandon production of sedans, a few years ago, and that early strategic move has paid off as the perpetual No. 3 player in the Motor City has ridden sales of its Ram trucks and Jeep utility vehicles to robust profitability without the albatross of having to sell sedans that fewer and fewer American consumers want. Detroit’s weakest player thereby has become arguably stronger than its two crosstown rivals at the moment.
The company last week even confirmed it plans for a multi-billion-dollar new investment in refurbishing an old engine plant in Detroit to make still more Jeeps – and larger ones, at that. In bringing out a new three-row Jeep version, Fiat Chrysler will join a growing list of automakers that have placed new and first-time beets on the largest category of SUVs, including Subaru and Volkswagen.
Meanwhile, General Motors has been in the process of laying off thousands of white- and blue-collar workers as CEO Mary Barra deep-sixes several sedan models and tries to stay ahead of what she sees as a gathering storm in future sales. And constituencies around Ford Motor remain concerned that CEO Jim Hackett hasn’t fully explained his vision for the company’s future.
Fortunately for Ford, nothing excites auto watchers like new sheet metal, and the company has just launched its first marketing campaign around an important new vehicle: an all-new Ranger mid-size pickup truck, which finally inserts Ford into a significant segment that it abandoned several years ago.
EVs and AVs are forcing changes: Everyone concedes that the industry’s future belongs to electric vehicles and autonomous vehicles – but when? The future finally has begun invading the present in significant new ways that presage accelerating changes organized around these technologies.
For instance, Volkswagen and Ford – arguably, two of the global industry’s most disadvantaged players at the moment – keep growing closer to full-blown cooperation around automated vehicles, which would help each company make progress at lower cost in that crucial arena.
And BMW and Daimler have pledged a $1-billion partnership around ride-hailing and car-sharing services that many believe will define the future of urban transportation around the world.
But the most startling change in this area might be last week’s announcement of the departure of Alicia Boler Davis, GM’s top manufacturing executive and a long-time Barra lieutenant, who reportedly will land at Amazon. It’s unclear at this point – but the subject of inflamed speculation — what someone with Davis’s manufacturing credentials might do at a digital giant that so far hasn’t announced it will be making cars.
But Davis’s arrival might have something to do with another new step by Amazon: a $700-million investment in a Detroit-area startup, called Rivian, that plans to build an electric pickup truck and an SUV. Amazon could be interested in the company for the implications of future Rivian vehicles for its delivery network. Yet given how Amazon continues to expand into every vertical in the universe, it isn’t inconceivable that the company could be gearing up its own production of EVs and even AVs.
Meanwhile, what other potential investment partner for Amazon has been sniffing around Rivian too? Reportedly, it’s General Motors. In some new role at Amazon, Davis could end up working with old colleagues again in reshaping the future of transportation.