We all know being in the automotive industry is a cut-throat business. And no one knows this more than the car manufacturers who fight tooth and nail for their share of an extremely competitive market along with every cent of our hard earned cash.
As with everything in these rapidly evolving times, the automotive industry is not immune to change. In fact, according to Adam Jonas, Auto Analyst for Morgan Stanley, our current view of the automotive manufacturer’s world will change dramatically in the next 20 years.
Speaking to The Detroit News, Jonas said “We believe the radically changing landscape of autos requires a commensurate change of thinking in Detroit if the domestic OEMs [original equipment manufacturers], as we have traditionally known them, are to remain relevant 15 or 20 years from now,” Jonas told The Detroit News.
“The world has too many car companies: We cover nearly 30 auto assemblers globally across eight countries. In our opinion, the balance of economic, competitive and technological forces will ultimately consolidate this figure to five or six players.”
Jonas’ words following on from comments previously made by Sergio Marchionne, Chief Executive Officer of the Fiat Group. In fact, Marchionne has been suggesting for the past few years that, in the not so distant future, only five or six car company conglomerates will survive. In Marchionne’s view, car makers will need to manufacture in excess of 5 million cars a year to remain economically viable.
Where this view leaves independent companies such as BMW, who only build around 2 million cars per year, in the scheme of things to come is anyone’s guess.
The one car manufacturer who was singled out by Adam Jonas as an example of car companies of the future was Tesla. For those of you who are unfamiliar with Tesla, they are an independent American car manufacturer which designs, produces and distributes electric cars and electric vehicle powertrain components such as lithium ion battery packs. Tesla has created a strategic alliance with Daimler, Mercedes-Benz’s parent company, to develop battery technology. By creating this alliance, Tesla has shown that it is possible for an automotive manufacturer to invest and develop in new technologies and thrive while so doing.
“Tesla could either end up being Detroit’s worst enemy or its salvation,” Jonas said. “In our opinion, the disruption from Tesla comes early enough to allow an incumbent sufficient time to adapt its culture, capital allocation and recruiting strategy to the changing forces. With proper execution, Detroit may thank Tesla Motors for being that stiff board in the back of the head right when they needed it.”
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