CONSULTANTS PREDICT DIRE FUTURE FOR AUTO INDUSTRY At Detroit's Automotive Press Association

by Marty Bernstein
Senior Editor-At-Large

The future of automobile industry, especially the Detroit Three looks bright, doesn’t it? Sales are at all-time highs, profits are growing exponentially, and the economy, we’re told, is improving, but beneath this glitter, says a new report -- Global Automotive Outlook, from renown consultants, AlixPartners, the future of the automobile industry as we have come to know it is in deep, deep trouble.

The surge of interest and investment, says the report, in autonomous, connected, shared and electric vehicles is turning a conservative business model into a multi-billion-dollar crap shoot led by high-tech newcomers with very deep pockets and aggressive attitudes.

The Tesla’s, Amazon’s, Apple companies plan in one, two or three year periods unlike the ultra conservative two, four, eight and ten year cycles of traditional auto manufacturers. Billions have already been invested in new automotive technologies, but no one knows which will be a business bonanza or a bomb. “There are going to be billions and billions of dollars lost in bets that were put in the wrong place,” said John Hoffecker global vice chairman of AlixPartners.

Continuing he noted, “Only a handful of companies will win in the new world. Others will be forced to use the new technologies from industry leaders. The real winners in the future will be those who are able to quickly and successfully change their business focus to that of a consumer electronics business and quickly adapt to emerging technologies.”

Deep diving into various elements of the new auto business during a presentation the Detroit’s Automotive Press Association, AlixPartners report included a near term assessment of the industry and a much darker, I call it dire, prediction for U.S. automobile sales.

Mark Wakefield, the head of the automobile practice at AlixPartners predicted record high vehicle sales of 17.5 million in 2016 will drop 13% from 2017 through 2019 to 15.2 million sales partially due to a “used car time bomb” as hundreds of thousands of cars come off lease periods of three years.

Global Automotive Outlook’s supporting statistics and analysis noted this downturn is ill-timed due to impending industry upheaval that is forcing new major capital commitments, unfamiliar new partnership relationships and fundamental shifts in strategy for future of driverless electrified cars that may or not be shared or owned. All this while trying to run a traditional internal combustion engine car business as the world changes. Wakefield said, “Deciding what to invest in while maintaining enough flexibility to shift with unpredictable turns in technology and the consumer marketplace will be a real trick.” In other words, a crap shoot.

Electric vehicles get a lot of what my father called “chin music” a lot said but not much content. Less than 1% of the nation’s automobile market despite big time government give-a-ways yet it generates news. Only in China are electric vehicles welcome with growing sales. The report said 350,000 plug in cars were sold in China last year, up 84% and nearly twice as many as in the U.S. and 98% of them ae built in China. Adding to this is China’s investment in new battery technology and facilities.

Add in autonomous vehicles, self driving vehicles, ride sharing and connected cars to the equation to the package that requires a significant, albeit vital, business decision. Who will the consumer trust in this brave new world? AlixPartners predicts a major public relations challenge in technology. “Silicon Valley dwarfs’ traditional automakers in consumer awareness of driverless and other technologies. About 55% of survey respondents recognize Tesla and 20% Google as companies developing technologies while traditional automakers together registered 12%. Forty-one percent said they’d trust Silicon Valley autonomous vehicle programmers the most, while just 17% picked Detroit’s Three.

Fasten your seatbelt … it’s gonna be a very rough ride.