C8 – The Future

In the final chapter of the book, we examine the implications of our findings for the future landscape of the auto industry.  We examine the most common modes by which auto firm get into a crisis and look at some of the strategies for getting out of it, noting that mergers and acquisitions, a common form of industry consolidation, can be particularly problematic in the auto industry.

We look at some of the warning signs of crisis, noting a syndrome which we label ‘the permanently optimistic forecast’ – a tendency for companies to make unrealistic projections of growth in output which they persistently fail to achieve. We see this in Renault’s projections for sales of electric cars, in FIAT-Chrysler’s hopes for its Alfa-Romeo brand, and tellingly, of VW plans for the US market in the run up to the 2015 emission’s scandal.

Based on publicly available data, we construct indices of the four main factors which explain resilience – operational effectiveness, scale, market reach and stakeholder support – and use these to construct a simple ‘resilience league table’ of 14 of the major auto producers that shows who are likely to prove the most and the least resilient in the medium to long term.

A simplified version of this can be found here: Resilience league table.

We discuss whether electric vehicles and autonomous vehicles will disrupt the auto  industry, as many are predicting they will. We conclude that these technologies are unlikely to displace existing, strong, incumbents. In our view it is more likely that the stronger incumbents will absorb the new technologies. possibly via partnerships with technology companes such as Google and Apple, rather than be destroyed by them.

 

Selected Quotes

“Cars are a prime example of a technology that is heavily embedded in most economies and societies. This means that change is likely to be slow and incremental because cars touch and enable many aspects of people’s lives, all of which must absorb and adjust to any change. What this effectively means is that – irrespective of current environmental and energy concerns – the car industry as we know it, with its incumbent firms, is unlikely to change radically in the foreseeable future”. (p290)