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Issue: The Auto Industry
The Auto Industry
By: Vickie Elmer
Pub. Date: April 2, 2018
Access Date: May 10, 2020
DOI: 10.1177/237455680411.n1
Source URL: http://businessresearcher.sagepub.com/sbr-1946-106266-2884928/20180402/the-auto-industry
©2020 SAGE Publishing, Inc. All Rights Reserved.
©2020 SAGE Publishing, Inc. All Rights Reserved.
Can it adapt to changing demands?
Executive Summary
For decades, automakers sold their products in the United States and other large markets by featuring attractive styling, powerful engines
and vehicles that created an aura of status and affluence. Today, the industry is caught up in what General Motors executive Mark Reuss
calls the biggest transformation since its creation more than a century ago. Driving the shifts are technology such as artificial intelligence
and electric vehicles, as well as changing consumer preferences that create demand for ridesharing services and lessen vehicle sales.
The biggest potential change of all may be the advent of autonomous vehicles, although this could be slowed by the recent fatal collision
between a pedestrian and a self-driving car in Tempe, Ariz. Amid the industry’s innovations, traditional auto companies are hurrying to
form partnerships with software developers and other high-tech enterprises.
Among the key takeaways:
Chinese automakers are pushing to penetrate the U.S. market and are focusing on production of electric vehicles and the batteries
they require.
U.S. vehicle sales declined in 2017 after seven consecutive years of growth, and forecasters predict another dip in 2018.
Millennials, especially in urban areas, are powering many of the changes buffeting the auto industry, such as the demand for
ridesharing services and electric cars.
Click here to listen to an interview with author Vickie Elmer or click here for the transcript.
Full Report
Three cutting-edge trends in one vehicle: the “Pop.up Next” concept flying car has an electric engine, is self-driving and can
function as a drone. (Robert Hradil/Getty Images)
Most Fridays, Mark Reuss and other General Motors executives and engineers head to GM’s suburban Detroit track to test a new model
and its rival. Reuss, GM’s “car guy,” serves as head of global product development; and despite all the digital information collected on new
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cars, he believes in hands-on, revved-up driving of new cars and trucks. Even in the era of greener, leaner vehicles, Reuss still loves fast
cars and auto racing. 1
Yet he knows his real race is to a future of cars without drivers, vehicles with nonpolluting power sources and relationships with customers
that start with ridesharing or a virtual connection.
Dramatic shifts are coming at breakneck speeds for the global auto industry, ranging from artificial intelligence (AI) and remote-driven
trucks to selling automotive subscription services instead of sedans or SUVs, electric vehicles – and the big golden ticket: autonomous
vehicles.
“It’s probably the biggest change since the transformation of horse and carriage to the automobile. It’s that big,” Reuss said. “It has the
potential to change every person’s life, and that’s how we treat it.” 2
The traditional world of autos – enthusiasts’ clubs that show off vintage Corvettes or Mustangs and companies that bend metal and fine-
tune engines – is colliding with new technology, tech companies’ growing interest in the field and changing consumer tastes. The industry
faces new competition and business models and is partnering with game makers, software developers and a slew of startups to create
artificial intelligence, digital maps, and perhaps even flying cars.
Amid a whirl of change and innovation, the sector may even land a new name: “mobility.”
“It’s a very exciting time for the industry. A huge amount of change is yet to come,” and with it, a need for talent and investment, says Anil
Valsan, lead automotive and transportation analyst for the global consulting firm Ernst & Young (EY).
After decades of focusing on the new car models, automakers in the past two years “have actively taken steps both internally to drive this
change, and make significant investments outside” to cater to customers who seek both product and services, Valsan says.
These shifts result from technological innovations, but also from demographics and the new expectations of consumers under age 40.
“The Millennials … are having this very disrupting effect on the industry,” says Rebecca Lindland, an executive analyst for Kelley Blue
Book, the car evaluation company. “The move to mobility has really been brought about by Millennials.”
Yet it remains unclear whether legacy companies such as GM, Ford Motor Company and Volkswagen will be able to move quickly enough
to appeal to younger buyers and use new technologies as part of their products or services. Automakers need help with what EY calls
“turbocharged disruption” in part because most are not prepared to execute faster changes. Entrepreneurs and high-tech communication
companies “are already setting the pace for innovation in the automotive ecosystem,” the consulting firm said in a 2016 report. 3
On-demand mobility, software and other services could create up to $1.5 trillion in additional revenue worldwide by 2030, a 30 percent
increase in traditional car and aftermarket sales, the management consulting firm McKinsey predicted. 4
There is also great uncertainty over who will emerge as leaders in this sector – and no shortage of skeptics who question whether
autonomous cars can deliver on their promise of greater safety and more productive humans.
There is no question about the potential opportunity. Traffic accidents, largely
caused by human error, claim more than 35,000 lives in the United States
each year.
Yet driverless cars may carry their own perverse set of risks. “Lulled into a
sense of security, riders might not wear their seat belts, or be too busy texting
to take over if the technology needs help,” wrote Mark Buchanan, a physicist
and science writer. He added: “Unless human drivers are banned from the
roads, they can create added dangers by driving aggressively to take
advantage of the comparatively cautious self-driving cars.” And he warned
that a hacked autonomous vehicle could become “a potent, remotely piloted
weapon.” 5
The debate over how quickly to deploy self-driving vehicles and how safe they
are has intensified after an autonomous Uber car struck and killed a
pedestrian on March 18, the first known fatality involving such a vehicle. Its
sensors are supposed to detect bicycles, people and other objects to prevent
6
crashes.
Uber responded by temporarily halting autonomous vehicle testing. Days later, Arizona Gov. Doug Ducey suspended Uber’s testing
privileges in his state, a reversal of his previous enthusiasm for the technology and for pilot programs in Arizona. 7 Toyota also halted
testing, while other companies said they planned to continue their pilot programs.
8
The accident is likely to slow congressional action on pending legislation to reduce regulation of the fast-developing technologies.
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“Automakers will not only need to re-evaluate their testing procedures … but also convince wary consumers that the benefits of this
technology will outweigh the risks,” said Jessica Caldwell, an analyst for car researcher Edmunds.com. “Most people are still highly
skeptical about the safety of autonomous vehicles, so this kind of tragedy is a huge setback.” 9
So far, the U.S. government has given limited guidance on building safer autonomous vehicles, and more
than 20 states, including Illinois, Virginia and Nevada, are creating their own rules. 10 Self-driving vehicles
have a long road to travel: They need to rack up hundreds of millions – perhaps hundreds of billions – of
miles to acquire enough data to demonstrate their safety, according to the RAND Corp., a California-based
think tank. This would require driving a fleet of 100 cars 275 million miles, or around 12 years of round-the-
clock driving at 25 miles per hour, without a failure, to meet the federal safety standard of today’s vehicles,
RAND said. 11
Automobiles bring out strong emotions, positive and negative. They serve as a status symbol and badge of
wealth or privilege – and a contributor to air pollution and congestion. Cars create opportunities to live,
work and sell wherever their owners like – and kill thousands every year. They give owners a sense of Jessica Caldwell of
freedom to travel the open roads – and create repetitious jobs for truck drivers and assembly-line workers.
Edmunds.com
The industry still employs close to 1.7 million people in the United States and, after shedding thousands of
jobs during the 2007–09 recession, added 256,000 from 2009 to 2015. 12 Many of the jobs are in engineering, software, research and
other high-skill positions. 13
By next year at the latest, automakers will sell 100 million vehicles around the world, fueled by demand in India and Asia, according to the
consulting firm Frost & Sullivan. It forecast a 3 percent increase in global sales in 2018 over the previous year. 14
U.S. Car Sales End Multiyear Rise
Total vehicle sales, 2007–18
Source: “Total Vehicle Sales,” Federal Reserve Bank of St. Louis, March 2, 2018, https://tinyurl.com/y7wbw32g
U.S. car sales rose following the 2007–09 recession before dipping last year.
Despite increasing demand for roomier SUVs and light trucks, U.S. vehicle sales are slowing. The industry experienced its first sales
decline in seven years in 2017, and a further drop is expected in 2018. “The market is pretty saturated right now,” Caldwell, the
Edmunds.com analyst, told The New York Times, adding that there are a record 1.26 cars on the road for every licensed U.S. driver. 15
Amid this saturation and slowing sales, U.S. automakers certainly will face more competitors. For decades, the so-called Big Three of
Ford, GM and Chrysler battled for sales with Honda, Toyota, VW and then Korean automakers. Now startups Tesla and Chinese
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©2020 SAGE Publishing, Inc. All Rights Reserved. automaker Guangzhou Automotive Group (GAC) are adding more layers of competition. GAC opened a tech center in Silicon Valley, and it plans another in Detroit as it prepares to sell a seven-seat SUV in the United States by late 2019. 16 For decades, automakers have relied on a mix of styling and powerful engine performance to sell cars. More recently, vehicles were created to appeal to demographic segments, such as the minivan for a mom with children. Yet in this era of ridesharing and mobility, younger consumers may express themselves by which mobility app they use, not which car brand is parked in their garage, says Kelley’s Lindland. GM is steadily transforming itself from a metal-bending car company to one offering an array of mobility services: Maven, its car-sharing facility; 3D maps and a “marketplace” screen on the infotainment console for ordering coffee or takeout food. Facing competition from ridesharing services, the company offers car leasing to Uber drivers and testing for a variety of on-demand services. 17 Ford bought Chariot, a minibus company that consumers book with an app, and is adding London to four U.S. cities served by it. 18 And Nissan, Renault and Mitsubishi Motors launched a $1 billion fund to invest in mobility startups and finance developments in connectivity, artificial intelligence and electrification. “I don’t think we can do it alone,” Renault CEO Carlos Ghosn told Bloomberg at this year’s CES, the annual electronics trade show, in Las Vegas. 19 Mergers and partnerships are springing up worldwide as companies seek ways to share technologies and competencies. A Chinese billionaire bought a 9.7 percent stake in Daimler AG, and other Chinese automakers are seeking mergers and partnerships to compete in new markets. 20 Such partnerships are increasingly common between automakers and tech companies, firms big and small that make everything from artificial intelligence to digital road maps. Partnerships also pair automakers with pizza chains and a small sports car maker with a Silicon Valley startup that makes sensors for self-driving cars. All use these new alliances to show they can swim in the autonomous-vehicle sea and become one of the two or three winners in the battle to create robot cars. 21 Such partnerships and alliances are “vital to all companies’ efforts to stay competitive” and share long-term investment, analysts for the financial rating company Standard & Poor’s said. 22 The automotive industry is investing heavily in research and development (R&D), with European automakers spending 50.1 billion euros (about $62 billion as of late March) annually, or about 5 percent of sales. 23 The U.S. automotive industry ranks third in R&D spending, behind pharmaceuticals/health care and software and electronics, and is spending more on software and the “connected car,” according to the consulting firm PwC. 24 “Mary Barra’s GM no longer feels like it needs to be all things to all people,” says Lindland, referring to the company’s CEO. “It’s spending R&D differently,” and may buy more small companies to gain expertise and competencies, Lindland says. When the financial website The Motley Fool recently identified the three biggest mobility disrupters, it named Tesla, Waymo – and GM: “No legacy automaker has done more to prepare for the tidal wave of change.” 25 Still, it is difficult to change the public perception of traditional automakers such as GM, Ford and VW. Despite acclaim for GM’s electric Bolt, Millennials and others “don’t look to General Motors to forge the path of new technology,” Lindland says. Instead, Tesla, with its roadster rocketing into space and its $100,000 electric car with autonomous features, draws headlines and customers willing to wait months for new models. Yet its ability to actually build cars is questionable. “Tesla keeps up with the technology but is not able to execute yet,” Lindland says. It lost $675 million in one quarter in 2017 as it spent heavily on its next-generation electric vehicles. 26 While urban Millennials love may Tesla or their bicycles, their rural counterparts still want traditional cars or trucks. Some 87 percent of young rural drivers in Minnesota and three other states told researchers they want to drive a car to work. 27 While urbanites buy more electric and autonomous vehicles, rural residents probably will still drive gasoline-powered engines, because people in rural areas require longer driving ranges. “By 2030, the car market in New York will have much more in common with the market in Shanghai than with that of Kansas,” McKinsey researchers wrote. 28 Diesel Lags as Electric Vehicles Grow Change is a constant in the diesel and electric vehicle markets, which are headed in opposite directions. Diesel vehicles, while never particularly popular in the United States, have enjoyed strong sales in Europe, where they accounted for nearly 45 percent of all purchases in 2017. 29 Once lauded as a green alternative, diesel engines in fact produce nitrogen dioxide and particulate matter that started to draw scientific scrutiny and serious warnings around 2012. The nitrogen dioxide from diesel fumes causes 71,000 premature deaths across Europe, according to the European Union’s European Environment Agency, and the World Health Organization declared diesel exhaust a carcinogen, causing lung cancer. So European cities Page 5 of 14 The Auto Industry SAGE Business Researcher
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including Paris, Madrid and Athens have agreed to ban diesel vehicles from their city centers by 2025, and others are replacing diesel
buses or giving consumers incentives to trade in their diesel cars. 30
Concerns were exacerbated by the Volkswagen “dieselgate” scandal. The automaker admitted in 2015 that it had falsified results of
emission testing on its diesel cars, even as it was promoting them as environmentally smart. VW has faced a barrage of lawsuits,
government fines and vehicle recalls, and other automakers, including Audi, have been caught up in the scandal. 31
Safety Is Biggest Concern About Self-Driving Cars
Percentage citing reasons for reluctance to use autonomous vehicles
Source: Felix Richter, “Consumer Concerns About Self-Driving Cars,” Statista, March 20, 2018, https://tinyurl.com/y7b4bp6n
Safety is the biggest concern about self-driving cars, followed by a desire to be in control and concern over
vehicle error, according to an international 2016 survey by a global management consulting firm.
In February, two German cities – including Stuttgart, the home of Mercedes-Benz parent Daimler – received court approval to ban heavily
polluting diesel cars and trucks from their streets. The bans were initiated after an environmental group sued Stuttgart, Düsseldorf and 20
other German cities to force driving bans after many cities were found to exceed European Union air quality standards. The ruling could
encourage similar action across Europe, analysts said, at a time when diesel car sales have already declined after the VW scandal.
Diesel sales could drop from 52 percent of Europe’s new car purchases in 2015 to around 27 percent by 2025, according to Barclays. 32
Elsewhere, air quality concerns mean a variety of possible new regulations. Following China’s lead, California is mulling a ban of gasoline
combustion-powered vehicles, though it is likely to be a decade away. The state, which accounts for more than 2 million new auto sales
annually, or almost 20 percent of the U.S. total, already has stricter pollution rules than the U.S. 1970 Clean Air Act. 33
At the same time, gasoline engine cars gradually are getting cleaner. New research shows that automobiles, which had been reported as
being responsible for up to 75 percent of some air pollutants, now are closer to 50 percent. Paint, pesticides, cleaning products and other
items created from petroleum compounds now create more urban air pollution than vehicles. 34
Zero-emission cars primarily are electric vehicles, and automakers will introduce almost 50 new electric models globally by 2020. Even
British inventor James Dyson, best known for his vacuum cleaners, said he will invest $2.7 billion to develop an electric car and batteries.
Yet even as companies commit to electric cars, “there is little evidence that there is a lot of consumer demand,” said Kevin Tynan, a
Bloomberg Intelligence senior analyst. 35 Electric cars are still mostly luxury cars, whose higher prices can cushion the high costs of their
batteries. Battery prices have begun to decline, and automakers are counting on cost reductions to increase demand for the vehicles.
However, Hyundai said these price reductions could end by 2020. 36
Global sales of electric vehicles hit 1 million in 2017, and the number is forecast to reach 1.4 million this year. 37 And 40 percent of them
will drive and be registered in China. 38 The electric car “is likely to be the most significant and potentially disruptive industry trend in
39
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39
coming years,” resulting from tighter environmental regulations in China and Europe especially, Standard & Poor’s analysts wrote.
Because electric cars require relatively little maintenance, they will be in demand for autonomous vehicle fleets. 40 Yet for now, most
automakers lose money on electric vehicles because of the high costs of batteries and large R&D expenditures. Autonomous vehicles, on
the other hand, are seen as saving business money by cutting labor costs and allowing vehicles to run around the clock. Companies see
opportunities in self-driving semi trucks, pizza delivery vehicles and taxis.
41
Yet in 2012, when Lyft wanted to pitch investors on self-driving vehicles, it was warned that it would seem crazy and laughable.
Interest in self-driving vehicles is highest in India and China, perhaps because of large numbers of auto accidents and fatalities in those
countries, and lower in Germany and Japan. Despite strong interest, especially among younger consumers, almost three quarters of
people surveyed say autonomous vehicles will not be safe. 42
China’s Ambitions
China’s ambitions in the auto industry are as big as the country and run the gamut from selling electric vehicle batteries to exporting cars to
the United States and Europe.
State-controlled GAC made a splashy debut in January at the annual North American International Auto Show in Detroit, with six vehicles,
including an electric “concept car” – a vehicle made to test potential interest. “We are well prepared to face the challenges in the U.S.
market,” GAC President Yu Jun said. 43
GAC is among dozens of small Chinese or Chinese-backed companies seeking to sell to the West, despite the Trump administration’s
pushback against imported vehicles. More than one-third of the 4,500 exhibitors at this year’s CES were from China, and many make
autonomous or electric vehicles. 44
“China, unabashedly, wants to be the Detroit of electric vehicles,” Anthony Milewski, a Swiss investment manager who focuses on such
cars, told Bloomberg News. “They are going to lead the world in capacity, and, eventually, in the technology.” 45
Watch video with marketing professor Phil Harris on the Chinese auto market:
Chinese electric vehicle battery maker Contemporary Amperex Technology Co., Ltd, or CATL, was founded in 2011 by an engineer who
spent most of his career making batteries for consumer electrics. The company plans to raise $2 billion this year to build a factory that will
quintuple its capacity. CATL spends about 11 percent of its revenue on research and development and is growing rapidly. 46 Its new plant
will allow it to add U.S. and other automakers as customers and to bypass Tesla as the world’s largest electric auto battery maker by
2020. 47
“We can change lanes and lead” in the high-end market of smart electric vehicles, William Li, a founder of electric carmaker NIO, told
Bloomberg News. 48 This could create the first Chinese automaker with global cachet and standing and boost the export market for
Chinese cars.
China became the world’s largest market for electric vehicles in 2015. Yet the country has dozens of domestic automakers, many of them
struggling. An auto sales boom ended in 2017, as double-digit sales growth downshifted to a 3 percent increase. “The days of making
easy money in China are fading away,” said Paul Gong, an auto analyst for the Swiss bank UBS. 49
50
China’s car culture started in the 1990s, and cities started pushing aside bicycles, which had numbered 523 million in the mid-1990s.
The electric car growth comes partly from government policies and support. Chinese consumers receive generous tax credits, which have
been extended through 2020. Starting in 2019, China will require automakers producing or importing more than 30,000 traditional vehicles
in China to make almost 10 percent of their fleet alternative-fuel cars or face fines. This has pushed both VW and Toyota to develop
electric vehicles specifically for Chinese consumers. 51
Flying Cars and Boring Modules
There are several possible futures for the auto: 3-D-printed sports cars, shared autonomous vehicles with augmented-reality interiors to
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suit the destination, fleets of electric vehicles – or dull, anonymous pods that function more like trains. Some experts say automobiles as
they currently exist will gradually disappear. Others see them soaring, with flying taxis and airborne cars aimed at rich consumers.
Automakers will shift their measures of success away from the number of vehicles sold to miles driven, or perhaps revenue per mile, says
Valsan of Ernst & Young. “It’s more a utilization mindset, the share of customers’ wallet and the share of customers’ journeys,” he says.
Cars could all but disappear in 20 years in favor of autonomous “modules” that travel grouped like trains
along highways and streets. In a provocative essay in the industry publication Automotive News, Bob Lutz,
a former senior executive at GM and Chrysler, suggests that high-performance brands such as BMW and
Mercedes will disappear and UPS, the U.S. Postal Service, Amazon and Uber will buy “several million”
autonomous vehicles a year for their fleets.
Once 30 percent of vehicles are fully autonomous, “everyone will have five years to get their car off the road
or sell it for scrap or trade it on a module,” wrote Lutz. 52
Several consumer trends are converging that could mean fewer cars and trucks on streets. First, both aging
Baby Boomers and teens are saying they do not want to drive cars, for different reasons, says Lindland.
Interest in “walkable communities” is increasing, with developers building more mixed-use and village
communities for families and retirees.
Taxi-bots, a robotic taxi already being tested by several companies, could eliminate the need for 90
percent of vehicles, a simulation in Lisbon found. 53 Automakers could lose 40 percent of their profits if Auto analyst Anil Valsan
robot-taxis take off, although the overall mobility industry will grow to $5.8 trillion in 2035, fueled by new
technologies, according to Boston Consulting Group. 54
The complexity of bringing truly autonomous cars into cities could add years to estimates bandied about. “That last 1 percent move toward
self-driving cars might be the most difficult thing that humanity has ever attempted,” Morgan Stanley auto analyst Adam Jonas said. Yet
GM is making significant progress and testing in demanding places such as San Francisco and soon Manhattan. 55
Technology for autonomous vehicles will remain “very expensive for years”
and 80 percent of buyers worldwide will not be able to afford it, said Mark
Suss, the Renault Group’s global access program director. 56
Because self-driving cars and their artificial intelligence systems depend on
strong data and internet services, autonomous travel may become the next
“digital divide,” said Stephen Zoepf, executive director of Stanford University’s
Center for Automotive Research, in a presentation at the Detroit auto show.
Urban areas could reap safety benefits while rural ones will not, he said.
Others are more hopeful.
“We’re going to see all these really amazing new kinds of vehicles,” said
Danny Shapiro, senior automotive director for Nvidia, which makes artificial
intelligence for gaming, robots and self-driving cars. One could serve as a
mobile office and another for different kinds of recreation, all equipped with AI and computing power, Shapiro told a panel in Detroit.
U.S. and European consumers may someday be able to choose from flying cars, which are already in development and may appeal to
wealthy consumers. Uber and Waymo are working on them. 57
One of the more intriguing looks at what autos may be like comes in a new book called “My Cognitive autoMOBILE Life,” written by two
technologists who worked for IBM. They see cars turning into self-healing, self-learning service robots that adapt their interiors to suit
drivers’ destinations or passengers’ interests. These vehicles would use self-configuring apps that add horsepower or convert a car into a
shared vehicle that monitors other drivers’ behavior. The car’s “digital platform will use the common tools and methods already in place for
supporting their smartphone,” the authors wrote. 58
Automakers have perhaps seven years to reinvent themselves, according to Fiat Chrysler CEO Sergio Marchionne. Otherwise, they may
be run over by fast-growing disrupters such as Waymo, he said.
“This business has never been for the fainthearted. The technology changes that are coming are going to make it probably more
challenging than it’s ever been,” Marchionne said. 59
About the Author
Vickie Elmer works as a business journalist and creativity and careers coach. Her articles appear in The Washington Post and Crain’s
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Detroit Business, among other publications. She and a group of artists and entrepreneurs launched a startup nonprofit called Mint Artists
Guild in Detroit that helps high school artists develop skills and opportunities to sell their creative work. Various family members have
worked for General Motors, Chrysler and Toyota, among other automotive companies and suppliers. Her previous SAGE Business
Researcher reports focused on the Global Art Market, Failure, Women in Top Management and the Fashion Industry.
Chronology
1890–1956 The “horseless carriage” achieves dominance.
1890s Gasoline-powered automobiles debut, although bankers and the public deride inventors as “imbeciles” and “the fool
who is fiddling with the buggy that will run without being hitched to a horse.”
1901 Oldsmobile manufactures 425 Curved Dash vehicles, the first mass-produced U.S. car. From 1902 to 1905, it is the
best-selling car in America.
1903 Although the United States has only 150 miles of paved roads, Horatio Nelson Jackson, a Vermont doctor, impulsively
bets $50 that he could drive his 20-horsepower car from San Francisco to New York City; traveling with his mechanic,
Jackson arrives in New York 63 days later, after many breakdowns.
1908 Ford’s Model T rolls off the assembly line for the first time; within 20 years, more than 15 million are sold.… General
Motors is founded in Flint, Mich.
1933 Toyoda, a Japanese company built on creating a better textile loom, established its automotive division; its first car
used parts from Chevrolet, Ford and Chrysler. It changes its name to Toyota in 1936.
1941 Drawing on its car-building expertise, Ford opens the sprawling Willow Run plant outside Detroit to produce B-24
bombers for World War II. Company executives boast they could build a bomber an hour, a goal they reach in 1944,
when the plant employs 42,000 people.
1955 Volkswagen, founded in 1937 under the auspices of Adolf Hitler, builds its millionth Beetle, though only around 9,000
are exported to the United States at the time.
1956 President Dwight Eisenhower signs legislation creating the interstate highway system. It will cost $128.9 billion and
eventually span 46,876 miles.
1977–Present New technologies reshape the industry.
1977 In what is considered the first “autonomous car,” Japan’s Tsukuba Mechanical Engineering Laboratory produces a
model that could travel 20 miles an hour. In the 1980s, German aerospace engineer Ernst Dickmanns creates a series
of autonomous cars, some based on Mercedes-Benz models.
1997 Prius, Toyota’s electric-hybrid vehicle, makes its U.S. debut and takes the lead in the race to create affordable
alternative-fuel cars.
2000 Zipcar begins renting cars by the hour. Major car rental companies copy the concept, and Avis purchases Zipcar in
2013.
2008 Burdened by high costs and excess factory capacity, General Motors and Chrysler file for Chapter 11 bankruptcy
reorganization. The following year, President Barack Obama spearheads a bailout that totals almost $80 billion, all but
about $9 billion of which is eventually repaid.
2014 Engineer Mary Barra becomes CEO of General Motors, the first woman to lead a major automaker.
2016 Domino’s starts using an autonomous wheeled robot to deliver pizzas in Australia – at a speed of 12.4 mph. A year
later, Domino’s begins working with Ford on autonomous-vehicle deliveries in Ann Arbor, Mich., although customers
will still have to come out of dorms and homes to fetch their pizzas.
2017 Even as Uber’s CEO resigns under a cloud of controversy, the company passes 5 billion rides worldwide. Rival Lyft hits
500 million rides in the United States and gains market share.
2018 California approves new regulations on self-driving cars that will allow tests by 50 companies (February).… A self-
driving Uber car strikes and kills a woman in Tempe, Ariz., the first known pedestrian death caused by an autonomous
vehicle (March).
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The Auto Industry
SAGE Business Researcher©2020 SAGE Publishing, Inc. All Rights Reserved. Resources for Further Study Bibliography Books Halberstam, David, “The Reckoning,” Open Road Media, 2012. In this classic work first published in 1986, a Pulitzer Prize-winning author describes how the U.S. auto industry fell behind its Japanese competitors in the decades after World War II. Ingrassia, Paul, “Crash Course: The American Automobile Industry’s Road from Glory to Disaster,” Random House, 2010. Drawing on extensive interviews with workers and executives, a former Detroit bureau chief for The Wall Street Journal recounts the mistakes that led to General Motors and Chrysler seeking bankruptcy reorganization in 2008. Lipson, Hod, and Melba Kurman, “Driverless: Intelligent Cars and the Road Ahead,” MIT Press, 2016. An engineering professor (Lipson) and a technology analyst (Kurman) look into the coming of intelligent cars and how they will change society. Wedeniwski, Sebastian, and Stephen Perun, “My Cognitive autoMOBILE Life: Digital Divorce from a Cognitive Personal Assistant,” Springer, 2017. Two technologists describe how smartphones, virtual assistants and automobiles will join with artificial intelligence to create a highly personalized smart vehicle. Articles “Redesigning the industry: How will it all shake out?” Automotive News, Nov. 4-Dec. 11, 2017, http://tinyurl.com/ybacwkt5. A special report from an industry newspaper looks at the auto industry’s changing business model, visionaries and suppliers, and the huge changes all must navigate. Boudette, Neal E., “Car Sales End a 7-Year Upswing, With More Challenges Ahead,” The New York Times Jan. 3, 2018, https://tinyurl.com/yd3osnpj. After the industry recorded seven years of gains, U.S. auto sales slowed in 2017, and experts expect a larger drop in 2018. One reason is that as automobile quality improves, Americans are keeping their cars longer. Holley, Peter, “After crash, injured motorcyclist accuses robot-driven vehicle of ‘negligent driving,’” The Washington Post, Jan. 25, 2018, https://tinyurl.com/y7wybtqd. A San Francisco accident leads to one of the earliest lawsuits involving a self-driving car, but police blame the crash on the motorcycle driver. Hough, Jack, “GM Gets Back in the Fast Lane,” Barron’s, Feb. 3, 2018, https://tinyurl.com/yapc8t8r. General Motors is moving quickly and strongly into new services and products mobility, and its share price could increase 35 percent as a result. Mervis, Jeffrey, “Are we going too fast on driverless cars?” Science magazine, Dec. 14, 2017, https://tinyurl.com/yb7g3tx5. Optimistic predictions about autonomous vehicles are based on little research, especially on the social, economic and environmental effects. Shankleman, Jess, and Hayley Warren, “How Electric Cars Can Create the Biggest Disruption Since the iPhone,” Bloomberg News, Sept. 21, 2017, https://tinyurl.com/yd6g9fg4 Electric cars, combined with ride-sharing and other new technologies, could represent as big a change to transportation, oil and other business sectors as the iPhone was to the mobile phone industry. Vonberg, Judith, and Nadine Schmidt, “‘We can’t just stop breathing’: A global scandal, made in Germany,” CNN, Feb. 22, 2018, https://tinyurl.com/yarsvyh5. Cars marketed by Volkswagen and others as “clean diesel” emitted 20 to 40 times the amount of nitrogen oxides allowed under U.S. law. Researchers say children can contract asthma and adults could lose a decade of life because of pollutants from these cars. Reports and Studies “The Contribution of the Automobile Industry to Technology and Value Creation,” A.T. Kearney, 2013, https://tinyurl.com/y7f33nco. This report by a management consulting firm looks at the auto industry’s role in job creation, training of managers and innovation in India, South Korea and elsewhere. “Global Automotive Executive Survey 2017,” KPMG, 2017, https://tinyurl.com/y89n472a. The auto industry’s changing landscape includes geopolitical shifts and many more electric vehicles, according to accounting firm survey of industry executives and its own research. Ferraris, Vittoria, Nishit Madlani and Alex Herbert, “Industry Top Trends 2018: Autos,” Standard & Poor’s, Nov. 15, 2017, https://tinyurl.com/ydxh8fs6. A report from the ratings firm Standard & Poor’s looks at the growth, risks, finances and emerging trends likely to affect automakers and their key suppliers through 2019. Gao, Paul, et al., “Disruptive trends that will transform the auto industry,” McKinsey & Co., January 2016, http://tinyurl.com/ycuzofkg. Four Page 10 of 14 The Auto Industry SAGE Business Researcher
©2020 SAGE Publishing, Inc. All Rights Reserved. trends will reinforce one another and create opportunities and major changes by 2030, according to this report by management consultants McKinsey. The Next Step Consumer Safety Ell, Kellie, “Driverless cars aren’t safe or ready for the road: Robotics expert,” CNBC, March. 20, 2018, https://tinyurl.com/yc26m39y. The recent death of an Arizona pedestrian who was hit by a self-driving car has highlighted the lack of guidelines in place for the technology, argues a robotics expert. Self-driving cars should be subjected to standardized testing similar to automated airplane systems, she says. Hawkins, Andrew J., “The fate of the steering wheel hangs in the balance,” The Verge, March 16, 2018, https://tinyurl.com/yd8m73r7. A bill under consideration by the Senate would loosen regulations on the development of self-driving vehicles, which concerns consumer safety groups and some Democratic senators. Wakabayashi, Daisuke, “California Scraps Safety Driver Rules for Self-Driving Cars,” The New York Times, Feb. 26, 2018, https://tinyurl.com/y9d7tlog. A California rule scheduled to take effect in April will eliminate a requirement that autonomous vehicles have a human in the vehicle for possible emergencies. Diesel Industry Cropley, Steve, “‘Diesel-saving’ technology could make it to market in two years,” Autocar, March 22, 2018, http://tinyurl.com/y9htyv9n. A recently developed system that converts the nitrogen oxide produced by diesel engines into nitrogen and water could potentially save the diesel industry. Oge, Margo, “Commentary: How Monkeys Proved to VW That Diesel Can Never Be Safe,” Fortune, March 6, 2018, https://tinyurl.com/y9fz7ufp. The only way to prevent further damage to human health and climate change is to move away from diesel engines altogether and adopt electric vehicles, argues the former director of the U.S. Environmental Protection Agency’s Office of Transportation and Air Quality. Topham, Gwyn, “The death of diesel: can struggling industry woo back consumers?” The Guardian, March 4, 2018, https://tinyurl.com/y7hj62nd. Sales of diesel vehicles are plummeting as more European countries and municipalities consider harsher penalties to limit the emissions that diesel engines produce. Organizations Alliance of Automobile Manufacturers 803 7th St., N.W., Suite 300, Washington, DC 20001 1-202-326-5500 https://autoalliance.org Industry group that seeks policy solutions on behalf of major U.S., European and Japanese automakers. American Automobile Association (AAA) 1000 AAA Drive, Heathrow, FL 32746 1-407-444-8000 https://newsroom.aaa.com/about-aaa/aaa-fact-sheet Founded in 1902, this club for car owners and passengers provides roadside assistance, travel information and discounts to members. It also lobbies on behalf of drivers and passenger safety. Center for Auto Safety 1825 Connecticut Ave., N.W., Suite 330, Washington, DC 20009 1-202-328-7700 https://www.autosafety.org/about-cas Nonprofit founded in 1970 to advocate for auto safety, quality and better fuel economy. Publishes reports and takes complaints about problem cars. European Automobile Manufacturers Association Avenue des Nerviens 85, 1040 Brussels, Belgium +32 (0) 2 732 55 50 www.acea.be Advocacy group that represents car, truck, van and bus makers in Europe and seeks to “ensure the economic, environmental and social sustainability” of the industry. Page 11 of 14 The Auto Industry SAGE Business Researcher
©2020 SAGE Publishing, Inc. All Rights Reserved. Fédération Internationale des Sociétés d’Ingénieurs des Techniques de l’Automobile 29, M11 Business Link, Stansted, CM24 8GF UK +44 (0) 1279 883 470 https://www.fisita.com Umbrella group representing 38 member auto engineering societies; organizes the biennial World Automotive Congress. National Highway Traffic Safety Administration (NHTSA) 1200 New Jersey Ave., S.E., West Building, Washington, DC 20590 1-888-327-4236 https://www.nhtsa.gov U.S. agency that oversees auto safety, recalls, data collection on crashes and more. Society of Automotive Analysts 1729 Southfield Road, Birmingham, MI 48009 1-248-804-6433 http://saaauto.com Trade group that provides information, insights and access to industry leaders and data, and hosts an annual industry outlook conference. Society of Automotive Engineers 400 Commonwealth Drive, Warrendale, PA 15096 1-724-776-4841 https://www.sae.org Trade group representing engineers in automotive, mobility, aerospace and other fields. Notes [1] Nick Bunkley, “Mark Reuss, in the ‘knothole’: For GM’s product chief, track time isn’t an escape. It’s part of rebuilding the company,” Automotive News, May 22, 2017, https://tinyurl.com/y7dso7sc. [2] “Breaking into The Auto Industry: A Q&A With Duke Alum Mark Reuss,” Duke University, Pratt School of Engineering, Dec. 5, 2016, https://tinyurl.com/y724xk3j. [3] “Automotive change drivers for the next decade,” EY Global Automotive & Transportation Sector, 2016, https://tinyurl.com/y7wk7c72. [4] Paul Gao, et al., “Disruptive trends that will transform the auto industry,” McKinsey & Co., January 2016, https://tinyurl.com/ycuzofkg. [5] Mark Buchanan, “I’m Not Sold on Self-Driving Cars,” Bloomberg View, Sept. 8, 2017, https://tinyurl.com/yc48jynk. [6] Sam Levin and Julia Carrie Wong, “Self-Driving Uber Kills Arizona woman in first fatal crash involving pedestrian,” The Guardian, March 19, 2018, https://tinyurl.com/y7v8xdl7. [7] Alejandro Lazo and Greg Bensinger, “Arizona Governor Suspends Uber’s Self-Driving Cars From Roads,” The Wall Street Journal, March 26, 2018, http://tinyurl.com/yayqnllh. [8] John D. McKinnon, “Uber Driverless-Vehicle Accident Complicates Push to Ease Rules,” The Wall Street Journal, March 20, 2018, https://tinyurl.com/y9ooxr9q. [9] Tim Bradshaw and Patti Waldmeir, “Toyota halts testing of autonomous vehicles on US public roads,” Financial Times, March 20, 2018, https://tinyurl.com/y8morqa2. [10] “Autonomous Vehicles / Self-Driving Vehicles Enacted Legislation,” National Conference of State Legislatures, accessed March 12, 2018, https://tinyurl.com/yavas5gj. [11] Jeremy Hsu, “When It Comes to Safety, Autonomous Cars Are Still ‘Teen Drivers,’ ” Scientific American, Jan. 18, 2017, https://tinyurl.com/yaf4qz59. [12] Joel Cutcher-Gershenfeld, Dan Brooks and Martin Mulloy, “The Decline and Resurgence of the U.S. Auto Industry,” Economic Policy Institute, May 6, 2015, https://tinyurl.com/ycxskc2d. [13] Joshua Wright, “Workforce Supply and Demand in the Automotive Industry,” EMSI, March 6, 2017, https://tinyurl.com/yc7rgmq9. [14] Sarwant Singh, “Will It Be A Smooth Drive or A Bumpy Road for The Automotive Industry in 2018?” Forbes, Jan. 30, 2018, https://tinyurl.com/y6uxfh5e. Page 12 of 14 The Auto Industry SAGE Business Researcher
©2020 SAGE Publishing, Inc. All Rights Reserved. [15] Neal E. Boudette, “Car Sales End a 7-Year Upswing, With More Challenges Ahead,” The New York Times, Jan. 3, 2018, https://tinyurl.com/yd3osnpj. [16] David Sedgwick, “China’s GAC Sets U.S. launch for ‘19; will recruit dealers at NADA convention,” Automotive News, Jan. 15, 2018, https://tinyurl.com/yb47na3t. [17] Paul Lienert, “GM’s Maven assembling building blocks for ride, delivery services,” Reuters, Aug. 16, 2017, https://tinyurl.com/yaxenm99. [18] Peggy Hollinger, “Ford applies to launch commuter minibus network in London,” Financial Times, Nov. 5, 2017, https://tinyurl.com/ycysavkh. [19] David Welch, John Lippert and Yan Zhang, “Nissan-Renault Plans $1 Billion Fund for Auto Tech Startups,” Bloomberg, Jan. 9, 2018, https://tinyurl.com/yc5uoyb4. [20] Xie Jun, “Carmakers pursue overseas ‘marriages,’ ” Global Times, Feb. 25, 2018, https://tinyurl.com/yao9l878. [21] Jack Stewart, “As Cars Go Robo, Their Makers Find New Partners,” Wired, Jan. 21, 2018, https://tinyurl.com/yb3kc6t6. [22] Vittoria Ferraris, et al., “Global Auto Industry 2018: At A Crossroads,” Standard & Poor’s Global Ratings, Oct. 10, 2017. [23] “Research and Innovation,” European Automobile Manufacturers Association, Jan. 6, 2017, https://tinyurl.com/yacshpxr. [24] “2016 Global Innovation 1000 – Automotive industry focus,” PwC, Nov. 10, 2016, https://tinyurl.com/y9ept2zm. [25] Jeremy Bowman, “Disruptor Alert: These Three Companies are Changing Transportation,” The Motley Fool, Jan. 31, 2018, https://tinyurl.com/ya2yapkj. [26] Dominic Rushe, “Elon Musk’s Tesla announces biggest quarterly loss ever,” The Guardian, Feb. 7, 2018, https://tinyurl.com/y87hzxu7. [27] Aarian Marshall, “Rural Millennials Still Dig Driving. Well, They Have No Choice,” Wired, Jan. 26, 2017, https://tinyurl.com/zqrg63n. [28] Paul Gao, et al., “Disruptive trends that will transform the auto industry,” McKinsey & Co., January 2016, https://tinyurl.com/ycuzofkg. [29] “Share of Diesel in New Passenger Cars,” European Automobile Manufacturers Association, March 8, 2018, https://tinyurl.com/yc3ewye3. [30] Adam Forrest, “The death of diesel: has the one-time wonder fuel become the new asbestos?” The Guardian, April 13, 2017, https://tinyurl.com/l7lfxmp. [31] Russell Hotten, “Volkswagen: The scandal explained,” BBC, Dec. 10, 2015, https://tinyurl.com/oc7c5cy. [32] Markus Wacket and Ilona Wissenbach, “Diesel cars can be banned from German cities, court rules,” Reuters, Feb. 26, 2018, https://tinyurl.com/ydg2ng3e. [33] Ryan Beene and John Lippert, “California Considers Following China With Combustion-Engine Car Ban,” Bloomberg News, Sept. 26, 2017, https://tinyurl.com/ybnf2xhb. [34] Cecile Borkhataria, “Chemicals in household cleaning products, pesticides and perfumes are now as big an air pollution threat as cars,” Daily Mail, Feb. 15, 2018, https://tinyurl.com/ya8pucjf. [35] David Welch, “Automakers Plan Electric Car Blitz as Tesla Burns Billions,” Bloomberg, Oct. 2, 2017, https://tinyurl.com/y7ysdlva. [36] Hyunjoo Jin, “Electric vehicle battery prices to steady by 2020: Hyundai Motor,” Reuters, Dec. 12, 2017, https://tinyurl.com/y9zfmc83. [37] Singh, op. cit. [38] Ibid. [39] Vittoria Ferraris, et al., “Industry Top Trends 2018: Autos,” Standard & Poor’s Global Ratings, Nov. 15, 2017, https://tinyurl.com/ydxh8fs6. [40] Jess Shankleman and Hayley Warren, “How Electric Cars Can Create the Biggest Disruption Since the iPhone,” Bloomberg News, Sept. 21, 2017, https://tinyurl.com/yd6g9fg4. [41] Matt McFarland, “Lyft ‘s quiet CEO opens up on his wild ride,” CNN Tech, March 5, 2018, https://tinyurl.com/yccmp7oh. Page 13 of 14 The Auto Industry SAGE Business Researcher
©2020 SAGE Publishing, Inc. All Rights Reserved. [42] Joe Vitale, Craig A. Giffi and Amy Bergstrom, “What’s ahead for fully autonomous driving: Consumer opinions on advanced vehicle technology,” Deloitte’s Global Automotive Consumer Study, https://tinyurl.com/ycrqentk. [43] Russ Mitchell, “China wants to enter the U.S. car market, but a rough road lies ahead,” Los Angeles Times, Feb. 5, 2018, https://tinyurl.com/ybvjmhxj. [44] Yan Zhang, “China Neck and Neck With Silicon Valley in Showcasing Auto Tech at CES,” Bloomberg, Jan. 11, 2018, https://tinyurl.com/y88vfk5x. [45] Jie Ma, et al., “The Breakneck Rise of China’s Colossus of Electric-Car Batteries,” Bloomberg News, Feb. 1, 2018, https://tinyurl.com/ya8ue5f5. [46] Ibid. [47] Ibid. [48] “Beijing’s Electric-Car Push Could Produce a World-Class Chinese Auto Brand,” Bloomberg, Nov. 21, 2017, https://tinyurl.com/y9vsq8r6. [49] Trefor Moss, “China’s Auto Market Slips Into Slow Lane – Except for EVs,” The Wall Street Journal, Jan. 11, 2018, https://tinyurl.com/y8d5o5n9. [50] Linda Poon, “Rebuilding the ‘Kingdom of Bicycles,’ ” CityLab, April 6, 2017, https://tinyurl.com/y9zyw3k4. [51] “Beijing’s Electric-Car Push Could Produce a World-Class Chinese Auto Brand,” op. cit. [52] Bob Lutz, “Kiss the good times goodbye,” Automotive News, Nov. 7, 2017, https://tinyurl.com/ydgqef6d. [53] Greg Ferenstein, “Futuristic Simulation Finds Self-Driving ‘Taxibots’ Could Eliminate 90% of Cars, Open Acres of Public Space,” Medium, April 24, 2015, https://tinyurl.com/ycqkwfkq. [54] Joann Muller, “Carmakers Risk Losing 40% of Today’s Profit Pools When Electric Robo-Taxis Take Off,” Forbes, Jan. 11, 2018, https://tinyurl.com/yd4yyjvz. [55] Jack Hough, “GM Gets Back in the Fast Lane,” Barrons. Feb. 3, 2018, https://tinyurl.com/yapc8t8r. [56] Peter Sigal, “Renault exec shares secrets of automaker’s low-cost car success,” Automotive News Europe, January 2017, https://tinyurl.com/yd9p8o7y. [57] David Vinjamuri, “Flying Cars Are No Joke For Uber,” Forbes, Nov. 9, 2017, https://tinyurl.com/ybw4qmyn. [58] Sebastian Wedeniwski and Stephen Perun, “My Cognitive autoMOBILE Life,” Springer, 2017. [59] Tommaso Ebhardt, “Adapt or Die is Marchionne’s Stark Farewell Message to Carmakers,” Bloomberg, Jan. 15, 2018, https://tinyurl.com/ydbqkok5. Page 14 of 14 The Auto Industry SAGE Business Researcher
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