Bad strategy and a lack of diversification will kill some carmaking giants soon, according to Dr Peter Harrop, the chairman of IDTechEx.
The new IDTechEX report, titled ‘Bad Strategy Will Kill Some Carmaking Giants Soon’, argues that “Bad strategy rather than tactics, such as misjudged new models, will kill several major carmaking giants. They face a perfect storm of peak car, totally new technology, totally new markets and recession.”
Are carmaking giants too timid?
Harrop explains: “In the past, giant corporations have successfully reinvented themselves in a remarkably short time. IBM appropriately flipped from computer box shifters to systems and services. It took write-offs and sold its laptop business. Rolls Royce in aeroengines leapt from the little car company. Compared with that, most of today’s automakers are suicidally timid right now. Those in denial about pure electric vehicles hope they are buying time with 48V mild hybrids but all too often the ones they make have diesel engines! Indeed, Jaguar Land Rover has gone from one of the world’s most profitable car companies to billions of dollars in losses by trying to sell mainly diesel throughout its range, oblivious to diesel becoming a four-letter word.”
Some are strongly backing both pure electric and fuel cell hybrid vehicles, with billions of dollars. Will that leave their pure electric thrust underfunded compared to more focused competition? And prioritizing cars for both powertrains? Oh dear. Most seem in denial about peak car and the inevitable peak electric car that will follow.
Harrop mentions a host of escalating negatives which are pulling these threats nearer, such as:
- The decrease in young people getting driving licenses, or being able to afford to buy a car. Harrop says as they move to cities, their disposable income is lost on rent;
- Long-term change in employment means that young people may be living with their parents longer now; and
- The cost of driving has grown.
The need to diversify across electric vehicle sectors
He adds: “Those carmaking giants primarily making cars should be terrified but not surprised. Both RethinkX and Barclays Research predicted global peak car as early as 2022 or so, and the new negatives make it possible they will be right, partly for new reasons.”
“No traditional car maker is rapidly pivoting into other activities leveraging their skills. It is challenging because no emerging EV sectors are big enough to replace the huge car market: automakers have to select and win at several”.
The solutions for carmaking giants
“To survive in cars, you need to succeed in energy independent solar cars (Lightyear, Sono, Hanergy etc.) and the car derivative called the robot shuttle. You must lead in key components such as power electronics. Competitors of Tesla have struggled to match, let alone beat its powertrain efficiencies: its reinvented motors have proved tough to match. See the IDTechEx report, “Electric Motors for Electric Vehicles: Land, Water, Air 2019-2029”.
He concludes by suggesting solutions for carmaking giants: “What is the tick list for a future survivor in the auto industry? Maybe a start could be:
1. Strong position in quite large EV growth markets such as construction, agriculture, mining, urban transport beyond cars, aircraft, boats, ships.
2. Speed in going 100% pure electric.
3. Autonomy leadership – creative application in new sectors as much as technology.
4. Strong balance sheet (sorry Tesla).
5. In fast growing EV sectors where China is never going to be the dominant regional market.
6. Inside the massive, protected market of China which took a rare breather in 2018 with a 3% decline in car sales, its first drop since 1990, but still 28 million units compared to 17.27 million for the USA at number two.”
For further information, contact research@IDTechEx.com.