A new wave of optimism is overtaking the US auto industry as it rebounds from the depths of the recession and a brutal restructuring, according to Booz & Company’s second annual US Automotive Industry Survey and Confidence Index.
“Bullishness and optimism prevailed in the survey results. Auto executives clearly believe the industry is back,” says Scott Corwin, a partner at Booz & Company. “It has emerged from the lows of the 2009 recession with a much stronger and more stable foundation. The newly restructured industry is leaner, is stronger and has gone ‘back to basics’—paving the way for a brighter, more profitable future.”
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In February and March of 2012, Booz & Company surveyed more than 200 executives from more than 75 automotive vehicle manufacturers and suppliers.
Key findings include:
- Relative to last year, industry executives are significantly more bullish on the state of the automotive industry; 94 % of OEMs and 92 % of suppliers described it as either “somewhat better” or “much better” than last year.
- Automotive executives cite Hyundai/Kia (88 %) and Volkswagen/Audi (72 %) as the OEMs most likely to grow market share over the next five years.
- 86 % of supplier executives and 72 % of OEM executives say the Detroit Three will maintain or grow market share next year.
- 53 % of respondents project a US market share of 4 % or more for Chinese OEMs by 2020.
- With continued government support, 57 % of respondents believe that alternative powertrains will command more than 10 % of the market by 2020. However, without continued government support, only 30 % of respondents have the same expectation.
- Relative to 2011, respondents are significantly more confident in the long-term prospects of full hybrid powertrains (70 % more confident than last year) and mild hybrid powertrains (65 %), but less confident in the future adoption of plug-in hybrid (46 %), battery electric (29 %), and fuel-cell electric powertrains (25 %).
- 78 % of OEM respondents say they are either holding the line on incentives or significantly reducing them.
- 34 % of suppliers and 50 % of OEMs say cuts in capacity have left them constrained.
- 55 % of OEMs and 42 % of suppliers say they were impacted by the 2011 Japanese earthquake and tsunami, demonstrating how global the U.S. auto supply chain is today.
Booz also said that the survey revealed four key factors that will shape the automotive industry in the next two years.
- Re-emergence of Fundamentals: The U.S. auto industry has learned the tough lessons of recession-driven restructuring, and this is driving a “back to basics” approach focused on strengthening balance sheets, producing excellent vehicles, and not letting supply get ahead of demand.
- Shifting Demand Centre: Emerging markets are gaining steam, and all automakers need to learn how to deal with different economies, consumers, and competitors.
- Powertrain and Technology Uncertainty: Alternative powertrains are still in play, but their success depends largely on government support and fuel prices. The industry is moving toward fully digital, connected cars, but automakers are struggling to decide what to place their technology bets on, and how.
- Interconnected Supply Chain: The unfortunate events of the Japanese tsunami and floods in Thailand brought home the interconnectedness of the global supply chain. 92 % of OEMs and 85 % of suppliers say they are seeking ways to mitigate these risks in the future.
“Walk on almost any car lot and you will see that this has definitely been a product-led renaissance. Coming out of the industry restructuring, OEMs and suppliers have addressed a number of fundamental problems in production capacity and labor, and are demonstrating much greater discipline around product and pricing,” says Brian Collie, a partner at Booz & Company. “If the industry can stay disciplined and preserve the efficiencies it fought so hard to implement, the future looks bright and profitable.”
