The Auto Industry – SAGE Business Researcher

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.

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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 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.

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.

DOI: 10.1177/237455680411.n1