Through the offices of the major automakers, an ill wind is blowing. Change is on the horizon, in more ways than one, and today’s difficult conditions may be poised to develop into something altogether more catastrophic down the line. The big players in the American auto industry are sounding the alarm—things are tipping towards disaster.
If you haven’t heard of the SAE Detroit Section’s Global Leadership Conference (GLC), you’re not alone. A gathering for top automotive executives, the GLC usually flies entirely under the radar as an event for insiders only. However, this year, outside forces have seen the group deciding to raise its voice on important matters. “The GLC Committee is so concerned with what they see coming in the automotive industry that, for the first time, they decided to publish this White Paper and issue a Call to Action,” states the group in its whitepaper, entitled “The US Auto Industry at Risk.”
But what is it that has them spooked? It’s the combination of several major changes all happening at the same time that are pushing domestic auto manufacturers towards “breaking point.”
“Multiple waves of technological changes are washing across the industry and revamping the ways in which cars and trucks are engineered, manufactured, sold, and recycled,” reads the paper. You don’t have to be a top auto executive to know that electrification has posed a major challenge for legacy automakers. Beyond that, new manufacturing technologies like gigacasting are shaking up the status quo. Automakers have to grapple with these technological changes if they want to build cars that remain competitive in the future. However, the white paper notes these issues are just the tip of the iceberg.
According to the GLC, the arrival of ‘Peak Auto’ is only complicating matters. The worry is that it’s simply not possible to keep selling more vehicles every year to the same old markets. The paper outright states that demand for cars has stopped growing in the US, Europe, Japan, and South Korea.
At the same time, the threat of competition from new Chinese manufacturers is looming ever larger. It’s a perfect storm—the pie isn’t getting any bigger, but a bunch of new players are trying to grab a slice. The paper claims that Chinese EV manufacturers have a cost advantage of up to 35%, which it credits to a “national strategy to lock up the supply chain for electric vehicles.” The result is a huge boon for Chinese automakers to the detriment of all others. “By the end of this decade, China is on track to export as many vehicles as the U.S. makes annually,” the paper’s authors note.
Regulatory issues are also a concern, particularly when it comes to pending environmental rules. “The U.S. automotive industry is investing tens of billions of dollars in electric cars and plug-in hybrids to meet emission and fuel efficiency standards which become especially stringent in 2027 through 2032,” reads the paper. The automotive industry has, in effect, been coerced by government policy to move in this direction, at great cost. It appears there is some resentment in the GLC regarding this fact. “So far, the public is not purchasing these vehicles in the numbers required to satisfy those requirements,” reads the paper. “In fact, a significant part of the public wants no part of them.”
It’s clear that the big players in Detroit are more than just concerned. Indeed, the tide is already turning against them—and against legacy automakers overseas as well. From the paper:
Over the last five years, the Detroit Three automakers lost 6.6% points of global market share to Chinese automakers and EV startups. That represents about 5.6 million units of capacity and tens of thousands of jobs. In a global market of 86 million light vehicles annually, each percentage point of share equals 860,000 vehicles, which in turn equals three or four assembly plants worth of production. Each of those plants have several thousand employees. Japanese automakers have lost 3.4% points of share, the Germans 1% point, while the Koreans have not lost any. China gained 8.2% points and the EV startups—mainly Tesla—gained 2.1% points. The loss of global market share by the traditional automakers is reducing their economies of scale and economic output.
Ultimately, none of these issues are brand new, but these challenges are now looming large for domestic automakers. The paper does, however, lay out a path to salvation. The paper’s authors are pragmatic, noting that the industry will not be saved by government policies alone.
The document’s most interesting highlight is that the issue of cost needs to be addressed by legacy auto—particularly where its engineering methods are out of date or irrelevant in light of modern advances. In particular, it notes several ways in which electric vehicles can be built cheaper if designs are approached with a fresh sheet of paper:
One obvious example is that automakers need to “unlearn” old engineering practices and specifications that made sense for internal combustion vehicles but are not needed with electric cars. For example, the structural beams inside the instrument panels on EVs from some legacy automakers are built to specifications that were needed for cars with piston engines. Those specs were drawn up to eliminate the vibrations that come from piston engines. Yet even though electric cars do not generate those kinds of vibrations, the structural beams are still built to those specs and that adds unnecessary cost and weight.
Another example of a practice that must be “unlearned” is with the sealant applied to the panels in the trunk area, which is there to prevent carbon monoxide from leaking into the passenger cabin. Even though EVs do not emit carbon monoxide, those trunk wells are still built to the old specs with sealant. Automakers need to review their specifications and eliminate those which are unnecessarily driving up the cost of making electric vehicles.
The white paper has more advice for legacy automakers. It states that suppliers should be given less restrictive specifications to enable them to work faster. Common componentry is cited as an excellent cost saving measure, particularly if brands are willing to share parts with competitors. For example, it notes that this makes the most sense for parts that “do not contribute to a brand’s image”—things like windscreen wiper actuators or tire pressure sensors. If multiple automakers chose to share these basic components, there would be great savings to be had thanks to the economies of scale.
As covered by Forbes, the white paper is ultimately preaching that there is a way through the coming malestrom. “We really wanted to not just focus on here’s a laundry list of everything that’s wrong, everything that’s haywire, but rather, how can we bring this into a set of recommendations,” said JP Flaharty, a Toyota North America executive who chaired the GLC this year.
The hope is that this white paper will light a fire under the industry, and get things moving in the right direction. Legacy automakers face a great challenge in the years ahead, some more than others. Time will tell if they’ve got what it takes to make it through.
Image credits: Ford, GM, Lewin Day, Chrysler
Hey Auto Industry, you want to know what the tipping point is for most of us? That the average car price is now $48,397(according to CarEdge, Nov. 5, 2024). In 2019 it was closer to $37,000. Can you please explain that? Yes I know the pandemic caused a temporary dip in the availability of some components. For me that doesn’t explain how costs didn’t come back down once supply rebounded. You took advantage of the lack of supply to raise prices and didn’t normalize once supplies did. My family income is well into the six figure range and I will never pay $50k, for a new car. Much less 80, 90 or 100,000 dollars for one of your SUV’s! That is patently absurd!
You don’t make enough reasonably priced new cars anymore, that is your ‘tipping point’.
Well the American legacy manufacturers got hooked on building “trucks” that are cheap to build, have lower safety and pollution standards to meet, have big government subsidies n the form of the chicken tax and eligibility for Section 179 Vehicle Deductions for SUVs over three tons.
Eliminate all that market manipulation and a big part of the problem would go away.
Some reparability standards would probably help Gigacastings and stamping the entire side of a vehicle in one piece do that bumping the rear corner requires replacing the roof make for lower manufacturing costs but hurt the consumer.
I don’t particularly want to buy Chinese cars, but the legacy manufacturers, Ford and GM in particular, plus that other clown show, have just abandoned the market.
I find it hilarious that the US and Asian makers *don’t* share many parts. As anyone who has owned multiple brands of European cars, that is SOP across the pond. My favorite being the ZF power-steering reservoir that is found on probably 75% European car with hydraulic steering for the past 40+ years. Why redesign the wheel when you can just buy one in?
I am 100% behind keeping the Chinese out of the US car market. We never should have let them in the US market for anything to start with. But the rich needed to get richer, so here we are.
Do Chinese make cars cheaply or do they lose money by selling them at too low a price?
The website has two views on this. Perhaps you should get together and call yourselves an institute.
Sounds more like an alarm for auto mfrs to sell what the market wants: brown EV wagons sitting low to the ground.
(Well, that is what the majority of voices in my head say, and who am i not to let democracy rule?)
I’ll take mine in orange ( it’s a brighter shade of brown) thank you.
You’re not the mainland Chinese government, it seems.
Been priming myself for a good rant here…
Car manufacturers: STOP GIVING PEOPLE WHAT YOU THINK THEY WANT AND GIVE THEM WHAT THEY ACTUALLY NEED!
I will say that again a different way: STOP MAKING CARS A TECHNOLOGICAL CIRCLE JERK!
I exclusively drive older vehicles because they are 1) effective at transporting people and things (primary purpose of a vehicle) 2) are relatively safe and 3) are insanely cheap to own.
If Honda made a modern version of a 1st Generation CR-V (1997-2001 aka simple box with cheap parts and good function), I would buy it brand new in a heartbeat. Give it a few requisite modern features to make the regulators happy (reverse camera, traction aids, etc) and call it a day.
If Ford made a modern version of a 3rd generation Ford Ranger (1998-2011 aka simple truck that’s relatively comfortable, good function, very cheap to own), I would buy it brand new in a heartbeat. Give it bare minimum requisite changes thanks to regulations and call it a day.
If ANYONE made a nice simple wagon, I would buy it again in a heartbeat.
I don’t hate electric cars, HOWEVER I hate that buying an electric car almost assuredly means also signing up for a very complex expensive vehicle which is going to be difficult to repair.
I can afford many new cars nearing 6 figures, but I won’t touch one because of touch screens and things that beep and boop and the fact that you can sideline the entire vehicle if you sneeze on one of the modules the wrong way. I hate that headlights cost thousands of dollars on some cars now, and tires are a fortune because someone thinks 20″ or larger wheels are cool.
Knobs did not need any more innovation. Headlights with easy to replace bulbs did not need innovation. Things did not need to be oiled for life. Dipsticks worked fine and oil level sensors do not. Dashboards do not need to be big ass screens with simulated gauges. My car doesn’t need to have dozens of computers.
The entire industry seems to be having a weird race to the bottom via trying to build what they think people want which is overly complex, expensive, difficult to own/maintain vehicles.
Turns out they were wrong and that’s why no one is freaking buying vehicles. I know a ton of folks who are car fans and not car fans who can afford new cars and will not buy one because new cars are overly complex and dumb and expensive. These are customers who are not buying because of dumb product plans.
STOP IT ALREADY, AUTO INDUSTRY! This is dumb. Cars do not need to be over-engineered and complicated tech products. I am an engineer. I was an engineer in the auto industry over a decade ago.
Rant over.
I have worked in the car supplier and tangentially related industries my whole career. I am car nerd and lover through and through. This topic has taken up a disproportionate amount of my brain cycles and conversation time with my fellow car buddies for years now.
The modern car business just doesn’t make sense to me. Nobody I know ever considers buying a new car because it is the equivalent of taking out a second mortgage. The people I know who are fiscally responsible refuse to do that. I work in an industry where everyone makes an income where they should in my opinion easily be able to afford new vehicles every 5 or so years no problem. The vehicles in the parking lot are around ten years old.
Any CEO of a car company needs to get their head out their ass and go look at parking lots of the demographic of the people they want to sell cars to and then ask why they haven’t sold those people a new car for the last 5+ years.
A small part of me does sympathize with OEMs spending billions of dollars on EVs nobody is buying but they aren’t blameless there. The other part of me sees GM is spending tens of billions of dollars on stock buybacks the last few years and knows they will be the first one to go crying they are broke when the time comes.
I am not sure if it’s the banks/financing or the industry leadership pricing themselves out of a job. Bit of a chicken or the egg and other complexities on top of it.
I don’t know every pressure keeping car prices so high but at the end of the day new cars are simply too expensive for people to afford.
Are those people going to buy a car though? No matter how good they are? I feel like this is just a personal outlook on how you spend money + a lack of urgency to buy.
I also could afford to buy cars more frequently, but my cars are currently 11 and almost 13 years old. The 13 year old one does have low mileage for its age. I bought them new, and while we look at something “nicer”, these cars still work fine. So the desire to sink $50k+ on a depreciating asset just doesn’t get any sort of nudge towards action.
The second part of it is that dealers and OEMs make buying a car harder than it should be. I have identified a front runner replacement for the 13 year old car – a Grand Highlander Hybrid. For most of 2024 you couldn’t even see a Grand Highlander in a dealer show room. Never mind test drive a hybrid model. Buy one? Wait in line or pay dealer markup. That is ignoring the stop sale they had for a recall.
At the dealership I went to just to see a Grand Highlander, the salesman was supposed to follow up with me on their allocation situation, and add me to a mailing list of updates. He never did. Guess he doesn’t need my sale.
Nothing sucks the excitement out of buying a new car more than having to play dealer games that cost you time and money. Or doesn’t even get you the car you actually want (color, options, etc.).
If cars were cheaper, maybe it’d mean I’d need less of a “nudge”, but it still would not solve the fact I can’t buy what I want from the dealership without their nonsense. And $40k instead of $50k on a depreciating asset is still a lot of money to me.
So yes, another year gone by where this “well-qualified buyer” didn’t buy a car.
I mean if you compare cars from 10-20 years ago vs today, for nearly the same price, we’re getting a lot more technology.
If the cars didn’t have those improvements, things would be a lot cheaper.
However, I don’t think the main issue is the cost of the car as much as the cost of maintenance, repairs, accident damage, insurance, and the cost of gasoline.
A lot of people are still getting the same salaries they had 20 years ago, that’s pricing them out of the segment they used to be able to afford.
There’s technology like improvements in metallurgy, better physics modeling for safety, airbags, engine controls that make more power from less fuel and pollution, or EV power trains. That’s good tech. It makes cars safer, and more economical.
Then there is all the infotainment crap, motorized hvac vents, weird lighting modules, subscription shit, non standard lcd screens that are going to fail, and on and on.
I want the first technology, I don’t want the second, and it’s not just not wanting to pay for it, I just don’t want it and might even pay to get rid of it
I have a lot of thoughts on this, but I’m lazy and my opinion doesn’t really matter, so I’ll just focus on one thing as it’s a particular bee in my bonnet. I agree with small parts sharing between makes, but IMO it doesn’t go far enough. Particularly for stuff like Matryoshka doll CUVs, whose bodies in white should be shared. Change the visible interior and exterior parts and fiddle with dimensions or seats, add/remove sound insulation and change suspension tuning to suit marketing demands for a particular make, and send it. None of those vehicles are special and I doubt anybody’s buying them for the experience even with all the redundant engineering that comes with the OEMs developing their own versions separately. Certainly, I’ve been in cars that were the same BIW that seemed like completely different cars because of changes to sound insulation, suspension, available options, and maybe a bit more care put into the construction, never mind the very different exterior and interior appearances. Who would know or GAF that their eunuchmobile is basically the same underneath as the competitor if they like the way theirs drives or looks, especially if it means the vehicle is cheaper to buy, can presumably have more R&D and QC resources devoted to it so it will be of better quality (yeah, yeah, but it is possible in theory), and higher volumes mean that it will be easier and cheaper to keep running in the future. “Wha,” cries the dork who gets worked up about things that don’t matter, “My Chebby is a Ford underneath! It ain’t no real Chebby!” Oh, wait, now it’s 15 years old and you can find the part on any one of three different high volume makes in the junk yard, insurance is cheaper, more mechanics have done this job more times, aftermarket companies have a larger incentive to keep making new parts for it after it’s left production, and there’s also a financial incentive to make improved replacements for parts that maybe didn’t quite get the R&D or QC they should have.
Headlights, too. Lighting is expensive AF to engineer. Make a common unit with contained optical and set them into proprietary superficial housings with unfluted lenses so nobody knows they’re the same until it’s cheaper to replace. A few years ago, it seemed like everyone was making their own 2.0T with just about the same dyno chart. Why? On to EVs now, there’s no logical reason to use a different motor to the other monkeys. Control software can be tweaked to offer whatever marginally different characteristics people expect from a certain brand. Batteries? Same (or at least have the same space carved out for them in the BIW that can be filled with however many of whatever kind of cells that might be called for on the highest anticipated trim version). Offer them in different sizes to hit different price points. Maybe the cheapest Ford version is $30k, but Dodge wants to hit a lower price point. OK, less insulation, 20% smaller battery, calibrate the throttle to behave more aggressively to make up for it and to meet the Dodge marketing image, and done. JFC, I’d be better than far too many of these CEOs (which wouldn’t help as it’s unlikely the others I’d need to be on board with me to get this done would be).
Doing what you suggest raises the obvious question of why do we need all these brands then.
For the same reason GM had Chevy, Pontiac, Buick, Olds, Caddy and GMC. Not to mention borrowing from Isuzu, Toyota, Daewoo, etc… You target a particular audience and/or price point, using whatever pieces you can, as cheaply as you can.
Cerberus’ concept would largely be an extension of the badge engineering that’s already been going on for decades, but with even greater economies of scale. And Ford and GM have been dabbled with this a bit anyway (transmissions). It’s probably just a matter of time before they extend it to whole bodies/platforms. If they ever get back into the small car game, I can see that being a joint venture, with the BIW possibly being built by a third party.
At the end of the day it’s really all about the marketing.
Exactly. We don’t and we have many zombie brands as it is. With the age of EV, what’s left of traditional characteristics that separated brands will be largely gone. Arguably, that’s been the case for some marques for decades (Lancia and Citroen haven’t been the innovative brands in ages, partly thanks to there being few real innovations left to discover in a mature technology, yet neither successfully adapted to the new circumstances, existing mainly as superficial and superfluous rebrands of higher volume makes). Once the dealer and political agreements that are the only things keeping some of these alive can be resolved, they can be shuttered. Others should be reduced to an occasional model rather than a full-on brand (let’s say people only want a Jaguar sports car, so Land Rover could build a “Jaguar -Type” or whatever to come and go as the market seems receptive, but it will be a Jaguar-branded LR sports car, built as part of LR’s lineup rather than Jaguar being a brand that needs to stand on its own financially and can’t. LR, OTOH, would be able to fill out their lineup where a LR-branded sports car would be an odd and difficult thing to market and would probably have to conform to LR’s corporate look and feel—inappropriate for a sports car—but a Jaguar-branded vehicle could stand alone in styling and character).
But that’s something like Step 3. Step 1 is consolidating at least the uninspiring “just need a car” models that are highly redundant across marques to reduce costs. Step 2 or so would be consolidating manufacturing facilities for these shared volume models. There would still be room for an individual manufacturer to have their own specialty vehicles, be they low production halo cars or volume product they specialize in doing well. Like, I wouldn’t propose this manufacturing model for the full size pickups as the domestic 3 do those pretty well and the competition between them improves a product that is expected to perform more extreme functions, plus the customers are more passionate about the trucks and the marques they represent and would cry foul. Something like the compact CUV market, where the vehicles act as daily grinders and are expected to just do the normal stuff reliably, don’t have that need for the exceptionalism in a particular area as vehicles that are used to extremes do, nor do they have the kind of passionate fanbase that goes along with it.
“electrification has posed a major challenge for legacy automakers.”
Yeah and the Bill Clinton administration actually helped pay for the development of “80mpg vehicles” that included electrification tech. Oh you don’t remember? Let me refresh your memory:
https://en.wikipedia.org/wiki/Partnership_for_a_New_Generation_of_Vehicles
What did you all do with that government investment?
You pissed it away and did nothing with it.
And GM… what did you do with your investment in the EV1 program and Ovonics?
Again you pissed it away.
And Toyota has been doing the hybrid thing since 1997. And Tesla has been selling BEVs since 2008.
But all you assholes did back then was make jokes about the new tech and stupidly claim that nobody would want it even as people lined up to buy them.
And you spent your money on government lobbists in an effort to block progress.
So I have no fucking sympathy… especially not for GM. You all had plenty of time to get your shit together and you didn’t. So now you’re caught in a bind.
Booo fucking hoo.
“Beyond that, new manufacturing technologies like gigacasting are shaking up the status quo. Automakers have to grapple with these technological changes if they want to build cars that remain competitive in the future.”
Oh puleease… all you guys are doing is buying the tech/equipment from IDRA. Tesla has already done it. There is nothing for you to “grapple with” or “figure out”. It already has been figured out. Essentially you’re whining about having to make an investment that will lower your manufacturing costs in the long run.
Booo fucking hooo.
” “The U.S. automotive industry is investing tens of billions of dollars in electric cars and plug-in hybrids to meet emission and fuel efficiency standards which become especially stringent in 2027 through 2032,””
My response? Shut the fuck up, stop whining and get back to work. If Tesla could do it with a fraction of the resources, you guys have absolutely no fucking excuse. It’s just a question of willingness.
“One obvious example is that automakers need to “unlearn” old engineering practices and specifications that made sense for internal combustion vehicles but are not needed with electric cars.”
Which is another way of saying “we don’t want to change”.
The best place for this report is in the recycling bin.
Any car maker that isn’t already paying attention to what Tesla and the Chinese are doing (and making tech investments accordlingly) deserve to die.
GM doesn’t care because they know they’ll just get bailed out again 🙁
The Bolt and Volt were the last cars that GM sold that I’d be interested in. Even if the Bolt had that ugly C pillar,
I’d get one used , but GM seems to have abandoned them. It’s apparently easier to get parts for a 60 year old Chevy than a recent one.
They are correct but for the wrong reason. Simply put to continue to be profitable cars need to turn over every 4 years. At current pay scales and expensive cars needing 8 years financing banks will stop rolling over loans that are at the original MSRP after 4 years. Something has to give. We are at $1,000 a month 72 month payments it is financially ruinous.
Yep. The simplest answer is cars are now a second mortgage.
If you can figure out why that is, and why people don’t like that then you solve the whole issue
“Chinese manufacturers have leapt out of the gate with innovative pure EV designs that are cheap to manufacture. Legacy automakers haven’t always had the same luck“
Luck? Look at the list of the 25 best-selling “cars” in the U.S. How many of them have a plug-in option (PHEV or full BEV)? How many of them are similar in price to the gas version? How many of them are widely available across all 50 states?
So many of the OEMs either gave a half-hearted or nearly none-existent try in the U.S. And Wall Street can’t see past the next quarterly earnings report. Whether the competition comes from Tesla, the Chinese, and/or the Koreans, the future U.S. car market is going to look a lot different.
Sometimes these headlines or claims of “no one wants EVs” is akin to a kid saying “I’m no good at sport XYZ when all they have done is sit inside and play Wii Sports.
While I hope the upcoming Ram Ramcharger PHEV and its Jeep derivatives tap into a new segment of customers, hope is not a strategy.
Good luck OEMs. Maybe your stock buyback and self-charging EV strategies will work out for you. Maybe.
Well Ford and Tesla because of their stock structure can plan long term.
The Chinese can plan long term. VAG is controlled by the Porsche and Peich families, Lower Saxony and the unions, which is conducive to a long view.
The companies that answer to stockholders are sort of screwed.