Auto execs warn of industry 'breaking point'

A new white paper warns that the car industry is nearing a “breaking point,” requiring a new wave of strategies and processes to overcome its challenges.

Driving the news: The paper was written by auto industry executives and summarizes talking points discussed during the annual SAE Detroit Section Global Leadership Conference (GLC). The conference brings together senior officials from across the car industry to discuss key challenges facing the business. These are the biggest threats to the industry’s future, according to the GLC.

Electric vehicle mandates: EVs aren’t selling fast enough to justify the massive investments needed to produce and scale them, even though some government policies are still calling for a ban on gas-powered car sales.

Changing technologies: Cars are becoming more technologically complex, boosting costs for automakers. The paper notes that manufacturers will need to collaborate to lower production expenses as the industry continues to shift toward software-defined vehicles.

Stalling markets: According to the GLC, the car market (in the U.S., Europe, South Korea and Japan) has hit a “peak,” meaning that it is no longer growing. This is exacerbating issues caused by escalating production expenses.

Competition with China: China’s domestic automakers are taking a bigger and bigger piece of the pie, both in their home market and on a global scale. The paper cites a 6.6% loss in global market share between Detroit-Three manufacturers due to Chinese competition.

Outdated engineering: The paper urges the industry to adopt new manufacturing techniques rather than sticking to traditional approaches. The need for better processes is especially evident for EVs, which the paper notes are often designed with the same specs as gas cars even though they have their own unique needs.

Not enough lobbying: The GLC says the U.S. car sector lacks the same lobbying edge other industries have long since built, making it difficult for automakers to have a say in federal policy.

Elephant in the room: At the same time, some issues are notably absent from the paper’s list of woes.

• Affordability is a key issue behind stalling car sales, both in the U.S. and around the world.

• The average transaction price for a new vehicle in late 2019 was $38,948—as of Q3 2024, prices are up almost $8,600 at $47,542. Last year, the gap was closer to $11,000.

• Automakers have benefited heavily from this surge in prices, as evidenced by the sharp increase in profits during and following the COVID-19 pandemic.

• Things have improved slightly in recent months as competition with China has forced manufacturers to reconsider their approach and implement more incentives. However, the lesson was learned too late for companies like Stellantis to avoid painful repercussions.

Bottom line: It is encouraging to hear that the industry is waking up to the challenges facing its long-term success and working towards collaborative solutions. Hopefully, those solutions will also take into account the needs of both consumers and retailers, without whom automakers stand little chance.

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