A General Motors Maven car-sharing service vehicle in front of the New York Stock Exchange in New York on May 15, 2017. AlixPartners says many bets on many car-sharing services have yet to pay off for investors and backers. Photo credit: BLOOMBERG
DETROIT — The auto industry is betting billions of dollars in a global game of roulette involving connected, autonomous, shared and electric vehicles.
While some “traditional” automakers such as General Motors and Ford Motor Co. are hedging their bets to keep their seats at the table, newcomers out of Silicon Valley such as Tesla Inc. are going all-in to disrupt the game.
No one playing knows whose strategy will pay off in the end, but one thing is certain: Not everyone can be a winner.
“There are going to be billions and billions of dollars lost in bets that were put in the wrong place,” John Hoffecker, global vice chairman of consulting firm AlixPartners, said Tuesday during an Automotive Press Association meeting in Detroit.
The ongoing gambles and challenges facing the automotive industry are the focus of AlixPartners‘ new “Global Automotive Outlook” covering connected, autonomous, shared and electric vehicle (CASE) trends, creating a “new automotive ecosystem.”
Hoffecker expects a handful of companies to essentially “win” in this new world, while others will be forced to adopt technologies from the leading companies or risk losing their seat at the table. He said companies that are able to quickly and successfully adapt to the emerging technologies, while navigating traditional industry problems, will ultimately be the most successful.
“The big winner in the future is going to be this person who can figure out how to change their organization into more of a consumer electronics kind of business than what we’ve seen,” he said. “Where they think about their business in one-, two-, three-year cycles; not four-, eight-, 10-year cycles.”
The report includes research around emerging trends as well as a survey of 2,000 adult consumers in the U.S. covering shared mobility services.
One bet that hasn’t paid off as much as many had expected in recent years are investments in car-sharing services such as ZipCar or Car2go, according to AlixPartners.
The report found awareness of the services has substantially decreased in recent years, as ride-sharing, or ride-hailing, companies such as Uber and Lyft have gained in popularity.
“Ride-sharing has really taken over,” said Mark Wakefield, global co-head of the automotive industrial practices at AlixPartners. “Not only have they taken quite a cut out of taxis, but car-sharing itself.”
The change, according to the report, actually is good news for new-vehicle sales. The company estimates every one vehicle used for car-sharing replaces the need for 19 personal vehicles, while a vehicle used for ride-sharing only replaces four cars or trucks.
‘Used car time bomb’
AlixPartners forecasts U.S. light-duty vehicle sales to steadily drop from 16.9 million this year to 15.2 million in 2019. Following the trough, the firm forecasts sales to steadily increase to 16.8 million by 2022.
The change in forecast is due to rising incentives and a “used-car time bomb” of 500,000 additional off-lease vehicle-returns hitting the market this year than last, according to Wakefield.
That amount of vehicles, he said, likely will lure buyers into the used-car market and cause leasing prices on new vehicles to increase due to anticipated higher residual values and tighter credit standards.
“You’ve got a double-whammy of the used car on the same lot being cheaper and the lease price going higher,” he sad. “That’s a problem.”