[vc_row][vc_column][vc_single_image image=”11532″ img_size=”full”][vc_column_text]From Tesla the unicorn, China, why EVs aren\u2019t consumer lead and why batteries may not be the only solution, Mark Gallivan sat down with Joe McCabe of AutoForecast Solutions at the Southern Automotive Conference 2023.<\/b><\/p>\n
When I spoke with <\/span>Joe McCabe<\/span><\/a> at the <\/span>Southern Automotive Conference<\/span><\/a> in Biloxi, Mississippi last month his eyes were darting this way and that as he got <\/span>animated a<\/span>bout the global automotive industry. We discussed how, as an industry now facing profound change, all the business-as-usual discussions within the industry have upended themselves in only a matter of years. McCabe certainly has plenty to say and long-held opinions to slay. As President and CEO of AutoForecast Solutions, he has been advising tiered suppliers, vehicle manufacturers, government agencies, financial institutions, and the academic community fo<\/span>r over 25 y<\/span>ears.<\/span><\/p>\n \u201cWe forecast every new vehicle to be built worldwide for the next 8 years,\u201d McCabe opens. \u201cWho builds it, where, when, and how many – this is down to the powertrain detail, engine, transmission, and <\/span>electric-motor detail level – updated e<\/span>ach month – we want people to make better decisions.\u201d To which he adds, \u201cI\u2019m not anti-EV, <\/span>I am pro-reality, and there\u2019s just a new type of consumer out the<\/span>re. The socially motivated, emotional consumer that says \u2018I’m not going to buy the brand that has 120 years of experience but I <\/span>am<\/span><\/i> going to buy the object that is shiny and cool.\u2019\u201d The Tesla, the Rivian – he says these brands are taking the consumer in a different direction which, in his opinion, makes it an unfair playing field for legacy brands with heavily invested dealership networks an<\/span>d overhead. \u201c<\/span>The new players don’t have to have that same structure and can really change the industry going forward.\u201d<\/span><\/p>\n How does McCabe see the automotive industry today? \u201cThe pendulum swings in this industry. We\u2019re all in this EV space, but maybe there\u2019s a better mix. Maybe electrification is the answer, but it doesn\u2019t need to be 100 percent BEV.\u201d During our interview, the possibility of hydrogen power bobbed up more than once. According to McCabe, 58 countries build light vehicles in six different regions. North and South America, East and Western Europe, Asia Pacific and Africa. The Southern Automotive Conference itself represents automotive industry professional associations in southern United States states that include Alabama, Georgia, Kentucky, Mississippi, South Carolina, Tennessee, Texas, and the <\/span>Southern Automotive Women\u2019s Forum (SAWF)<\/span><\/a>. The onus of attracting auto manufacturers like Rivian, Tesla, Mazda and Ford (Blue Oval) into this diverse southern region falls to the <\/span>Southern Automotive Manufacturing Alliance (SAMA) that represents the southeastern region – the fastest-growing in North America.<\/span><\/p>\n I pressed McCabe for his opinion on the current state of the North American automotive industry. \u201c<\/span>One of the things we have been tracking (globally) is the <\/span>chip shortage<\/span><\/a> across the globe. We are at the point of millions of impacted volume – but not <\/span>all is lo<\/span>st volume. We have lost millions of semiconductor chips and it is a reality, Covid was a blessing as consumers had to wait for their products at stiffer adjusted prices, and that profitability is what has helped the manufacturers\u2019 shareholder value. It\u2019s also changed the industry dynamic and how it\u2019s shifting. It needs to adapt to a new market out there.\u201d<\/span><\/p>\n We turn to the future and McCabe sees most markets other than China diminishing in volume. Brands will begin building to customer demand instead of building up an inventory. This, he foresees, will open an unfortunate conversation for suppliers that are volume-driven machines. The negotiation will change<\/span> from \u201c<\/span>you give me more volume – I will give you a<\/span> better price,\u201d to \u201cI need you – the vehicle manufacturer – to provide upfront investment for fear that the volumes you are asking for are not met,\u201d h<\/span>e suggests. He believes the vehicle manufacturers are probably not going to change their tune and want a better price and it will force suppliers to change their product set going forward.<\/span><\/p>\n Does McCabe see battery electric vehicles (BEVs) being the panacea for the automotive industry we keep hearing they will be? \u201cVehicle manufacturers have to design to a global consumer. Years ago they figured that to have one vehicle platform and underpinnings was all they needed.\u201d\u00a0<\/span><\/p>\n Does this necessitate supplier parts consistency? \u201cCorrect. You need 100 percent consistency and you need the same manufacturing process here on the same vehicle platform built in Germany as you do in Vietnam or China. You need consistency in quality because all (vehicles) are domestically consumed and some are exported to a different market.\u201d This is a challenge, says McCabe, as it raises the issue of maintaining the costs of the vehicle while trying to push an initiative that, to him, is not a consumer-driven initiative.\u00a0<\/span><\/p>\n \u201cElectrification is not consumer driven – it is governmental and environmental driven. And without incentivizing it in two ways; firstly with carrot and stick to incentivize, or disincentivize like taxing an ICE vehicle or not allowing you to drive in certain city centers at 2 o\u2019clock because it\u2019s not electrified.\u201d McCabe suggests two strategies are emerging and they\u2019re trying to intertwine in such a way as not to \u201cseem like a bully,\u201d but to convince the consumer this will be an upfront cost they will get back in the next 3, 5, or 7 years. You are not hoping to build a car that is <\/span>cheaper to drive than an ICE vehicle<\/span><\/a>, but you have to give the consumer back something the consumer sees as value in the trade if they are willing to spend that extra money.<\/span><\/p>\n The discussion moves to the rise of BEV adoption. \u201cThe early adopters have adopted. So when a new BYD vehicle comes to the market it is a new shiny object and buyers say \u2018I\u2019ll get one\u2019. New brands will get a massive push at the beginning, it will peak and it will hit a valley and another one will come and that too will peak and hit a valley, says McCabe. \u201cAutomotive manufacturers cannot sustain that kind of business model. They need sustainable coverage of the revenue stream and that is the big problem. Suppliers see the peak and they believe that peak will continue at a 45-degree angle and when it drops off they realize they are in trouble.\u201d\u00a0<\/span><\/p>\n Manufacturers are working against a constant push and pull and people are wondering who\u2019s going to be the next winner – \u2018Is there a next Tesla out there?\u2019 McCabe says no. \u201cThere is not another Tesla out there. They are a unicorn in the <\/span>automotive space<\/span><\/a> and have proven it is possible to be a new entrant and make money at the same time because they solved a lot of the big problems and were allowed to focus. Tesla does not have a lot of volume – it can focus on 5 nameplates – S, X, 3, Y, and now Cybertruck but they don’t have a big overhead in terms of what they are managing. Global brands like Volkswagen <\/span>have 11 bran<\/span>ds acros<\/span>s 21 cou<\/span>ntries\u00a0 – all trying to satisfy a consumer somehow, these are big problems for the big players to deal with.\u201d<\/span><\/p>\n Will the buying behaviors of Gen Z and Millennials break the prestige of legacy premium and luxury brands battling a growing stream of new BEV entrants? \u201cThe breakthrough of the wall will be when the prices go up. There won\u2019t be a $30,000 to $40,000 vehicle. Instead, the gap will rise to between $47,000 and $62,000. They are still expensive vehicles but the whole bar is going to rise. When you look at what an EV\u2019s cabin does: it has seats and a big IPAD screen – that\u2019s all they care about. It has all the technology they want.\u201d All the new brands are trying to build the same ecosystem as Tesla as a shared community of owners who help each other out with things like charging cables at parking bays.<\/span><\/p>\n Does McCabe see the SUV as a niche fad? \u201cSUVs have cannibalized the minivan. If we talk about the States, we don\u2019t want to share our cars and yet we have all this hockey gear and kids so the minivan was a great solution at the time and it was cannibalized by SUVs and Crossovers so I don\u2019t see the SUVs dying.\u201d\u00a0<\/span><\/p>\n Much attention has been paid to 3D printing by luxury and ultra-luxury manufacturers. Is <\/span>3D printing<\/span><\/a> likely to become a dominant force in vehicle manufacturing? \u201c(3D printing) allows you to take an <\/span>AutoCAD drawing<\/span><\/a> and make it real. You don\u2019t have to put a million-dollar line in the assembly and take 3 weeks to get up and running. With 3D printing, you can set it up right now and it will be ready tomorrow when you come back into the office. That to me is an absolute game changer because if you can make it modular enough, there is your subscription model.\u00a0<\/span><\/p>\n A brand can say I sold you one car but I\u2019m going to let you modularize this thing to the hilt. It\u2019s the Jeep model – the aftermarket for Jeeps is huge with different winches and bumpers. There\u2019s a whole culture for that – you can say \u2018you want to make a vehicle? Great, we can go to our catalog and we will make it exactly how you want it.\u2019 This is a monster differentiator. 3D printing is costly and uses a lot of energy, but to me, if you can recalibrate it into something fast for a new kind of consumer who wants to change something on their vehicle fast. The bones of the car have to be the same – the airbags and bumpers and it has to be a safe vehicle. For an electric vehicle, you have no engine, no transmissio<\/span>n, and minimal fluids to manage <\/span>and you are changing little things here and there with 3D. 3D printing is going to start with very high-end low-volume manufacturers for consumers that want to design it as only one in the world,\u2019 you are talking to one percent of one percent of people.\u201d<\/span><\/p>\nSnapshot: the Automotive Industry Today<\/span><\/h2>\n
What Does the Future Hold for the Automotive Industry?<\/span><\/h2>\n
The Rise of the BEV<\/span><\/h2>\n
How Might Automakers Capitalize on 3D Printing?<\/span><\/h2>\n