{"id":7709,"date":"2019-07-18T09:25:47","date_gmt":"2019-07-18T16:25:47","guid":{"rendered":"https:\/\/blog-prod.qad.com\/blog\/?p=7709"},"modified":"2020-11-06T11:45:04","modified_gmt":"2020-11-06T19:45:04","slug":"forecasting-peak-automotive-production","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2019\/07\/forecasting-peak-automotive-production","title":{"rendered":"Forecasting Peak Automotive Production"},"content":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;7710&#8243; img_size=&#8221;full&#8221;][vc_column_text]<span style=\"font-weight: 400;\">With the age of car-sharing, battery-powered fleets and self-driving cars quickly approaching, many automakers are trying to reinvent themselves into mobility companies. This is taking place more as young people in urban communities are driving less, accelerating the shift toward what&#8217;s being dubbed &#8220;peak automotive production&#8221; &#8211; a time in the not-too-distant future when sales of private vehicles across the western world may plateau before making a swift descent. Many automakers, suppliers and industry prognosticators believe it is realistic &#8220;peak automotive production&#8221; may take place in the next 10 years. Being able to forecast this potential plateau is critical for automakers and suppliers alike as they look to avoid capital-intensive investments, shift business models towards software and services, and develop other effective strategies for future operations.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">The Rise of Mobility Services<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Worldwide, people are migrating to megacities &#8211; which are expected to be home to two-thirds of the global population by midcentury &#8211; where an automobile can be expensive and inconvenient. As a result, mobility services are multiplying rapidly, with everything from electric scooters to robo-taxis trying to establish a foothold in the urban mobility market. At the same time, major urban centers such as London, Madrid and Mexico City are restricting cars&#8217; access. And now with the growing safety and environmental mandates making new cars increasingly more expensive, the financial case for alternatives is growing stronger. Such constraints, plus the expansion of the sharing economy and the autonomous age, mean that automakers are investing in alternative strategies. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Consider the strategic investment made recently by General Motors (GM). In March 2016, GM acquired Cruise Automation for an undisclosed amount, although reports have placed the number &#8220;north of $1 billion.&#8221; They have also made strategic investments in ride-sharing businesses Lyft and Maven, as well as in Yi Wei Xing, an online social platform and car rental service in China.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At present, the valuation for Cruise Automation is now estimated to be $19 billion &#8211; GM is betting it will help the automaker lead the pack as the auto industry transitions to an era of on-demand ride services utilizing autonomous vehicles. Some investors and industry analysts now argue that the self-driving unit at GM is worth more than the entire company. Automakers and investors alike seem to be betting on a future with &#8220;peak automotive production.&#8221;<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Evolving Scenarios<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Industry forecasts predict light vehicle production will hit the 100 million vehicle milestone in 2020 and grow to more than 115 million by 2030. However, most of this growth is being driven by China, India, Eastern Europe and other emerging markets as a result of the growing middle class. Now consider, automakers in mature <\/span><a href=\"https:\/\/www.qad.com\/industries\/automotive\"><span style=\"font-weight: 400;\">automotive<\/span><\/a><span style=\"font-weight: 400;\"> markets are starting to throttle back their projections. This pull-back is leading industry analysts and insiders to actually debate this idea of &#8220;peak automotive production.&#8221; So let&#8217;s look at the main arguments for a decrease in vehicle production and those for an increase in vehicle production.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Decreasing Industry Production<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Shared mobility is likely to be increasingly practical and financially attractive in metropolitan areas, especially as these areas become more densely populated. Shared mobility is an exceptionally effective solution for the challenges associated with rapid urbanization. Well-developed car sharing infrastructures means not only more space saved for pedestrians and other traffic participants, but also less pressure on public transport services.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Considering the fact that the public transportation systems of many metropolitan areas are struggling to keep up with the influx of population, <\/span><a href=\"https:\/\/www.qad.com\/blog\/2017\/06\/self-driving-cars-ride-sharing\/\"><span style=\"font-weight: 400;\">ride sharing<\/span><\/a><span style=\"font-weight: 400;\"> becomes even more attractive. Many subway systems, for example, are antiquated and in need of constant repair, therefore making them unreliable sources of transportation. At the same time, bus fleets that have yet to convert to cleaner engines will soon be impacted by global regulations on emissions &#8211; this represents a massive cost to cities that may already be financially overburdened.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In light of existing public transportation systems, one of ride sharing&#8217;s biggest attractors by far is its convenience. By simply accessing an app, passengers can work, talk on the phone, check social media and get where they need to go &#8211; all in relative privacy. This alternative has become so attractive, in fact, a recent Reuters study showed nearly a quarter of U.S. adults have sold or traded in a vehicle in the last 12 months, with 9% of that group turning to ride-sharing services like Uber and Lyft as their main way to get around. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The rise of autonomous technology is also projected to make a positive impact on public transportation. By creating autonomous buses and robo-taxis that traverse cities on predetermined loops, a more efficient, attractive and safe transportation option will open up for the population, further decreasing the need for individuals or families to own cars. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Generation Y consumers are now the most promising demographic for ride-sharing companies. Young people are quickly becoming the major force shaping market requests in the United States. With many shouldering considerable debt from school loans, the price, as well as high maintenance costs, of a new car are high enough for them to avoid owning one altogether and opt instead for shared mobility alternatives. As the vehicle buyers shift from Baby Boomers to millennials, buying behavior is likely to change significantly.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Increasing Industry Production<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Dense areas with a large, established vehicle base are fertile ground for these new mobility services, and many cities and suburbs of Japan, China, Europe and North America fit this profile. New mobility services may result in a decline of private vehicle sales, but this decline is likely to be partially offset by increased sales in shared vehicles that need to be replaced more often due to higher utilization and related wear and tear. Vehicle scrappage is determined by miles driven, and each on-demand vehicle will travel more miles than the privately-owned vehicles that it replaces, but unless carmakers do something to greatly extend the life of the vehicle, vehicle life span (in terms of miles driven) will not significantly change.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One possible way the mileage of these cars could be extended is to change every car over from standard combustion engines to battery electric vehicles. Battery electric vehicles require far less maintenance than cars with internal combustion engines and could potentially double their mileage driven per lifetime. It&#8217;s unlikely that this will be achieved in the next 10 years, however.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Finally, many believe the big driver of increased vehicle production will come from the distance on-demand vehicles cover between individual passenger trips. Recent studies have shown, for example, that nearly 50 percent of the miles that Uber drivers log in New York City don&#8217;t include passengers &#8211; it&#8217;s the time drivers take to get <\/span><i><span style=\"font-weight: 400;\">to <\/span><\/i><span style=\"font-weight: 400;\">their passengers in the first place. As a result, vehicle miles driven will continue to increase along with the demand for ride-sharing services, thus driving increased vehicle production.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Don&#8217;t Get Caught Unaware<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There&#8217;s no doubt that on-demand vehicles and ride sharing will continue to have an impact on our industry; how it affects your company is dependent upon your organizational view. This is why I advocate for businesses to engage in longer-term <\/span><a href=\"https:\/\/www.qad.com\/blog\/2019\/03\/scenario-planning-in-the-midst-of-disruption\/\"><span style=\"font-weight: 400;\">scenario planning<\/span><\/a><span style=\"font-weight: 400;\"> as soon as possible, with a robust strategic process. Companies who take advantage of this sooner rather than later will have far more options and will have a leg up on the competition in their efforts to maximize value in these times of significant <\/span><a href=\"https:\/\/www.qad.com\/blog\/2018\/06\/technology-disruption-creates-turbulent-landscape-for-suppliers\/\"><span style=\"font-weight: 400;\">technology disruption<\/span><\/a><span style=\"font-weight: 400;\">.<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;7710&#8243; img_size=&#8221;full&#8221;][vc_column_text]With the age of car-sharing, battery-powered fleets and self-driving cars quickly approaching, many automakers are trying to reinvent themselves into mobility companies. This is taking place more as young people in urban communities are driving less, accelerating the shift toward what&#8217;s being dubbed &#8220;peak automotive production&#8221; &#8211; a time in the not-too-distant future [&hellip;]<\/p>\n","protected":false},"author":60,"featured_media":7710,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[182,199],"tags":[834,7,237,620,836,835,839,323,837,494,838],"class_list":["post-7709","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-manufacturing-trends","tag-automakers","tag-automotive","tag-autonomous-vehicles","tag-electric-vehicles","tag-industry-production","tag-megacities","tag-peak-automotive-production","tag-ride-sharing","tag-shared-mobility","tag-technology-disruption","tag-vehicle-scrappage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Forecasting Peak Automotive Production | QAD Blog<\/title>\n<meta name=\"description\" content=\"\u201cPeak automotive production\u201d could take place in the next 10 years. 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