ACME, MI — During one session at the annual Management Briefing Seminars, there were variations on the phrase “the sky isn’t falling.”
Then, during the same discussion, Denise Carlson, a planning executive for automotive supplier Denso, put up a slide to illustrate a point.
One line showed “traditional assumptions” for US new vehicle sales. It climbed up the chart over a period representing decades. Next to it was a red line that dived starting at the year 2030. It was labeled “new assumptions.”
Denso’s new assumptions took into account industry trends such as ride-sharing services that may hold down demand long-term demand for cars and trucks.
“It’s a discussion worth having,” Carlson said after the session, referring to the slide.
Denso, she said during her presentation, is preparing for such a drop now. “How do we transform?”
The Management Briefing Seminars, or MBS, is a summer tradition in the auto industry. It’s held near the resort city of Traverse City in northwest Michigan and organized by the Center for Automotive Research (CAR; Ann Arbor, MI). The conference provides a chance to network among those who for automakers and suppliers.
This year’s edition has an underlying theme of uncertainty. The industry faces regulatory pressure to boost fuel efficiency and cut emissions. That’s forcing automakers and suppliers to shift to “multi-material” vehicles to lighten the load. It’s also driving development of hybrid and electric vehicles. Meanwhile, tech companies such as Google and Apple are looking to invade automotive with self-driving vehicles.
In short, everybody has a lot on their mind.
“We see an industry in transition,” said Avi Reichental, vice chairman of Techniplas (Nashotah, WI), a maker of plastic automotive parts.
Automotive faces “a period of disruption,” he said. What’s not known is “how impactful the disruption will be,” he said. Reichental referred to it as “the deceptive phase of disruption.”
Short Term Outlook
Over the past few years, automotive has been one of the strongest performers in manufacturers while other segments slumped. The industry enjoyed record US light-vehicle sales the past two years, with 17.55 million deliveries in 2016, according to Autodata Corp.
Light-vehicle deliveries fell 2.1% in 2017’s first half. The second half of the year didn’t improve, as July light-vehicle sales fell 7%, according to Autodata.
Among the automakers reporting slumping July sales: Ford Motor Co. with a 7.5% decline, FCA US LLC with a 10% drop , General Motors Co. with sales down more than 15% and a 14% plunge for BMW Group (combined BMW and Mini sales).
One of the few gainers was Toyota Motor Corp., up 3.6% to 222,057 cars and light trucks. The Japanese automaker wasn’t far behind GM’s 225,9111, according to Autodata.
Still, nobody is panicking short term. “We’re in what I consider a plateau environment,” Colin Langan, a UBS analyst, said during an MBS presentation.
Michael Robinet, an analyst for IHS Markit, said at the same session sales may increase next year.
“We’re expecting next year to be stronger,” Robinet said. The forecast is “predicated on some level of tax cut” being enacted by Congress, he said. President Donald Trump wants to revamp the US tax code.
But while the industry is cruising for now, longer-term issues are being raised at MBS.
IHS Markit, for example, forecasts that new engine introductions will peak in 2019. “After that, the well begins to run dry,” Robinet said. That’s because forecasters expect automakers to shift to more hybrids and electric vehicles to meet fuel efficiency standards.
A BMW executive made a similar point during a session on Monday about lightweighting.
“It might be the end of the powertrains as we know them,” said Florian Schek, BMW head of lightweight design and vehicle weight. “We don’t know how long it will take to transform.”
Richard Yen is senior vice president for automotive and global markets for Altair (Troy, MI), a supplier of engineering software. He said the movie to hybrids and electric vehicles is irreversible. In turn, he said, designing vehicles will turn more complicated, similar to aerospace.
“It’s become system engineering,” Yen said.
There’s still optimism despite the uncertainty.
“In the end a lot of good will come out of it,” said Techniplas’ Reichental. “Not everybody will be favorably impacted. We will come out of it better off than we went into it.”