Bill Rinna, Director, Americas Vehicle Forecasts
21 November 2018
21 November 2018
One of the most famous quotes attributed to Henry Ford regarding the Model T is that “any customer can have a car painted any color that he wants so long as it is black”. Since the US automotive industry at the time was still in its infancy, he did this to limit variation and improve production efficiencies to keep costs down, so that the Model T could be available to the masses. Well, we have certainly come a long way since then and today’s auto industry is about to embark on an exponential expansion of consumer vehicle choice.
“OEMs will continue to fragment this segment by size, shape, price and capability to a somewhat excessive degree”
It is no secret that the US market is shifting towards SUVs – we see them accounting for over 50% of the market by 2020 – as OEMs will continue to fragment this segment by size, shape, price and capability to a somewhat excessive degree. But automakers are also expanding their Pickup and dedicated EV portfolios (including numerous BEV startups with starry-eyed aspirations), while others still hold strong on traditional sedans, coupés and hatchbacks. The deluge of new entries is driven not only by consumer demand, but also by government regulation (in the case of electrified models). Ultimately, this will lead to nearly 70 additional new and unique models by 2025, all at a time when we are expecting flat-to-falling demand in the US market. The result is many more models competing for the same, or lower, topline volume, leaving smaller and smaller pieces of the pie for the ‘in demand’ segments and mere crumbs for the rest.
Given the hyper-focus on automaker margins as capital is diverted into long-term mobility projects, something will clearly have to give. Going forward, there can be no weak links in the chain as precious investment dollars will be required for electric and autonomous vehicle advancement, with little to no return for the foreseeable future. The obvious choice for the chopping block are traditional sedans (which is already happening) as those models are expected to fall to below 20% of the market by 2021. But we may also see underperforming SUVs under greater scrutiny as the ‘shotgun approach’ by automakers – the scattering of new SUV entries into the market in the hope that something hits the target – may not, ultimately, be sustainable.
“it is consumer choice that will determine what sticks and what falls by the wayside”
The irony is inescapable in that just as we enter into a period of showroom expansion by automakers, much of the dialogue is focused around autonomy and car sharing, which, in time, is likely to reduce the number of vehicle choices needed. But choice is the operative word here as, in the end, it is consumer choice that will determine what sticks and what falls by the wayside.