Greater expectations: brighter days will return for the automotive industry

Future EV

Although automotive OEMs will face years of stagnant vehicle sales, a stronger recovery thereafter will bring growth back up to long run averages and herald a return to stronger profits. By then, however, the industry is likely to have undergone further consolidation.

According to a vehicle sales and powertrain mix forecast by Automotive from Ultima Media, the global automotive industry is facing a nearly unprecedented period of declining or stagnating vehicle sales. However, rather than this being the beginning of what some refer to as ‘peak car’, a stronger period of growth will follow.

From around the middle of the next decade onwards, Ultima Media forecasts that increasing population growth, emerging markets and a stronger uptick in alternative energy vehicle sales will underpin a stronger recovery in sales.

“For the time being though, OEMs are going to have to adopt a range of strategies to counter already slim and shrinking operating margins,” says Daniel Harrison, automotive analyst at Ultima Media. “This also comes at a critical time for OEMs when most of them are likely to be faced with heavy fines for breaching EU CO2 targets.”

Consequently, Harrison expects there to be continued industry consolidation, joint ventures, alliances and platform sharing – all with the aim to pool resources and share the huge investment costs associated with the next generation of vehicles. 

These effects will be felt not just by OEMs, but also by tier suppliers all the way along the supply chain.

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