Challenges (and opportunities) for US automotive industry

Detroit at night

As overall US vehicle sales slow down and EV sales remain stagnant, there are concerns that some OEMs are chasing new-generation technologies at the expense of their existing business – potentially setting up a ‘make or break’ scenario in the near future.

Declining vehicle sales and investment in new vehicle technology driven by a stricter emissions regulations are combining with the impact of global trade wars to make things very difficult for the automotive industry in the near term. Analysts at the Automotive Logistics Global Detroit conference in September said that the next five years could see more consolidation, aggressive restructuring and retrenchment.

Faced with a slowdown in US vehicle sales from next year, and with a possible recession on the way, carmakers and suppliers in that market may have to wait longer to see any return on the significant investments they are making in connected, autonomous and electric vehicle (EV) technology.

Brandon Mason, automotive director and mobility leader at PWC, said the automotive sector should expect significant capital pressure over the next few years. While it is currently at a peak, with sales expected to reach 16.9m units this year, carmakers are operating at high single-digit margins in terms of profit, which could be precarious if current expenditure on new vehicle technology continues. That is because sales are expected to retract over the next three to four years, down to 15.9m in 2021, and will not top out again until 2025.

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