The auto industry needs to lead the technology debate, keep legislation and science ratios in balance, and prepare for the production of costly, complex vehicles in the 2020s, warns renowned economist and professor Garel Rhys. Rhys is not easily frightened by the struggles of the auto industry. In a long career as one of Europe’s leading economists in the sector, he has seen most of the drama firsthand.
But there is one thing that really does cause him serious concern: “It is the fact that the industry still has not bought into the idea that it should lead the debate instead of being dragged—screaming and shouting—by legislators towards the development of technologies. It remains a reactive industry and there is a real danger that it will go on being led by the nose by governments.”
Rhys, Emeritus Professor of the Cardiff University Business School and Center for Automotive Industry Research and President of the U.K. Institute of the Motor Industry, is a respected commentator on the global motor industry. But as it is crunched by global recession, he believes it is time for it to make a fundamental shift.
“Many years ago, the industry said it wanted to introduce lean burn engines as the right engineering solution to emissions reduction," said Rhys. "But legislators wanted three gases taken care of with (relatively speaking) immediate effect, which meant a catalyst. The industry lost the argument, but in the long term probably the noncatalyst option would have been the better. The problem was that the industry was being led, not leading.
“It is still not commercially adroit and too easily falls back into wishful thinking—the sort of thing that led GM to believe seven years ago that it had only to wait to get back to 50% market share. It was impossible—a total myth.”
The industry is still deluding itself and is still not proactive, said Rhys. “What it needs is more confidence, but that confidence has to be well placed,” he added.
When legislation gets ahead of science
However, it now has a chance to consider its position and to boldly argue that sometimes legislation gets ahead of science. That chance may last several years.
It could be 2013, or as late as 2017, before there is a return to 2007 levels of overall prosperity and security, believes Rhys, and the auto industry is entirely tied to that timescale. But as recovery comes, changes in the structure of the global car industry will certainly be seen.
“In the second half of the next decade and up to 2020, we will see a consolidation of the traditional vehicle manufacturers, but we will also see the emergence of stand-alone companies in China able to design and produce their own vehicles," he said. "That will be in addition to joint ventures.”
Many of the current 133 Chinese companies involved in car production would probably disappear or be consolidated, and that would be the beginning of the emergence of some very strong global competitors, he believes: “It will be rather like the Japanese auto industry in the early 1960s—when Japanese companies really began to appear on the international scene.”
As for those Japanese companies, Rhys sees Nissan further cementing its Alliance with Renault with shared commonality, while still maintaining separate brand identity. In Europe, PSA is likely to get closer to Fiat, and Fiat has linked with Chrysler and will provide car-based architectures. Rhys believes Chrysler will “gradually disappear, to become just factories and brands but not an operating company.” He expects Saab to disappear.
While Jaguar Land Rover (JLR) will survive under the wing of Tata, Rhys finds it ironic that, only now, does the company have products in place—particularly diesels—that should and could have been introduced 10 years ago: “JLR’s then owner, Ford, was too careful trying to get the product side right and spending too much money on such things as the Jaguar Engineering Center at Whitley. It is no use having great R&D facilities and fine factories if the products are not selling well and not generating cash flow.”
Development of choice
Deciding how development money should be spent has long been a problem for companies, particularly now, as the choice of technologies that might or might not meet the criteria for environmentally acceptable powertrain and fuels remains wide.
“It is a menu of possible solutions,” said Rhys. “In a sense, the auto industry is facing what the aero industry faced when the time came to find a design to replace the ubiquitous Douglas DC-3. There were a lot of ‘solutions’ created by a lot of companies,” but nothing was a total, all-in-one replacement for the old airplane.
“It is the same now for cars; there is no one technical solution that truly stands above the others. Some may think that, eventually, it will be the battery, but that technology has still to be developed. I suspect that, by 2020, the vast majority of us will still be driving gasoline and diesel engined vehicles, although 80% of them will be capable of burning biofuel.”
The real challenge is beyond 2020
The real challenge is beyond 2020—probably from 2025 to 2030, warns Rhys. Until then, powertrain solutions will be what he regards as “relatively cheap” to achieve. “But beyond that, CO2 emissions will have to be reduced even more and cars may become very expensive as technology becomes more and more complex. We will be forced to implement those reductions because they will be necessary for the planet. Vehicle producers will not be allowed to make cars anywhere in the world that do not meet the criteria. Because vehicles will then be very expensive and the cost of changing them so great, end users will keep them far longer than they do today.”
It's then that OEMs need to be established in a position of strength to keep the legislation/science ratio at sensible levels.
But there may be more opportunity for niche players, said Rhys, some of them using aspects of technology that the large OEMs would not be able to integrate in cars that were already costly.
This would also fit into a likely emerging pattern that would see a simplification of model lines. “Consumers may not be as bespoke in looking at cars and their equipment as some advisers to manufacturers and designers think," said Rhys. "There will be a need for some variety but not so much as to be confusing as it can be today.”
In future, particularly in the 2020s as the cost of products rise, buyers may become highly discerning about the long-term functionality and longevity of their cars rather than their image, Rhys believes. Vehicles will become useful tools like a basic pickup or taxi. And buyers will focus more sharply than today on two key questions: “What is this expensive vehicle for? What value is it to me?”
If Rhys is right, the answers they demand will affect every aspect of car design and engineering for decades to come.