The world’s largest automakers have been engaged in a race to develop the most efficient electric car, the best connected car, and to be the first to introduce a The world’s largest automakers have been engaged in a race to develop the most efficient electric car, the best connected car, and to be the first to introduce a fully-autonomous car to the market, for a while now. In order to be able to keep pace with the competition, manufacturers put an incredible amount of money, time and effort, which is bound to take a toll on some of them.
A new report says that automakers will be having a hard time staying afloat during this race, as they face higher costs associated with the development of electric-drive, connected-car and autonomous-driving technologies. According to a report recently published by AlixPartners, a consulting firm headquartered in New York, many car manufacturers will have to make some pretty hard choices in the following years if they want to avoid getting left in the dust by the larger and wealthier companies.
The report, which introduces the CASE acronym for the first time, referring to “connected, autonomous, shared and electric”, states that automakers will have to make significant investments in order to maintain high profit margins, but few of them will be able to do it. AlixPartners’ researchers say that only a handful of manufacturers have sufficient capital to invest in all of the above-mentioned technologies, and those who don’t, will be forced to collaborate with each other or even merge with some of the larger and more powerful companies.
At the moment, AlixPartners says that 16 joint ventures, 17 assembly alliances and 15 technical alliances in the auto industry, along with nine cases of one car maker owns equity in another, and these numbers are bound to go up over the next ten years or so.
What all this means is that the auto industry is headed towards an inevitable consolidation, something that Sergio Marchionne, the CEO of Fiat Chrysler Automobiles, has been talking about for a while. He was trying to convince General Motors to merge with his company for a couple of months, saying that it was a necessary move in order to make sure both automakers are able to deal with increased capital costs as they try to develop new electric models and advance self-driving car technologies.
AlixPartners says that the race towards CASE cars is partly driven by increased demand for in-car connectivity features, as well as plug-in cars, in China and in the U.S. On top of that, the United States wants to make connected-car technology mandatory for all new vehicles sold in the country, so automakers that will want to sell their cars in this market will have to invest in development of new in-car technology features, which will surely strain them even further.