What the future of the auto industry will look like
Surging demand for cars in rapidly growing nations will mean a robust car industry in 20 years. The US will have a piece of it – though smaller than today – and the models it turns out will be much greener as the iconic industry reinvents itself.
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Will the US ever get that money back? There are “reasonable scenarios” under which the taxpayer investment will be returned, said Ron Bloom, President Obama’s high-profile auto adviser, at a June 10 Senate hearing. “But by no means would I say that I am highly confident that will occur.”Skip to next paragraph
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That does not sound like a ringing endorsement, does it? Postbankruptcy, both GM and Chrysler will be shorn of debt and overhead, and theoretically will be better able to compete in a tough market. The key may be to what point US sales recover.
In January, the pace of vehicle sales in America fell below 10 million units annually for the first time in almost three decades. Some analysts see sales staying in a trough for years, as newly frugal consumers learn to do without leased Audi Q7s, and turn to the used-car market, or (gasp!) keep driving their old cars instead.
Others think that is too pessimistic. In the US, about 13 million cars a year are scrapped due to advanced age, according to the International Motor Vehicle Program, a research consortium founded at the Massachusetts Institute of Technology in 1979. (Aren’t the Monzas all gone by now?)
That loss might put a floor under demand. “The global auto industry will recover to pre-crisis levels as the global economy recovers: There is no paradigm shift at hand,” says a recent research paper from the IMVP, a nonprofit funded by donations from auto firms, as well as other sources.
POST-TROUGH, THE U.S. AUTO industry at least will look a little greener. Besides start-ups, the traditional US automakers are moving to hybrid models. Ford’s new Fusion hybrid is doing well in showrooms today, relatively speaking. GM is making a big deal out of its forthcoming Chevy Volt, an extended-range plug-in hybrid that will be available next year.
Mr. Obama wants 1 million plug-in hybrids on US roads by 2015. By 2016, the US will require automakers to produce fleets of vehicles that get an average of 35.5 miles per gallon, up from today’s figure of 27.5. The federal government is poised to spend billions on everything from new lithium-battery plants to incentives for consumers to buy more-efficient cars.
A new generation of electric cars, as a result, is moving toward showrooms. In the US, 13 hybrid models were available in 2007. By 2011, at least 75 will be on dealer lots, Deutsche Bank reported last year. IHS Global Insight, a consulting firm, projects 47 percent hybridization of the US market by 2020. In Europe, where fuel economy requirements are tougher, the transition could be even more dramatic: Roland Berger and J.D. Power estimate that the market for hybrids/electric vehicles could rise to 50 percent by 2015 – up from 2 percent in 2007.
Is the gas-powered V-8 about to become as extinct as 8-track tapes?