auto magazines

2016 Auto Industry Trends

2016 Auto Industry Trends

For the auto industry, two thousand fifteen was a mixed bag by any measure. Record sales in the U.S. gave the sector a much-needed boost, but growing economic malaise in much of the rest of the world, particularly in emerging markets, led to a plane year overall, dampening prospects for global automakers and suppliers.

Meantime, in design rooms and on factory floors, auto companies were dabbling with fresh technologies and vehicle concepts that have the potential to convert the automobile (and transportation more broadly) in perhaps the most dramatic style since Ford spinned out the Model T. Already we are beginning to see bits and lumps of what the so-called connected car will look like – a fully digitized vehicle with Wi-Fi; advanced infotainment systems and apps; vehicle-to-vehicle communications that let cars on the road «talk» to each other, exchanging basic safety data such as speed and position; real-time location services and routing based on traffic conditions; and networked Web links that facilitate vehicle diagnostics and repairs.

At the same time, the intelligent car is rapid moving from the drawing board to the streets. As an demonstrable precursor to the autonomous vehicle, the intelligent car can give drivers a very first taste of the practice of relinquishing control of a vehicle, with such functions as self-braking, self-parking, automatic cruise control based on road conditions, automatic accident-avoidance features, computer-operated power steering, and electrified parking brakes, as well as electronic throttles and engine control.

The idea of fully autonomous vehicles is too futuristic for much of the driving public to embrace right now. But for automakers, the path from current models to driverless cars is going to be an titillating period of transformation. These fresh developments represent enormous opportunities even as they augur a perilous, unsteady phase for the industry. Original equipment manufacturers (OEMs) must navigate the challenges of designing, manufacturing, and upgrading traditional powertrain models while staking a claim in emerging technologies and improved customer practices.

Your capability to be at the vanguard of product trends without running afoul of environmental rules will be tested.

If you are an executive at an OEM or an auto equipment supplier, your strategic acumen – your capability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules – will surely be tested. The critical dimensions that you will have to consider and deftly manage can be violated down into three categories: macroeconomic compels, a fresh era of private transportation, and stricter regulations.

Macroeconomic compels

Long product cycles and deep capital investments make planning in the auto industry a complicated endeavor. For the past ten years, OEMs and suppliers have generally chased global sales growth while hoping to improve margins by leveraging automobile platforms in numerous regions and striving for scale wherever possible. The results of this strategy have been decidedly mixed. In 2015, they turned sour as global economic conditions worsened. This trend makes any fresh commitment to invest in a country or region a risky one that must be deliberately crafted using a clear-eyed assessment of market conditions.

Below is our view of the auto market realities in key geographies:

• North America: U.S. markets are peaking at historic levels, setting a sales record of just under 17.Five million vehicles in 2015, up Five.7 percent from the year before and topping the high-water mark of 17,402,486 in 2000. U.S. sales are likely to be relatively vapid in the next two years and may face a moderate downturn in 2018, the victim of economic cycles, higher auto loan interest rates as the Federal Reserve raises overnight rates, and an expected flood of vehicles into the used car market. Mexican auto sales outpaced forecasts in 2015, hopping nineteen percent to more than 1.Three million units, and are expected to surpass 1.Five million by 2021. Investments in fresh auto factories in Mexico are surging as well; installed capacity is likely to grow more than fifty percent over the next five years (partially for North American consumption, but also for global export). These conditions compel automakers and suppliers to manage supply chains and factory usage cautiously in the U.S., while continuing to expand in Mexico.
• European Union (E.U.): Sales have improved in the European Union since the financial downturn, but the E.U. auto industry is held hostage by local economies that are teetering on the edge of recession. In 2015, fresh car registrations in the E.U. rose 9.Trio percent year-on-year, to 12.6 million units. But that is well below the record year of 2007, when more than eighteen million vehicles were sold in the region. And automakers in some E.U. nations fighting to grow their economies – notably France, Greece, Spain, Italy, and Portugal – face losses or low profits, fragmented markets, and the inefficiencies of model proliferation. The E.U. auto industry must figure out ways to better match production capacity to market request, while at the same time investing in fresh potentially strong product areas (for example, petite SUVs and crossovers) and in fresh automobile technologies.
• Emerging Nations: Perhaps the thickest downward macroeconomic force in the auto industry today is the underperformance of emerging markets, which not too long ago represented a significant chance for major gains in the global auto sector. While India`s sales remained harshly vapid in 2015, China`s year-over-year growth slowed to 7.Trio percent from a ten percent build up in two thousand fourteen and sixteen percent build up in 2013. Fresh vehicle ownership confinements in China`s largest cities will further curtail sales in the coming years. Russia had its 2nd straight year of precipitous decline in 2015; sales were almost fifty percent below the two thousand twelve peak. And Brazil`s sales fell by almost 1.Trio million units, or thirty percent, from its record high in 2012, a drop that was larger than the entire Mexican car market.

Fresh era of private transportation

As noted above, connected and intelligent cars are just beginning to make inroads in the auto industry, and already they have had a powerful influence on the way automakers are adjusting organizationally. Companies are envisioning a far different future than could have been imagined a decade or so ago. Two separate worlds are melding in order to design and develop these cars: the traditional automotive company and software garments. The industries bring with them conflicting cultures, product development models, and business operations. For example, car companies design their products once, in a painstaking five-year-long development cycle. Software companies like to fail and fix in a rapid product development process.

Not only will autonomous cars be a raunchy sell in any market, but traditional powertrains and engines will likely predominate for decades to come.

Albeit many people may be drawn to shiny fresh objects and assume that electrical vehicles and hovercrafts represent the most likely transportation future, the reality is different: Not only will autonomous cars be a rough sell in any market, but traditional powertrains and internal combustion engines are more than likely to be the predominant type of vehicle on the road for decades to come. In that landscape, newer vehicles will be distinguished primarily by their innovative technology involving both assisted driving and global connectivity. In a latest examine, fifty six percent of fresh car buyers said they would switch to a different brand if the one they were considering didn`t suggest the technology and features they desired. Similarly, forty eight percent of car buyers said they would walk away from a vehicle they liked if the technology was difficult to use.

The technology necessary to make connected and intelligent cars – specifically, Web networking, sensors, and software – is not in the traditional wheelhouse for most automobile makers. That shortcoming is an invitation to high-tech companies such as Apple and Google, which are making moves to develop the technology to «own» critical components of the networking, autonomous, and communications capabilities of automobiles. The enlargening presence in the auto industry of technology firms cannot be disregarded or downplayed by OEMs. These companies will likely prove to have an outsized influence on the auto sector in the coming years, chiefly because their abilities and the industry`s needs align flawlessly: They are adept at seamlessly connecting components to create networks valued by consumers for the information, entertainment, efficiencies, and practices they produce.

Stricter regulations

Even as automakers must concentrate on upgrading the transportation and mobility features of their vehicles, stricter fuel economy regulations are closing in. By 2025, for example, automaker fleets in Europe and the U.S. will have to average upward of sixty miles per gallon, a aim that becomes more difficult if oil prices remain low, stoking consumer interest in popular larger, less-efficient vehicles like pickups and SUVs. Meeting these standards will require step-change improvements, not incremental ones. And considering the brief time framework, many of these advances will have to be applied to the traditional internal combustion engine and powertrain. Indeed, experts believe that petroleum-based vehicle fuel economy can be improved by as much as seventy five percent with combustion breakthroughs focused on maximizing engine efficiency and minimizing the formation of emissions within engine cylinders; harass aftertreatment technologies that further reduce emissions; and the recovery of energy from waste warmth.

To improve spectacle, automakers will have to take risks in product development.

In addition to improving overall powertrain spectacle, automakers will have to take risks in product development, a trend that we are already witnessing. For example, in 2014, Ford substituted the steel in its popular and very profitable F-series truck with aluminum in order to reduce weight and enhance fuel efficiency, a budge that could have panicked off customers who believed that the lighter material was less rugged. So far, this treatment has paid off. The two thousand fifteen F-150 had the best mileage of any gasoline pickup and held its position (by a large margin) as the best-selling vehicle of any kind in the U.S.

Honda is taking a similar chance with its latest adoption of continuously variable transmissions (CVTs) across the bulk of its car lineup. Instead of cycling through stationary gears, these transmissions operate on pulleys that permanently adjust gear ratios to provide optimal spectacle in transferring power to the automobile`s wheels. CVT technology produces much better fuel economy because it eliminates inherent inefficiencies in fixed-gear transmissions that result in wasted energy. However, customers are not sold on CVTs yet; some complain that these cars are listless, especially during acceleration, because they lack the rhythmic higher revs and forward movement felt during traditional transmission up-shifting.

Other automakers, including BMW, Mazda, and Fiat Chrysler, are attempting to meet stricter fuel economy standards through a combination of improved aerodynamics, better spectacle using turbo engines, and lighter manufacturing materials, among other tactics.

The combined influence of these three dimensions (macroeconomic coerces, a fresh era of private transportation, and stricter regulations), which have taken center stage in the auto industry, is not lightly managed or blunted. As an executive leading an automobile maker or a supplier, you are all too familiar with the urgency needed to confront each of these unavoidable aspects of the auto business and their effect on your company, albeit you may not yet have a plan to do so. We recommend that you consider these steps as the basis of your strategic plan:

• Step 1. Launch, learn, and adapt quicker than ever – but not rashly. You should prioritize agility, but find ways to take risks without sacrificing sound execution that can jeopardize both customer satisfaction and, more importantly, safety. In brief, a company must be true to its DNA while evolving as rapidly as possible.

2016 Auto Industry Trends

2016 Auto Industry Trends

For the auto industry, two thousand fifteen was a mixed bag by any measure. Record sales in the U.S. gave the sector a much-needed boost, but growing economic malaise in much of the rest of the world, particularly in emerging markets, led to a vapid year overall, dampening prospects for global automakers and suppliers.

Meantime, in design rooms and on factory floors, auto companies were dabbling with fresh technologies and vehicle concepts that have the potential to convert the automobile (and transportation more broadly) in perhaps the most dramatic style since Ford spinned out the Model T. Already we are beginning to see bits and lumps of what the so-called connected car will look like – a fully digitized vehicle with Wi-Fi; advanced infotainment systems and apps; vehicle-to-vehicle communications that let cars on the road «talk» to each other, exchanging basic safety data such as speed and position; real-time location services and routing based on traffic conditions; and networked Web links that facilitate vehicle diagnostics and repairs.

At the same time, the intelligent car is quick moving from the drawing board to the streets. As an visible precursor to the autonomous vehicle, the intelligent car can give drivers a very first taste of the practice of relinquishing control of a vehicle, with such functions as self-braking, self-parking, automatic cruise control based on road conditions, automatic accident-avoidance features, computer-operated power steering, and electrical parking brakes, as well as electronic throttles and engine control.

The idea of fully autonomous vehicles is too futuristic for much of the driving public to embrace right now. But for automakers, the path from current models to driverless cars is going to be an arousing period of transformation. These fresh developments represent enormous opportunities even as they augur a perilous, unsteady phase for the industry. Original equipment manufacturers (OEMs) must navigate the challenges of designing, manufacturing, and upgrading traditional powertrain models while staking a claim in emerging technologies and improved customer practices.

Your capability to be at the vanguard of product trends without running afoul of environmental rules will be tested.

If you are an executive at an OEM or an auto equipment supplier, your strategic acumen – your capability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules – will surely be tested. The critical dimensions that you will have to consider and deftly manage can be violated down into three categories: macroeconomic coerces, a fresh era of private transportation, and stricter regulations.

Macroeconomic coerces

Long product cycles and deep capital investments make planning in the auto industry a complicated endeavor. For the past ten years, OEMs and suppliers have generally chased global sales growth while hoping to improve margins by leveraging automobile platforms in numerous regions and striving for scale wherever possible. The results of this strategy have been decidedly mixed. In 2015, they turned sour as global economic conditions worsened. This trend makes any fresh commitment to invest in a country or region a risky one that must be deliberately crafted using a clear-eyed assessment of market conditions.

Below is our view of the auto market realities in key geographies:

• North America: U.S. markets are peaking at historic levels, setting a sales record of just under 17.Five million vehicles in 2015, up Five.7 percent from the year before and topping the high-water mark of 17,402,486 in 2000. U.S. sales are likely to be relatively vapid in the next two years and may face a moderate downturn in 2018, the victim of economic cycles, higher auto loan interest rates as the Federal Reserve raises overnight rates, and an expected flood of vehicles into the used car market. Mexican auto sales outpaced forecasts in 2015, hopping nineteen percent to more than 1.Three million units, and are expected to surpass 1.Five million by 2021. Investments in fresh auto factories in Mexico are surging as well; installed capacity is likely to grow more than fifty percent over the next five years (partially for North American consumption, but also for global export). These conditions compel automakers and suppliers to manage supply chains and factory usage cautiously in the U.S., while continuing to expand in Mexico.
• European Union (E.U.): Sales have improved in the European Union since the financial downturn, but the E.U. auto industry is held hostage by local economies that are teetering on the edge of recession. In 2015, fresh car registrations in the E.U. rose 9.Trio percent year-on-year, to 12.6 million units. But that is well below the record year of 2007, when more than eighteen million vehicles were sold in the region. And automakers in some E.U. nations fighting to grow their economies – notably France, Greece, Spain, Italy, and Portugal – face losses or low profits, fragmented markets, and the inefficiencies of model proliferation. The E.U. auto industry must figure out ways to better match production capacity to market request, while at the same time investing in fresh potentially strong product areas (for example, petite SUVs and crossovers) and in fresh automobile technologies.
• Emerging Nations: Perhaps the fattest downward macroeconomic force in the auto industry today is the underperformance of emerging markets, which not too long ago represented a significant chance for major gains in the global auto sector. While India`s sales remained toughly plane in 2015, China`s year-over-year growth slowed to 7.Three percent from a ten percent build up in two thousand fourteen and sixteen percent build up in 2013. Fresh vehicle ownership limitations in China`s largest cities will further curtail sales in the coming years. Russia had its 2nd straight year of precipitous decline in 2015; sales were almost fifty percent below the two thousand twelve peak. And Brazil`s sales fell by almost 1.Three million units, or thirty percent, from its record high in 2012, a drop that was larger than the entire Mexican car market.

Fresh era of private transportation

As noted above, connected and intelligent cars are just beginning to make inroads in the auto industry, and already they have had a powerful influence on the way automakers are adjusting organizationally. Companies are envisioning a far different future than could have been imagined a decade or so ago. Two separate worlds are melding in order to design and develop these cars: the traditional automotive company and software garments. The industries bring with them conflicting cultures, product development models, and business operations. For example, car companies design their products once, in a painstaking five-year-long development cycle. Software companies like to fail and fix in a rapid product development process.

Not only will autonomous cars be a harsh sell in any market, but traditional powertrains and engines will likely predominate for decades to come.

Albeit many people may be drawn to shiny fresh objects and assume that electrical vehicles and hovercrafts represent the most likely transportation future, the reality is different: Not only will autonomous cars be a raunchy sell in any market, but traditional powertrains and internal combustion engines are more than likely to be the predominant type of vehicle on the road for decades to come. In that landscape, newer vehicles will be distinguished primarily by their innovative technology involving both assisted driving and global connectivity. In a latest explore, fifty six percent of fresh car buyers said they would switch to a different brand if the one they were considering didn`t suggest the technology and features they desired. Similarly, forty eight percent of car buyers said they would walk away from a vehicle they liked if the technology was difficult to use.

The technology necessary to make connected and intelligent cars – specifically, Web networking, sensors, and software – is not in the traditional wheelhouse for most automobile makers. That shortcoming is an invitation to high-tech companies such as Apple and Google, which are making moves to develop the technology to «own» critical components of the networking, autonomous, and communications capabilities of automobiles. The enhancing presence in the auto industry of technology firms cannot be overlooked or downplayed by OEMs. These companies will likely prove to have an outsized influence on the auto sector in the coming years, chiefly because their abilities and the industry`s needs align ideally: They are adept at seamlessly connecting components to create networks valued by consumers for the information, entertainment, efficiencies, and practices they produce.

Stricter regulations

Even as automakers must concentrate on upgrading the transportation and mobility features of their vehicles, stricter fuel economy regulations are closing in. By 2025, for example, automaker fleets in Europe and the U.S. will have to average upward of sixty miles per gallon, a objective that becomes more difficult if oil prices remain low, stoking consumer interest in popular larger, less-efficient vehicles like pickups and SUVs. Meeting these standards will require step-change improvements, not incremental ones. And considering the brief time framework, many of these advances will have to be applied to the traditional internal combustion engine and powertrain. Indeed, experts believe that petroleum-based vehicle fuel economy can be improved by as much as seventy five percent with combustion breakthroughs focused on maximizing engine efficiency and minimizing the formation of emissions within engine cylinders; harass aftertreatment technologies that further reduce emissions; and the recovery of energy from waste fever.

To improve spectacle, automakers will have to take risks in product development.

In addition to improving overall powertrain spectacle, automakers will have to take risks in product development, a trend that we are already witnessing. For example, in 2014, Ford substituted the steel in its popular and very profitable F-series truck with aluminum in order to reduce weight and enhance fuel efficiency, a stir that could have panicked off customers who believed that the lighter material was less rugged. So far, this treatment has paid off. The two thousand fifteen F-150 had the best mileage of any gasoline pickup and held its position (by a large margin) as the best-selling vehicle of any kind in the U.S.

Honda is taking a similar chance with its latest adoption of continuously variable transmissions (CVTs) across the bulk of its car lineup. Instead of cycling through motionless gears, these transmissions operate on pulleys that permanently adjust gear ratios to provide optimal spectacle in transferring power to the automobile`s wheels. CVT technology produces much better fuel economy because it eliminates inherent inefficiencies in fixed-gear transmissions that result in wasted energy. However, customers are not sold on CVTs yet; some complain that these cars are listless, especially during acceleration, because they lack the rhythmic higher revs and forward movement felt during traditional transmission up-shifting.

Other automakers, including BMW, Mazda, and Fiat Chrysler, are attempting to meet stricter fuel economy standards through a combination of improved aerodynamics, better spectacle using turbo engines, and lighter manufacturing materials, among other tactics.

The combined influence of these three dimensions (macroeconomic compels, a fresh era of private transportation, and stricter regulations), which have taken center stage in the auto industry, is not lightly managed or blunted. As an executive leading an automobile maker or a supplier, you are all too familiar with the urgency needed to confront each of these unavoidable aspects of the auto business and their effect on your company, albeit you may not yet have a plan to do so. We recommend that you consider these steps as the basis of your strategic plan:

• Step 1. Launch, learn, and adapt quicker than ever – but not rashly. You should prioritize agility, but find ways to take risks without sacrificing sound execution that can jeopardize both customer satisfaction and, more importantly, safety. In brief, a company must be true to its DNA while evolving as rapidly as possible.

2016 Auto Industry Trends

2016 Auto Industry Trends

For the auto industry, two thousand fifteen was a mixed bag by any measure. Record sales in the U.S. gave the sector a much-needed boost, but growing economic malaise in much of the rest of the world, particularly in emerging markets, led to a vapid year overall, dampening prospects for global automakers and suppliers.

Meantime, in design rooms and on factory floors, auto companies were dabbling with fresh technologies and vehicle concepts that have the potential to convert the automobile (and transportation more broadly) in perhaps the most dramatic style since Ford spinned out the Model T. Already we are beginning to see bits and lumps of what the so-called connected car will look like – a fully digitized vehicle with Wi-Fi; advanced infotainment systems and apps; vehicle-to-vehicle communications that let cars on the road «talk» to each other, exchanging basic safety data such as speed and position; real-time location services and routing based on traffic conditions; and networked Web links that facilitate vehicle diagnostics and repairs.

At the same time, the intelligent car is quick moving from the drawing board to the streets. As an visible precursor to the autonomous vehicle, the intelligent car can give drivers a very first taste of the practice of relinquishing control of a vehicle, with such functions as self-braking, self-parking, automatic cruise control based on road conditions, automatic accident-avoidance features, computer-operated power steering, and electrified parking brakes, as well as electronic throttles and engine control.

The idea of fully autonomous vehicles is too futuristic for much of the driving public to embrace right now. But for automakers, the path from current models to driverless cars is going to be an arousing period of transformation. These fresh developments represent enormous opportunities even as they augur a perilous, unsteady phase for the industry. Original equipment manufacturers (OEMs) must navigate the challenges of designing, manufacturing, and upgrading traditional powertrain models while staking a claim in emerging technologies and improved customer practices.

Your capability to be at the vanguard of product trends without running afoul of environmental rules will be tested.

If you are an executive at an OEM or an auto equipment supplier, your strategic acumen – your capability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules – will surely be tested. The critical dimensions that you will have to consider and deftly manage can be cracked down into three categories: macroeconomic compels, a fresh era of private transportation, and stricter regulations.

Macroeconomic coerces

Long product cycles and deep capital investments make planning in the auto industry a elaborate endeavor. For the past ten years, OEMs and suppliers have generally chased global sales growth while hoping to improve margins by leveraging automobile platforms in numerous regions and striving for scale wherever possible. The results of this strategy have been decidedly mixed. In 2015, they turned sour as global economic conditions worsened. This trend makes any fresh commitment to invest in a country or region a risky one that must be deliberately crafted using a clear-eyed assessment of market conditions.

Below is our view of the auto market realities in key geographies:

• North America: U.S. markets are peaking at historic levels, setting a sales record of just under 17.Five million vehicles in 2015, up Five.7 percent from the year before and topping the high-water mark of 17,402,486 in 2000. U.S. sales are likely to be relatively vapid in the next two years and may face a moderate downturn in 2018, the victim of economic cycles, higher auto loan interest rates as the Federal Reserve raises overnight rates, and an expected flood of vehicles into the used car market. Mexican auto sales outpaced forecasts in 2015, hopping nineteen percent to more than 1.Three million units, and are expected to surpass 1.Five million by 2021. Investments in fresh auto factories in Mexico are surging as well; installed capacity is likely to grow more than fifty percent over the next five years (partially for North American consumption, but also for global export). These conditions compel automakers and suppliers to manage supply chains and factory usage cautiously in the U.S., while continuing to expand in Mexico.
• European Union (E.U.): Sales have improved in the European Union since the financial downturn, but the E.U. auto industry is held hostage by local economies that are teetering on the edge of recession. In 2015, fresh car registrations in the E.U. rose 9.Trio percent year-on-year, to 12.6 million units. But that is well below the record year of 2007, when more than eighteen million vehicles were sold in the region. And automakers in some E.U. nations fighting to grow their economies – notably France, Greece, Spain, Italy, and Portugal – face losses or low profits, fragmented markets, and the inefficiencies of model proliferation. The E.U. auto industry must figure out ways to better match production capacity to market request, while at the same time investing in fresh potentially strong product areas (for example, puny SUVs and crossovers) and in fresh automobile technologies.
• Emerging Nations: Perhaps the largest downward macroeconomic force in the auto industry today is the underperformance of emerging markets, which not too long ago represented a significant chance for major gains in the global auto sector. While India`s sales remained toughly vapid in 2015, China`s year-over-year growth slowed to 7.Trio percent from a ten percent build up in two thousand fourteen and sixteen percent build up in 2013. Fresh vehicle ownership limitations in China`s largest cities will further curtail sales in the coming years. Russia had its 2nd straight year of precipitous decline in 2015; sales were almost fifty percent below the two thousand twelve peak. And Brazil`s sales fell by almost 1.Three million units, or thirty percent, from its record high in 2012, a drop that was larger than the entire Mexican car market.

Fresh era of individual transportation

As noted above, connected and intelligent cars are just beginning to make inroads in the auto industry, and already they have had a powerful influence on the way automakers are adjusting organizationally. Companies are envisioning a far different future than could have been imagined a decade or so ago. Two separate worlds are melding in order to design and develop these cars: the traditional automotive company and software garments. The industries bring with them conflicting cultures, product development models, and business operations. For example, car companies design their products once, in a painstaking five-year-long development cycle. Software companies like to fail and fix in a rapid product development process.

Not only will autonomous cars be a raunchy sell in any market, but traditional powertrains and engines will likely predominate for decades to come.

Albeit many people may be drawn to shiny fresh objects and assume that electrical vehicles and hovercrafts represent the most likely transportation future, the reality is different: Not only will autonomous cars be a rough sell in any market, but traditional powertrains and internal combustion engines are more than likely to be the predominant type of vehicle on the road for decades to come. In that landscape, newer vehicles will be distinguished primarily by their innovative technology involving both assisted driving and global connectivity. In a latest investigate, fifty six percent of fresh car buyers said they would switch to a different brand if the one they were considering didn`t suggest the technology and features they desired. Similarly, forty eight percent of car buyers said they would walk away from a vehicle they liked if the technology was difficult to use.

The technology necessary to make connected and intelligent cars – specifically, Web networking, sensors, and software – is not in the traditional wheelhouse for most automobile makers. That shortcoming is an invitation to high-tech companies such as Apple and Google, which are making moves to develop the technology to «own» critical components of the networking, autonomous, and communications capabilities of automobiles. The enhancing presence in the auto industry of technology firms cannot be disregarded or downplayed by OEMs. These companies will likely prove to have an outsized influence on the auto sector in the coming years, chiefly because their abilities and the industry`s needs align flawlessly: They are adept at seamlessly connecting components to create networks valued by consumers for the information, entertainment, efficiencies, and practices they produce.

Stricter regulations

Even as automakers must concentrate on upgrading the transportation and mobility features of their vehicles, stricter fuel economy regulations are closing in. By 2025, for example, automaker fleets in Europe and the U.S. will have to average upward of sixty miles per gallon, a objective that becomes more difficult if oil prices remain low, stoking consumer interest in popular larger, less-efficient vehicles like pickups and SUVs. Meeting these standards will require step-change improvements, not incremental ones. And considering the brief time framework, many of these advances will have to be applied to the traditional internal combustion engine and powertrain. Indeed, experts believe that petroleum-based vehicle fuel economy can be improved by as much as seventy five percent with combustion breakthroughs focused on maximizing engine efficiency and minimizing the formation of emissions within engine cylinders; harass aftertreatment technologies that further reduce emissions; and the recovery of energy from waste fever.

To improve spectacle, automakers will have to take risks in product development.

In addition to improving overall powertrain spectacle, automakers will have to take risks in product development, a trend that we are already witnessing. For example, in 2014, Ford substituted the steel in its popular and very profitable F-series truck with aluminum in order to reduce weight and enhance fuel efficiency, a stir that could have panicked off customers who believed that the lighter material was less rugged. So far, this treatment has paid off. The two thousand fifteen F-150 had the best mileage of any gasoline pickup and held its position (by a large margin) as the best-selling vehicle of any kind in the U.S.

Honda is taking a similar chance with its latest adoption of continuously variable transmissions (CVTs) across the bulk of its car lineup. Instead of cycling through immobilized gears, these transmissions operate on pulleys that permanently adjust gear ratios to provide optimal spectacle in transferring power to the automobile`s wheels. CVT technology supplies much better fuel economy because it eliminates inherent inefficiencies in fixed-gear transmissions that result in wasted energy. However, customers are not sold on CVTs yet; some complain that these cars are listless, especially during acceleration, because they lack the rhythmic higher revs and forward movement felt during traditional transmission up-shifting.

Other automakers, including BMW, Mazda, and Fiat Chrysler, are attempting to meet stricter fuel economy standards through a combination of improved aerodynamics, better spectacle using turbo engines, and lighter manufacturing materials, among other tactics.

The combined influence of these three dimensions (macroeconomic compels, a fresh era of individual transportation, and stricter regulations), which have taken center stage in the auto industry, is not lightly managed or blunted. As an executive leading an automobile maker or a supplier, you are all too familiar with the urgency needed to confront each of these unavoidable aspects of the auto business and their effect on your company, albeit you may not yet have a plan to do so. We recommend that you consider these steps as the basis of your strategic plan:

• Step 1. Launch, learn, and adapt swifter than ever – but not rashly. You should prioritize agility, but find ways to take risks without sacrificing sound execution that can jeopardize both customer satisfaction and, more importantly, safety. In brief, a company must be true to its DNA while evolving as rapidly as possible.

2016 Auto Industry Trends

2016 Auto Industry Trends

For the auto industry, two thousand fifteen was a mixed bag by any measure. Record sales in the U.S. gave the sector a much-needed boost, but growing economic malaise in much of the rest of the world, particularly in emerging markets, led to a vapid year overall, dampening prospects for global automakers and suppliers.

Meantime, in design rooms and on factory floors, auto companies were dabbling with fresh technologies and vehicle concepts that have the potential to convert the automobile (and transportation more broadly) in perhaps the most dramatic style since Ford spinned out the Model T. Already we are beginning to see bits and chunks of what the so-called connected car will look like – a fully digitized vehicle with Wi-Fi; advanced infotainment systems and apps; vehicle-to-vehicle communications that let cars on the road «talk» to each other, exchanging basic safety data such as speed and position; real-time location services and routing based on traffic conditions; and networked Web links that facilitate vehicle diagnostics and repairs.

At the same time, the intelligent car is prompt moving from the drawing board to the streets. As an demonstrable precursor to the autonomous vehicle, the intelligent car can give drivers a very first taste of the practice of relinquishing control of a vehicle, with such functions as self-braking, self-parking, automatic cruise control based on road conditions, automatic accident-avoidance features, computer-operated power steering, and electrified parking brakes, as well as electronic throttles and engine control.

The idea of fully autonomous vehicles is too futuristic for much of the driving public to embrace right now. But for automakers, the path from current models to driverless cars is going to be an arousing period of transformation. These fresh developments represent enormous opportunities even as they augur a perilous, unsteady phase for the industry. Original equipment manufacturers (OEMs) must navigate the challenges of designing, manufacturing, and upgrading traditional powertrain models while staking a claim in emerging technologies and improved customer practices.

Your capability to be at the vanguard of product trends without running afoul of environmental rules will be tested.

If you are an executive at an OEM or an auto equipment supplier, your strategic acumen – your capability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules – will surely be tested. The critical dimensions that you will have to consider and deftly manage can be violated down into three categories: macroeconomic coerces, a fresh era of private transportation, and stricter regulations.

Macroeconomic compels

Long product cycles and deep capital investments make planning in the auto industry a elaborate endeavor. For the past ten years, OEMs and suppliers have generally chased global sales growth while hoping to improve margins by leveraging automobile platforms in numerous regions and striving for scale wherever possible. The results of this strategy have been decidedly mixed. In 2015, they turned sour as global economic conditions worsened. This trend makes any fresh commitment to invest in a country or region a risky one that must be deliberately crafted using a clear-eyed assessment of market conditions.

Below is our view of the auto market realities in key geographies:

• North America: U.S. markets are peaking at historic levels, setting a sales record of just under 17.Five million vehicles in 2015, up Five.7 percent from the year before and topping the high-water mark of 17,402,486 in 2000. U.S. sales are likely to be relatively vapid in the next two years and may face a moderate downturn in 2018, the victim of economic cycles, higher auto loan interest rates as the Federal Reserve raises overnight rates, and an expected flood of vehicles into the used car market. Mexican auto sales outpaced forecasts in 2015, hopping nineteen percent to more than 1.Trio million units, and are expected to surpass 1.Five million by 2021. Investments in fresh auto factories in Mexico are surging as well; installed capacity is likely to grow more than fifty percent over the next five years (partially for North American consumption, but also for global export). These conditions compel automakers and suppliers to manage supply chains and factory usage cautiously in the U.S., while continuing to expand in Mexico.
• European Union (E.U.): Sales have improved in the European Union since the financial downturn, but the E.U. auto industry is held hostage by local economies that are teetering on the edge of recession. In 2015, fresh car registrations in the E.U. rose 9.Three percent year-on-year, to 12.6 million units. But that is well below the record year of 2007, when more than eighteen million vehicles were sold in the region. And automakers in some E.U. nations fighting to grow their economies – notably France, Greece, Spain, Italy, and Portugal – face losses or low profits, fragmented markets, and the inefficiencies of model proliferation. The E.U. auto industry must figure out ways to better match production capacity to market request, while at the same time investing in fresh potentially strong product areas (for example, puny SUVs and crossovers) and in fresh automobile technologies.
• Emerging Nations: Perhaps the fattest downward macroeconomic force in the auto industry today is the underperformance of emerging markets, which not too long ago represented a significant chance for major gains in the global auto sector. While India`s sales remained toughly vapid in 2015, China`s year-over-year growth slowed to 7.Three percent from a ten percent build up in two thousand fourteen and sixteen percent build up in 2013. Fresh vehicle ownership limitations in China`s largest cities will further curtail sales in the coming years. Russia had its 2nd straight year of precipitous decline in 2015; sales were almost fifty percent below the two thousand twelve peak. And Brazil`s sales fell by almost 1.Three million units, or thirty percent, from its record high in 2012, a drop that was larger than the entire Mexican car market.

Fresh era of private transportation

As noted above, connected and intelligent cars are just beginning to make inroads in the auto industry, and already they have had a powerful influence on the way automakers are adjusting organizationally. Companies are envisioning a far different future than could have been imagined a decade or so ago. Two separate worlds are melding in order to design and develop these cars: the traditional automotive company and software garments. The industries bring with them conflicting cultures, product development models, and business operations. For example, car companies design their products once, in a painstaking five-year-long development cycle. Software companies like to fail and fix in a rapid product development process.

Not only will autonomous cars be a rough sell in any market, but traditional powertrains and engines will likely predominate for decades to come.

Albeit many people may be drawn to shiny fresh objects and assume that electrified vehicles and hovercrafts represent the most likely transportation future, the reality is different: Not only will autonomous cars be a harsh sell in any market, but traditional powertrains and internal combustion engines are more than likely to be the predominant type of vehicle on the road for decades to come. In that landscape, newer vehicles will be distinguished primarily by their innovative technology involving both assisted driving and global connectivity. In a latest probe, fifty six percent of fresh car buyers said they would switch to a different brand if the one they were considering didn`t suggest the technology and features they desired. Similarly, forty eight percent of car buyers said they would walk away from a vehicle they liked if the technology was difficult to use.

The technology necessary to make connected and intelligent cars – specifically, Web networking, sensors, and software – is not in the traditional wheelhouse for most automobile makers. That shortcoming is an invitation to high-tech companies such as Apple and Google, which are making moves to develop the technology to «own» critical components of the networking, autonomous, and communications capabilities of automobiles. The enlargening presence in the auto industry of technology firms cannot be disregarded or downplayed by OEMs. These companies will likely prove to have an outsized influence on the auto sector in the coming years, chiefly because their abilities and the industry`s needs align ideally: They are adept at seamlessly connecting components to create networks valued by consumers for the information, entertainment, efficiencies, and practices they supply.

Stricter regulations

Even as automakers must concentrate on upgrading the transportation and mobility features of their vehicles, stricter fuel economy regulations are closing in. By 2025, for example, automaker fleets in Europe and the U.S. will have to average upward of sixty miles per gallon, a objective that becomes more difficult if oil prices remain low, stoking consumer interest in popular larger, less-efficient vehicles like pickups and SUVs. Meeting these standards will require step-change improvements, not incremental ones. And considering the brief time framework, many of these advances will have to be applied to the traditional internal combustion engine and powertrain. Indeed, experts believe that petroleum-based vehicle fuel economy can be improved by as much as seventy five percent with combustion breakthroughs focused on maximizing engine efficiency and minimizing the formation of emissions within engine cylinders; harass aftertreatment technologies that further reduce emissions; and the recovery of energy from waste warmth.

To improve spectacle, automakers will have to take risks in product development.

In addition to improving overall powertrain spectacle, automakers will have to take risks in product development, a trend that we are already witnessing. For example, in 2014, Ford substituted the steel in its popular and very profitable F-series truck with aluminum in order to reduce weight and enhance fuel efficiency, a budge that could have startled off customers who believed that the lighter material was less rugged. So far, this treatment has paid off. The two thousand fifteen F-150 had the best mileage of any gasoline pickup and held its position (by a large margin) as the best-selling vehicle of any kind in the U.S.

Honda is taking a similar chance with its latest adoption of continuously variable transmissions (CVTs) across the bulk of its car lineup. Instead of cycling through immobile gears, these transmissions operate on pulleys that permanently adjust gear ratios to provide optimal spectacle in transferring power to the automobile`s wheels. CVT technology produces much better fuel economy because it eliminates inherent inefficiencies in fixed-gear transmissions that result in wasted energy. However, customers are not sold on CVTs yet; some complain that these cars are listless, especially during acceleration, because they lack the rhythmic higher revs and forward movement felt during traditional transmission up-shifting.

Other automakers, including BMW, Mazda, and Fiat Chrysler, are attempting to meet stricter fuel economy standards through a combination of improved aerodynamics, better spectacle using turbo engines, and lighter manufacturing materials, among other tactics.

The combined influence of these three dimensions (macroeconomic coerces, a fresh era of individual transportation, and stricter regulations), which have taken center stage in the auto industry, is not lightly managed or blunted. As an executive leading an automobile maker or a supplier, you are all too familiar with the urgency needed to confront each of these unavoidable aspects of the auto business and their effect on your company, albeit you may not yet have a plan to do so. We recommend that you consider these steps as the basis of your strategic plan:

• Step 1. Launch, learn, and adapt swifter than ever – but not rashly. You should prioritize agility, but find ways to take risks without sacrificing sound execution that can jeopardize both customer satisfaction and, more importantly, safety. In brief, a company must be true to its DNA while evolving as rapidly as possible.

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