(Booz & Co.: New York) -- A new wave of optimism is overtaking the U.S. auto industry as it rebounds from the depths of the recession and a brutal restructuring, according to Booz & Co.’s second annual U.S. Automotive Industry Survey and Confidence Index.
“Bullishness and optimism prevailed in the survey results,” says Scott Corwin, a partner at Booz & Co. “Auto executives clearly believe the industry is back. It has emerged from the lows of the 2009 recession with a much stronger and more stable foundation. The newly restructured industry is leaner, is stronger, and has gone ‘back to basics,’ paving the way for a brighter, more profitable future.”
In February and March of 2012, Booz & Co. surveyed more than 200 executives from more than 75 automotive vehicle manufacturers and suppliers. Key findings include:
• Relative to last year, industry executives are significantly more bullish on the state of the automotive industry; 94 percent of OEMs and 92 percent of suppliers described it as either “somewhat better” or “much better” than last year.
• Automotive executives cite Hyundai/Kia (88%) and Volkswagen/Audi (72%) as the OEMs most likely to grow market share during the next five years.
• 86 percent of supplier executives and 72 percent of OEM executives say the Detroit Three will maintain or grow market share next year.
• 53 percent of respondents project a U.S. market share of 4 percent or more for Chinese OEMs by 2020.
• With continued government support, 57 percent of respondents believe that alternative powertrains will command more than 10 percent of the market by 2020. However, without continued government support, only 30 percent of respondents have the same expectation.
• Relative to 2011, respondents are significantly more confident in the long-term prospects of full hybrid powertrains (70%) and mild hybrid powertrains (65%), but less confident in the future adoption of plug-in hybrid (46%), battery electric (29%), and fuel-cell electric powertrains (25%).
• 78 percent of OEM respondents say they are either holding the line on incentives or significantly reducing them.
• 34 percent of suppliers and 50 percent of OEMs say cuts in capacity have left them constrained.
• 55 percent of OEMs and 42 percent of suppliers say they were affected by the 2011 Japanese earthquake and tsunami, demonstrating how global the U.S. auto supply chain is today.
Four key factors emerged from the survey that will shape the automotive industry in the next two years.
Reemergence of fundamentals: The U.S. auto industry has learned the tough lessons of recession-driven restructuring, and this is driving a “back to basics” approach focused on strengthening balance sheets, producing excellent vehicles, and not letting supply get ahead of demand.
Shifting demand centers: Emerging markets are gaining steam, and all automakers must learn how to deal with different economies, consumers, and competitors.
Powertrain and technology uncertainty: Alternative powertrains are still in play, but their success depends largely on government support and fuel prices. The industry is moving toward fully digital, connected cars, but automakers are struggling to decide what to place their technology bets on, and how.
Interconnected supply chain: The unfortunate events of the Japanese tsunami and floods in Thailand brought home the interconnectedness of the global supply chain. 92 percent of OEMs and 85 percent of suppliers say they are seeking ways to mitigate these risks in the future.
“Walk on almost any car lot, and you will see that this has definitely been a product-led renaissance,” says Brian Collie, a partner at Booz & Co. “Coming out of the industry restructuring, OEMs and suppliers have addressed a number of fundamental problems in production capacity and labor, and are demonstrating much greater discipline around product and pricing. If the industry can stay disciplined and preserve the efficiencies it fought so hard to implement, the future looks bright and profitable.”
To download a full copy of the study, click here.