Morgan Stanley: Dramatic consolidation coming to auto industry
#1
Morgan Stanley: Dramatic consolidation coming to auto industry
Morgan Stanley: Dramatic consolidation coming to auto industry
Washington— An auto industry analyst thinks the world’s nearly 30 major automakers will see dramatic consolidation — and about a half dozen will remain.
Morgan Stanley auto analyst Adam Jonas said in a research note Tuesday that the U.S. auto industry needs a dramatic change in thinking, spurred on by electric vehicle maker Tesla Motors Inc.
“We believe the radically changing landscape of autos requires a commensurate change of thinking in Detroit if the domestic OEMs, as we have traditionally known them, are to remain relevant 15 or 20 years from now,” Jonas said. “The world has too many car companies: We cover nearly 30 auto assemblers globally across eight countries. In our opinion, the balance of economic, competitive and technological forces will ultimately consolidate this figure to five or six players.”
Forecasts a decade ago of auto industry consolidation haven’t come true.
During the financial crisis, governments helped prop up struggling automakers. Consolidation has taken place among suppliers, but not to the extent some had predicted.
Jonas said vision will be necessary for automakers to survive. As recently as 1950, Detroit was home to nearly a dozen major automakers.
“There are several auto firms with the vision to make it to that final select group. Others are more distracted by the issues of the day, working diligently towards the next engineering cycle,” he said.
He said the newest battle line is integration of technology being developed outside the auto industry.
General Motors Co. said last year it had set up a committee to review Tesla’s operations and see if it could learn anything.
“Tesla could either end up being Detroit’s worst enemy or its salvation,” Jonas said. “In our opinion, the disruption from Tesla comes early enough to allow an incumbent sufficient time to adapt its culture, capital allocation and recruiting strategy to the changing forces. With proper execution, Detroit may thank Tesla Motors for being that stiff board in the back of the head right when they needed it.”
He questioned if U.S. automakers are prepared as the industry moves to self-driving cars.
“Do GM and Ford have the right talent and organizational structures in place to achieve industrial leadership in these areas? Probably not enough, we think,” Jonas said, noting it will require careful collaboration with suppliers.
He said an unusually high concentration of new players in the worldwide tech industry are based in Silicon Valley, presenting a unique opportunity for domestic auto companies. He noted that BMW AG has about twice as many tech professionals staffed at its Mountain View technology center than all of Detroit’s automakers.
Morgan Stanley auto analyst Adam Jonas said in a research note Tuesday that the U.S. auto industry needs a dramatic change in thinking, spurred on by electric vehicle maker Tesla Motors Inc.
“We believe the radically changing landscape of autos requires a commensurate change of thinking in Detroit if the domestic OEMs, as we have traditionally known them, are to remain relevant 15 or 20 years from now,” Jonas said. “The world has too many car companies: We cover nearly 30 auto assemblers globally across eight countries. In our opinion, the balance of economic, competitive and technological forces will ultimately consolidate this figure to five or six players.”
Forecasts a decade ago of auto industry consolidation haven’t come true.
During the financial crisis, governments helped prop up struggling automakers. Consolidation has taken place among suppliers, but not to the extent some had predicted.
Jonas said vision will be necessary for automakers to survive. As recently as 1950, Detroit was home to nearly a dozen major automakers.
“There are several auto firms with the vision to make it to that final select group. Others are more distracted by the issues of the day, working diligently towards the next engineering cycle,” he said.
He said the newest battle line is integration of technology being developed outside the auto industry.
General Motors Co. said last year it had set up a committee to review Tesla’s operations and see if it could learn anything.
“Tesla could either end up being Detroit’s worst enemy or its salvation,” Jonas said. “In our opinion, the disruption from Tesla comes early enough to allow an incumbent sufficient time to adapt its culture, capital allocation and recruiting strategy to the changing forces. With proper execution, Detroit may thank Tesla Motors for being that stiff board in the back of the head right when they needed it.”
He questioned if U.S. automakers are prepared as the industry moves to self-driving cars.
“Do GM and Ford have the right talent and organizational structures in place to achieve industrial leadership in these areas? Probably not enough, we think,” Jonas said, noting it will require careful collaboration with suppliers.
He said an unusually high concentration of new players in the worldwide tech industry are based in Silicon Valley, presenting a unique opportunity for domestic auto companies. He noted that BMW AG has about twice as many tech professionals staffed at its Mountain View technology center than all of Detroit’s automakers.
#2
The pursuit of F
With many cars being fully autonomous 15-20 years from now, (sadly) will driving pleasure matter anymore? What will happen to sales of sports cars and other cars with sporty pretensions? This tech will surely start killing off individual types of vehicles and as such extend out to car brands.
#5
Lexus Champion
Forecasts a decade ago of auto industry consolidation haven’t come true.
#6
Pole Position
iTrader: (1)
There are many issues that come to mind when I think of this topic and some of the commentary. Technology costs (see Tesla). At this point and time it's far from a company appealing and affordable to the masses. Perhaps over time as the technology is refined it could drive the costs down on petrol cars and trucks? The car industry is big business (will the unions go quietly) and the keystone pipeline could lower fuel prices? That oil $ is highly influential. Hell I can't even monetarily justify buying a hybrid with the price difference (in the car segments that currently interest me). Even with fuel prices the way they are. I have long postulated that we are being pushed in the direction of solar and renewable energy by the prices of oil, etc.
Six or so companies?? Wow.
Yes I am just throwing darts for fun.
Six or so companies?? Wow.
Yes I am just throwing darts for fun.
Last edited by GSthe4th; 03-31-14 at 02:29 AM.
#7
Lexus Test Driver
Trying to use Detroit automakers as an example of what might happen to automakers on a global scale doesn't seem very logical.
Poorly-written article overall, in any case.
Poorly-written article overall, in any case.
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#8
Lexus Test Driver
For the last 35 years, this same topic and forecast comes up. I call it "empty noise."
#9
Lexus Test Driver
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How much did Tesla pay to have their name all over this article lol?
Passive marketing at its best
-Isn't Moron Stanley also the advocates of $350 per Tesla share lol???
Passive marketing at its best
-Isn't Moron Stanley also the advocates of $350 per Tesla share lol???
Last edited by yowps3; 03-31-14 at 03:46 AM.
#10
Lexus Fanatic
Forecasts a decade ago of auto industry consolidation haven’t come true.
It hasn't? One merely needs to take a look at what happened to the extinction of Plymouth, Mercury, Pontiac, Eagle, Oldsmobile, Geo, Merkur, Hummer, and Saturn as divisions, and the departure of Isuzu, Suzuki, Saab, Sterling, and Daihatsu from the American market. Despite persistant denial from its managements, I would not be surprised to see Mitsubushi also leave pretty soon. Not only in the last 10 years, but also in the last 20, we have seen nothing BUT consolidation.
Last edited by mmarshall; 03-31-14 at 11:15 AM.
#11
These days we have:
Toyota - Toyota, Daihatsu plus partially Subaru and Isuzu
VW - Audi, VW, Seat, Skoda, Porsche
BMW - works with PSA and Toyota on powertrains
Renault/Nissan - JV
Mercedes - works with Renault on Engines, platform sharing.
GM - Killed Pontiac, got Daewoo.... Chevy, Buick, Caddy
Fiat/Chrysler - JV
PSA - Peugeot and Citroen JV, 10% owned by Chinese company.
Hyundai - Hyundai KIA JV
I dont see any of these big ones doing anything... what is left is Honda, Mazda and Mitsibushi, although M/M are pretty small players world wide.
Above we have 10 major manufacturers that will certainly not slim down at all, with their sales rising as well as profits. It is impossible for this to shrink down but maybe thats why author is using far reaching "15" years prediction, which is silly.
Toyota - Toyota, Daihatsu plus partially Subaru and Isuzu
VW - Audi, VW, Seat, Skoda, Porsche
BMW - works with PSA and Toyota on powertrains
Renault/Nissan - JV
Mercedes - works with Renault on Engines, platform sharing.
GM - Killed Pontiac, got Daewoo.... Chevy, Buick, Caddy
Fiat/Chrysler - JV
PSA - Peugeot and Citroen JV, 10% owned by Chinese company.
Hyundai - Hyundai KIA JV
I dont see any of these big ones doing anything... what is left is Honda, Mazda and Mitsibushi, although M/M are pretty small players world wide.
Above we have 10 major manufacturers that will certainly not slim down at all, with their sales rising as well as profits. It is impossible for this to shrink down but maybe thats why author is using far reaching "15" years prediction, which is silly.
#12
Lexus Fanatic
These days we have:
Toyota - Toyota, Daihatsu plus partially Subaru and Isuzu
VW - Audi, VW, Seat, Skoda, Porsche
BMW - works with PSA and Toyota on powertrains
Renault/Nissan - JV
Mercedes - works with Renault on Engines, platform sharing.
GM - Killed Pontiac, got Daewoo.... Chevy, Buick, Caddy
Fiat/Chrysler - JV
PSA - Peugeot and Citroen JV, 10% owned by Chinese company.
Hyundai - Hyundai KIA JV
I dont see any of these big ones doing anything... what is left is Honda, Mazda and Mitsibushi, although M/M are pretty small players world wide.
Above we have 10 major manufacturers that will certainly not slim down at all, with their sales rising as well as profits. It is impossible for this to shrink down but maybe thats why author is using far reaching "15" years prediction, which is silly.
Toyota - Toyota, Daihatsu plus partially Subaru and Isuzu
VW - Audi, VW, Seat, Skoda, Porsche
BMW - works with PSA and Toyota on powertrains
Renault/Nissan - JV
Mercedes - works with Renault on Engines, platform sharing.
GM - Killed Pontiac, got Daewoo.... Chevy, Buick, Caddy
Fiat/Chrysler - JV
PSA - Peugeot and Citroen JV, 10% owned by Chinese company.
Hyundai - Hyundai KIA JV
I dont see any of these big ones doing anything... what is left is Honda, Mazda and Mitsibushi, although M/M are pretty small players world wide.
Above we have 10 major manufacturers that will certainly not slim down at all, with their sales rising as well as profits. It is impossible for this to shrink down but maybe thats why author is using far reaching "15" years prediction, which is silly.
#13
Just in time, bestsellingcarsblog has 2013 sales:
Pos Brand 2013 /12
1 Toyota 9.98 million 3%
2 Volkswagen 9.73 million 5%
3 General Motors 9.71 million 4%
4 Renault-Nissan 8.26 million 2%
5 Hyundai-Kia 7.56 million 6%
6 Ford 6.25 million 10%
7 Fiat-Chrysler 4.35 million 4%
8 Honda 4.10 million 7%
9 PSA Peugeot Citroen 2.82 million -5%
10 Suzuki 2.66 million -1%
11 BMW 1.92 million 6%
12 Daimler 1.56 million 10%
13 Mazda 1.32 million n/a
14 Mitsubishi 1.28 million 12%
15 Tata Motors 1.04 million n/a
16 Geely 0.98 million 8%
17 ChangAn 0.84 million n/a
18 Subaru 0.78 million n/a
19 Great Wall 0.75 million 21%
I could see Honda swallowing one of these smaller Japanese companies but how the heck do you get this list to 5? It is not possible as they are consolidated already and most of them are profitable except for PSA, and even they got cash infusion and change of ownership structure few weeks ago.
http://bestsellingcarsblog.com/2014/...w-catching-up/
Unless he expects nuclear war or gas reserves to disappear within those 15 years? :-)
#14
Lexus Test Driver
It hasn't? One merely needs to take a look at what happened to the extinction of Plymouth, Mercury, Pontiac, Eagle, Oldsmobile, Geo, Merkur, Hummer, and Saturn as divisions, and the departure of Isuzu, Suzuki, Saab, Sterling, and Daihatsu from the American market. Despite persistant denial from its managements, I would not be surprised to see Mitsubushi also leave pretty soon. Not only in the last 10 years, but also in the last 20, we have seen nothing BUT consolidation.
#15
Lexus Fanatic
Yes, I agree, but sometimes the difference betwen the two can be quite murky and confusing. Take Chrysler/Dodge/Jeep, for example. In the space of just a couple of decades, they were totally or partially owned by four different overlords......Renault/AMC, Mercedes (Daimler), Cerebus, and by a combination of Fiat , the U.S. Government, and the UAW. AMC once owned Jeep....a part of Chrysler today, but not decades ago. Before Renault and AMC,, Jeep was owned by Kaiser and ******. GM, today, likewise, up to very recently when the government sold off its shares, was owned by a combination of the American government and the UAW. Yes, the auto-workers union (UAW) owns a big block of both Chrysler and GM shares. Union money contributed to the reorganization of both, though GM did not also have a foreign buyer like Chrysler did with Fiat.
Last edited by mmarshall; 03-31-14 at 09:28 PM.