Automakers Face Uphill Struggle To Adapt To New Era Of Mobility
With the global emphasis on hybrid technology and autonomous cars, Detroit automakers have their task cut out to survive in this era.
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As you gain experience in online stock trading, you get to understand the trends of various industries. It is important to have a clear picture of which industry will perform better or worse in the short term and long term. Why Society Is Turning Against Conventional Automakers Experts believe that the conventional auto industry in the US is in for some tough times. There are many market forces working against these manufacturers, primarily new trends such as ride sharing, the fad of driverless cars, and the environmental conscience-inspired desire for cars powered by unconventional and non-polluting sources of energy. This means that conventional automobile manufacturers such as Ford ($F), General Motors ($GM) and Fiat Chrysler ($FCAU) have to make significant alterations to their assembly lines and facilities to incorporate manufacture and assembling of electric powertrains, software additions, driverless tech, and other key modifications to their model lines to live up to the new mobility trends that are sweeping not only the country but also globally. Lower Profit Margins Make Adapting Tough This will also affect parts suppliers and manufacturers who’ll have to change to the new trends or be held back. Automating and electrifying vehicles require a great deal of financial investment not just to acquire the infrastructure for these technological changes, but also the expertise to carry them out. Conventional automakers and automotive parts suppliers usually experience lower profit margins. This, combined with the massive investment to incorporate these changes makes the future quite bleak for the industry, while technological giants and unconventional automakers such as Tesla ($TSLA) have a very bright outlook because of the lucrative opportunities out there. It’s a Hybrid Future Hybrid vehicles are a reality the auto industry has to embrace. The 2016 Paris Agreement requires the auto industry to contribute 20% of greenhouse gas reductions from energy use by the year 2050. Globally, the transport sector has witnessed the greatest rise in emissions, according to research firm Blackrock. In 2016, four of the world’s major cities, Madrid, Paris, Mexico City and Athens declared they would by 2025, ban the use of diesel cars. Yes, it’s true that in the United States President Trump is in favour of the conventional energy and auto industries and is trying everything he can to give a rosy future. Moreover,
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fuel emission standards are more relaxed here. However, that does not change the overall outlook. The hybrid sector is growing here as well, with most of the hybrid and new age automotive technologies being developed right here in the United States. Proof of this is the fact that Tesla, the electric vehicle company established by Elon Musk, surpassed General Motors in becoming the most valuable car manufacturer though it has not yet turned a profit. But profits will soon come as the company looks to manufacture more affordable products. In the long term, conventional auto makers could struggle which is something investors need to consider.
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