Report Makes a Case for Tech-Driven Consolidation

Slower sales growth for passenger cars and trucks worldwide, coupled with increasing costs to develop emerging vehicle technologies, will drive a new wave of consolidation and strategic partnerships throughout the auto industry, according to AlixPartners LLP.

The Southfield, Mich.-based consulting firm forecasts global auto sales will expand 2.6% per year through 2021, down from the 2007-2014 annual rate of 3.2%. This would push total global sales to 103.2 million vehicles in 2021 compared with about 87.9 million units in 2015.

In addition to ongoing product development costs, the study says carmakers must make "significant" investments in four key emerging technologies: connectivity, autonomous driving, shared cars and electrified vehicles. Although the technologies are interrelated, most companies lack the expertise and resources to be a leader in all four areas, AlixPartners notes.

The firm envisions far closer collaboration among carmakers as a "considerable" wave of consolidation and partnerships sweeps the industry. This will include mergers, joint ventures and alliances among carmakers, suppliers and new IT-based entrants. The analysis also opines that the auto industry's low margins and high investment costs will discourage IT companies from acquiring a carmaker outright.

AlixPartners cites the powertrain-sharing alliance between Toyota and Mazda as an example of collaboration that will become increasingly necessary. The firm says there currently are 17 assembly alliances, 16 joint ventures, 15 technical agreements and nine equity relationships among carmakers. "No one can afford to get left behind," the authors warn.