The auto industry faces a near-term challenge (a possible UAW strike) and a long-term obstacle (expansion of Chinese automakers), a consulting firm said today.
AlixPartners delivered an annual industry forecast. The firm said vehicle sales are rebounding following the COVID-19 pandemic. It forecast that U.S. vehicle sales may reach 15.2 million units this year.
There was, however, one major caveat. That prediction depends whether there’s a prolonged labor strike. The new leadership of the United Auto Workers union is talking tough and has criticized automakers for closing plants despite large profits.
During the presentation, Mark Wakefield, a Detroit-based AlixPartners executive, acknowledged the difficulty of upcoming UAW negotiations.
“I’m very concerned about it,” Wakefield said. “The status quo isn’t sustainable from the union side.” A two-week walkout, he said “is manageable.” A longer strike would have a larger impact, he added.
The union’s current contract with General Motors Co., Ford Motor Co. and Stellantis expires on Sept. 14. Typically, the union selects one company as the “target,” intending to impose the basic terms on the others.
In the longer run, Chinese automakers will present a challenge comparable to the when Japanese and Korean automakers invaded the U.S. market.
“Chinese brands have done a really good job understanding what consumers want,” said Stephen Dyer, an AlixPartners executive based in China.
Sales of Chinese brand vehicles in China will exceed deliveries of foreign brands this year for the first time in decades, the consulting firm said. Sales of Chinese brands in their home country will account for 65% of sales by 2023. Until now, western automakers have looked at China as a way to fatten their worldwide sales.
Newer Chinese automakers are willing to put out new vehicles despite imperfections, but such imperfections can be fixed by “over the air” software fixes, AlixPartners said.
AlixPartners said traditional automakers need to be prepare for new competition from Chinese automakers. Such competition will “not be just low-end vehicles,” Wakefield said.
The consulting firm also forecast that electric vehicles will account for a majority of sales across major regions by 2035 – 59% in the U.S., 66% in China, and 82% in Europe. Governments in all regions are pushing EVs as a way to reduce greenhouse gas emissions.
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