The U.S. auto industry ended 2018 with sales of 17.3 million new vehicles, which beat expectations, but the outlook for 2019 is uncertain. Among the twists and turns on the road ahead are the fallout of a slowdown in China and in the U.S., the overhang of tariff wars, the impact of new technologies such as driverless vehicles, and the preferences of millennial and Gen Z consumers, which will drive future demand.
If the past year saw plant closures and layoffs at companies such as General Motors, the industry heads into 2019 with more investments, alliances and forays into electric vehicles and other newer technologies. While the industry began the year on a tepid note with an expected sales decline in January, it does not mean auto companies won’t ride out any bumps, according to experts at Wharton and elsewhere.
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“For each one there could be a positive spin and positive angle on it, and a negative spin and a negative angle on it,” McDuffie said. He saw the industry facing “a decent amount of uncertainty,” and that he was neither optimistic nor pessimistic about the year ahead. “We live in interesting times, turbulent times.”
Concerns loom about the strength of various economies – the U.S. and China in particular. “As big a concern as the tariff risk is the risk of China’s economy slowing way down,” said MacDuffie. The Chinese market has been “the main engine” for many of the global automakers, he added. “I wonder what it’s like to be a senior executive in these auto companies and have to deal with this amazing complexity and this amazing uncertainty.”
One automaker that is bullish on China even as the country grapples with an economic slowdown is Tesla, which is planning to build a factory there. “Tesla is always out there at the risky edge of something,” said MacDuffie, noting that it wants to build a new factory in China even as its own finances are stretched. On the other hand, he pointed out that Tesla is the first foreign company that China has allowed to build a plant on its own without a Chinese joint venture partner. “That means less chance of knowledge leakage and having to share information [with Chinese firms or the Chinese government]. But it also means the risk is not shared anymore.”
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