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Carmakers’ future: Only six of the best will be left, says analyst

on April 1 2014 | in Industry news, Latest news | by | with Comments Off

Expect to see the world’s carmakers trimmed to six major players over the next 20 years, says a US-based automotive industry analyst.

Adam Jonas, Morgan Stanley analyst

Adam Jonas, Morgan Stanley analyst

Investment bank Morgan Stanley’s Adam Jonas has told The Detroit News that the world simply cannot sustain the number of carmakers it has today.

“We believe the radically changing landscape of autos requires a commensurate change of thinking in Detroit if the domestic OEMs [original equipment manufacturers], 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.

“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.”

Jonas says brands that quickly integrate new technologies will be the ones that survive. He singled out US electric carmaker Tesla (a typical outlet is pictured above) as an example, although it makes only one model, the Tesla S sedan. “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.”

Jonas isn’t alone in his outlook. Fiat Group CEO Sergio Marchionne has been saying for many years – even before he steered Fiat’s takeover of the Chrysler Group – that the future has room only for five or six industry conglomerates.

Marchionne believes carmakers need to build more than five million cars a year to make money and stay in business. He said that by 2018 the merged Fiat/Chrysler company will be able to increase production to more than six million cars a year. “I don’t want to give any details of the plan, but we are going in that direction”.

Marchionne aims to complete the legal merger of Fiat and Chrysler by the end of 2014 to create Fiat Chrysler Automobiles, the world’s seventh-largest carmaker.

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