AlixPartners Makes the CASE

Given the amount of competition in the autonomous space, the costs for automated vehicle systems could drop 78 percent by 2025.

AlixPartners (alixpartners.com) is a global company that is all about corporate restructuring and turnarounds. It should come as no surprise that the firm has done extensive work in Detroit and that it has a depth of knowledge when it comes to the business of the auto industry at all levels.

At a recent Automotive Press Association meeting in Detroit, the firm’s John Hoffecker, global vice chairman, and Mark Wakefield, global co-head of the automotive and industrial practice, shared the results of a survey that they conducted essentially predicated on what they refer to as “CASE”:

  • Connected
  • Autonomous
  • Shared
  • Electric

And the results should give some people in the industry pause, as they see that there are going to be billions of dollars bet during the next few years and not everyone being winners.

Although Tesla is yet to make a nickel and would consequently seem ripe for a company like AlixPartners to come in and give Mr. Musk some organizational assistance, Hoffecker and Wakefield point out that when it comes to “Connected,” Tesla, with its “over the air” updates that can provide vehicular additions and improvements, is in a leading position, one that it has had since 2012. The tech to do this is available. But other OEMs haven’t taken the approach anywhere near the extent that Tesla has.

In the “Autonomous” arena the biggest bets are being made. According to the analysts, more than 50 major companies—OEMs and suppliers—are working on the development of autonomous capabilities and technologies—to say nothing of an array of smaller companies and startups. They suggest that there will be “a handful of big winners.” As for the rest? Well, nothing ventured, nothing gained.

Given the amount of competition that is taking place in the autonomous space, they reckon that the costs for automated vehicle systems could drop some 78 percent by 2025.

Which means, of course, that the technology will become more accessible to more, which, presumably, would result in more scale. Which could lead to further cost reductions.

In terms of “Sharing,” they say that it is more about “Hailing,” as in Uber and Lyft. That is, the whole ZipCar phenomenon is losing ground in consumers’ use than the Uber and Lyft approaches are.

On the one hand, this is better for the auto industry as they calculate that in ride sharing as many as 19 vehicles are eliminated from the fleet by one shared car whereas the number is only four for the ride hailing.

That said, they also found that nine percent of millennials surveyed in 10 large markets—Austin, Boston, Chicago, LA, Miami, New York, Portland, Seattle, San Francisco-Oakland and Washington, DC—say that they’re putting off getting a driver’s license because they can simply use their phones to get someone to drive them where they need to go.

This is one factor in what they suggest is going to be a downturn in U.S. light vehicle sales during the next few years, which they have going down to 15.2 million in 2019 (another thing exacerbating new car sales is the large number of off-lease vehicles coming back this year—on the order of 500,000 more than came in last year and last year was up 500,000 from 2015).

As for “Electrification,” they project that China’s heavy investments are going to provide it with the leadership role in that space. Clearly the most important part of an electric vehicle is the battery, and AlixPartners estimates that by 2021, China will have two-thirds of the world’s lithium-ion battery manufacturing capacity. That’s 175 GWh of capacity, which they put into context by describing it as “the equivalent of five Tesla ‘giga’-factories.” Which is another nod to Elon Musk, as what other company has created such a recognizable factory?

It seems fairly evident that although there has been widespread recovery from the Great Recession of 2008-09, the years ahead for this industry, largely characterized by CASE, will not be for the faint of heart.