Donald Trump’s threatening tweets have set carmakers on edge, but the industry gathering at the annual Detroit motor show has other pressing issues on its mind. Trump could be out of office by the turn of the decade, but driverless cars, Brexit and climate change will all have lasting effects on the sector.
Dealing with trade shake-ups
Car sales in the UK reached record levels in 2016, but the industry forecasts that growth will stall as the consequences of the referendum - including higher inflation - cause a 5-6% dip in sales this year. Under the worst-case scenario, tariffs imposed by the EU once the UK leaves the single market could add £1,500 to the price of a car, according to the Society of Motor Manufacturers and Traders. But Brexit could be a headache for manufacturers across Europe – and a similar scenario could play out in the Americas if Trump rips up the Nafta deal, which underpins car imports to the US from Mexico. Where a car is finally “made” is not a simple thing. Take GKN, which makes vehicle components in Birmingham for manufacturers across Europe. David Bailey, professor of industrial strategy at Aston University, said: “GKN’s components come from Spain, Italy, France – their products could have crossed the Channel several times before a car is sold. A lot of Brexit debate has been about tariffs on cars – but even non-tariff barriers cause huge complications in the supply chain.”
Curbing CO2 emissions
To meet EU targets, manufacturers must reduce the average emissions of their vehicles: in some cases, the cuts are so tough that the likes of Jaguar Land Rover are moving into electric cars. More will follow.
Restoring trust following the VW scandal
The industry has to rebuild consumer faith in the wake of the Volkswagen diesel emissions scandal. It must accept more rigorous testing and probably even tighter regulation. As cities consider clampdowns on diesel pollution – the kind that saw London breach legal limits last week – one response could be to make diesel engines even cleaner. But Bailey says the technology needed will push up the price: “Renault has suggested it will make small cars too expensive to produce.”
Driverless cars
Bailey thinks autonomous cars will become prevalent in urban areas by the mid 2020s, eventually revolutionising city transport. “You’ll summon a car via your phone, and won’t need to own one. That will shift the balance of power from manufacturers to service providers.” So BMW has teamed its electric i3 models with the DriveNow car-sharing business and General Motors is partnering with taxi-hailing app Lyft in a driverless trial.
Tech giants Manufacturers are spending billions on cleaner engines and electric or digitally connected vehicles, offsetting that cost by working more with tech firms. Consolidation has traditionally meant mergers or alliances between carmakers, but speculation that Apple might take a stake in McLaren points to another path. Bailey says: “The interesting issue is how much carmakers will have to cooperate with tech companies.”
Gwyn Topham
