The Evolving Automotive Landscape: What’s Driving the Future?
Dramatic changes in automotive technology are impacting the industry’s labor force, as legislative moves attempt to steer the industry’s future.
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Since the recession, the U.S. auto sector has reached unprecedented levels selling over 17 million units in 2018, the fourth best sales year historically. Globally, sales tapered off in 2018 due to political changes and trade tensions. From an output standpoint, some 11 million vehicles were produced in the U.S. last year, with this number expected to hold steady through 2025.
Still, the current news cycle indicates strain and uncertainty for the sector. Between the trade war, slowdown in China, influx of new technologies, and the preferences of millennials and Gen Z consumers, doubt and hesitation exist, thus influencing consumer demand. The past year has resulted in plant closures, workforce shifts, and joint ventures such as Mazda Toyota Manufacturing, U.S.A., Inc., among other changes. Put simply, the auto industry is evolving. This evolution will not be met without bumps, bruises and maybe even scars.
In order to meet smart manufacturing expectations, unlike other market verticals, the auto industry is experiencing dramatic labor trends. Similar to the larger manufacturing industry, the skills gap is a dominant factor in automotive as baby-boomers are aging out of the workforce. The added layer to the workforce challenge is the diminishing popularity and acceptance of trade skills.
“If the supply of workers interested in working in blue-collar jobs was growing as rapidly as demand, we would not have a problem. But in reality, the supply of workers for blue-collar jobs has been shrinking. People with a college degree are very unlikely to end up working in a blue-collar job, partly due to the stigma attached to manual labor,” wrote Gad Levanon, chief economist at The Conference Board, and Frank Steemers, associate economist at The Conference Board, in a labor market report.
These trends are driving change in the auto workforce. Trade workers such as welders and millwrights are a rarity, forcing manufacturers to look toward automation solutions. Robotics and manufacturing have become synonymous in recent years, but the pairing has gained its fair share of negativity largely due to the job loss association. In reality, the back-breaking labor that was often linked to plant work has been replaced by automated elements. One of the leading drivers for this shift is the safety of workers, since integrating robotics reduces the risk of exposure to physical hazards.
Automation has also enabled the need for sophisticated jobs to operate these robots. Furthermore, as production has become more advanced and complex, big data and analytics now must be calculated into the process, which creates yet another level of workers who are now needed.
Looking ahead, the automotive workforce will likely shift even further. As consumer demand requires more customization, auto manufacturing has to be ready to be flexible, while also maintaining speed-to-market expectations. Digitization will put additional focus on training and retraining individuals as well as increase the need for more knowledge workers.
The digital disruption of the auto industry cannot be mentioned without reference to electric and autonomous vehicles. While touted as holding the potential for the largest area of growth for automakers, electric and autonomous vehicles could arguably hold the most challenges as well. Electric vehicles (EVs) have actually been around for more than a century but didn’t really gain attention until Tesla released its Roadster in 2008. Currently, one in 250 vehicles on the road are battery-powered. Growth is expected for the market but not until 2030, with only a third of global cars predicted to be electric by 2040 according to Bloomberg’s 2019 Electric Vehicle Outlook.
But in reality, the supply of workers for blue-collar jobs has been shrinking. People with a college degree are very unlikely to end up working in a blue-collar job, partly due to the stigma attached to manual labor. Gad Levanon, chief economist, The Conference Board, and Frank Steemers, associate economist, The Conference Board EV models are attractive for many reasons. From an economic standpoint, EV adoption could affect the dependence on oil the U.S. imports, which could correlate to U.S. jobs. Automakers are betting these incentives will grow and are, in turn, investing in this area. Beyond Tesla, GM, Volvo, Toyota, Ford, Daimler, BMW, Volkswagen, and Fiat Chrysler are all taking steps to become players in the EV market. Still, the future rising demand of EVs will be driven by government requirements rather than market preferences.
Autonomous vehicles are yet another potential game-changer for the industry. Headlines are abundant that flaunt the self-driving car market’s ability to transform the industry. While true, many hiccups first need to be overcome. The fact is autonomous vehicles are still in developmental phases. One day they will be on roads, but those models may look nothing like the current test-runs.
This is why some companies have decided to join forces to tackle the challenges associated with this concept. GM and Honda are working together on battery development; and BMW, Daimler, and Volkswagen are looking to partner on R&D. Companies apart from automakers — like Apple, Google, Uber, and Lyft — also have skin in this game.
The consumer impact with self-driving cars has to be factored into the equation as well. While some analysts credited lower auto sales to millennials, 2018 sales indicate that, as millennials get older, they are moving to the suburbs, making more money, and thus buying cars. It’s expected that Generation Z will follow suit.
From the consumer standpoint, it’s also important to realize that some consumers simply enjoy driving. This characteristic will not change quickly.
The positive factors related to autonomous vehicles are significant, especially when considering the reduction of drunk or impaired driving. Additionally, parking structures could be converted into new developments, and insurance rates would have to be decreased, both of which would mean more money going back into the economy. The caveat? The technology has to be perfected. It will get there, but the timing is unclear for now.
All around the globe, governments are looking to dictate the future of automotive manufacturing. Both Europe and Asia are pushing for automakers to electrify their vehicles even though demand has yet to take off. The U.S. has been the leader in emission standards, with Europe following suit.
The positive factors related to autonomous vehicles are significant, especially when considering the reduction of drunk or impaired driving. Additionally, parking structures could be converted into new developments, and insurance rates would have to be decreased, both of which would mean more money going back into the economy. China specifically is investing billions of dollars to subsidize the manufacturing of electric vehicles and batteries. The country is focusing its attention on the EV market as a result of new emission standards that went into effect July 1. Here in the U.S., the focus is similar. On the environmental side, in 1975, the Corporate Average Fuel Economy (CAFE) standards were passed as part of the Energy Policy and Conservation Act in order to set a guideline for the average new vehicle fuel economy. Although the rules were a direct result of the 1973 oil embargo, the intent was to reduce the use of gasoline while making improvements in fuel efficiency.
In 2012, the Obama administration released new CAFE standards to raise the average fuel efficiency of new cars and trucks to 54.4 miles per gallon by 2025. The current White House, along with the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), is proposing the Safer Affordable Fuel Efficient (SAFE) standards to freeze the 2012 increase of 54 miles to 37 miles after 2021, citing the “balance of safety, economics, technology, fuel conservation and pollution reduction.”
As the SAFE standards are being debated, states like California and Colorado are pushing back against the regulations. Wherever they land, both automakers and consumers will feel the impact related to jobs and oil.
Across the board, regulatory pressures are expected to tighten, indicating that automakers must be agile to succeed.
From workforce to technology and even legislation, uncertainty abounds for the automotive market. But with this uncertainty comes tremendous opportunity. Automakers and suppliers alike have the ability to advance to make the difference in the marketplace. The truth is, investment into the future is happening. The American Automotive Policy Council credits the auto industry as the largest manufacturing sector in the U.S. From an output standpoint, international carmakers would need to assemble more than two million more cars and trucks in the U.S. to match the production of FCA US, Ford, and General Motors.
America is clearly staking its claim on the sector, but competition will, no doubt, be fierce. Buckle up, because the next decade looks to be a wild ride.
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