What Does the Future Hold for the Car Industry?
According to Bloomsberg, from November 2018-May 2019 there were an estimated 38,000 job losses in the car industry across the globe, including the redundancy of 600 employees in the 2 Nissan plants in Catalonia. Left without a livelihood, many can rely on the financial assistance offered by an online payday loan which is both quick and convenient. However, what will these workers do in the long term? How optimistic should we be for an upturn in the car industry?
Reasons why car manufacturers are struggling
One of the reasons why car manufacturers across the globe are facing financial difficulties has been a drop in the demand for new cars. The lack of consumer confidence in Europe and the US has made people reluctant to replace their vehicles and Chinese consumers seem to have been following their lead over the past year. In the case of China, the tensions between the Chinese leadership and the US, which culminated in the subsequent imposition of trade tariffs, has made a bad situation even worse.
Apart from falling demand, another reason why car manufacturers are in trouble has been the imposition of stringent laws controlling CO2 emissions in an attempt to deal with the problem of global warming. From 2021, carmakers in the EU will face large fines if their vehicles’ gas emissions exceed the agreed limits and these limits will become even tougher in the future. In order to comply with these regulations, it has been estimated that each vehicle will cost about 1,000 euros more. Further price increases will do nothing to encourage consumers to buy new models.
What other threats will carmakers face in the future?
Because of their limited range and the lack of infrastructure on the roads of Europe and the US, electric cars do not yet present a serious challenge to petrol-driven vehicles. The limited range of some models, such as the Ford Focus (160kms) and the VW Golf (190 kms), makes some drivers reluctant to buy them because they are unsuitable for longer car journeys. Also, chargers for electric cars need to be freely available in urban areas such as shopping centres and car parks as well as along national roads to encourage more drivers to invest in electric-powered vehicles.
Despite this major drawback, measures to encourage the ownership of electric cars, such as the UK government’s decision in 2018 to make them exempt from road tax,has led to a 73% increase in the numbers of battery-operated vehicles sold. In order not to be left behind, many car manufacturers are devoting resources to solving the limitations of the existing models of electric cars. This investment in new research obviously cuts into their operating costs and is another reason why they are having financial problems.
Another innovation which promises to have an impact on the car industry in the future is the development of driverless cars. Although tech giants like Google already seem to be winning the race, car manufacturers are desperately trying to catch up. Because the Research & Development is so pricy, many car manufacturers are joining forces to work on the technical difficulties of driverless cars. Ford and Volkswagen are collaborating while Honda has invested over 2 billion euros in the prototype designed by General Motors.
Once driverless cars go mainstream, it is quite possible that many consumers will change their mindset about the supposed benefits of owning their own vehicle. Exclusive car ownership could be replaced by part-ownership or even drivers opting to rent a car when needed. Both of these outcomes will have a dramatic impact on the number of vehicles sold globally.
If car manufacturers can make a success of electric and driverless vehicles, they could still manage to turn the situation around from a financial point of view. However, it is possible that global car sales will plummet which will necessarily lead to further redundancies. How much these former car workers will be well-equipped for the modern job market is a totally different issue so they will need retraining. It is therefore a hopeful sign that organisations like Bilbao Chamber of Commerce are doing so much to encourage new entrepreneurial initiatives.