- Bullish outlook continues. More than 90 percent of respondents describe the industry as either somewhat better or much better relative to last year. And both suppliers and OEMs say they are reasonably well positioned to face future competitive pressures.
- More aggressive use of incentives is expected. Operating with tight capacity has enabled OEMs to maintain strong pricing discipline and limit their use of incentives. However, warning signs are beginning to emerge that this may change; more than 40 percent of respondents expect more aggressive use of incentives during the next six months.
- Industry efforts to drive greater adoption of alternative powertrains continue to face strong headwinds. Respondents expect only 20 percent of cars to be powered by electricity, natural gas, and other alternative power sources by 2020, down from last year’s prediction of 24 percent. Furthermore, these numbers are viewed as highly sensitive to continued government support; without subsidies and infrastructure support, the expected 2020 penetration rate drops to 12 percent.
- Hyundai and Volkswagen will continue to gain market share.Respondents see Hyundai, Volkswagen, BMW, and Ford continuing to gain market share, while they predict small market share losses for GM, and larger losses for Subaru and Nissan. Notably, the level of confidence in these predictions is significantly lower than it was last year, suggesting that velocity of gains and losses is slowing down.
- Confidence is high in in-vehicle entertainment, telematics, and the “connected car.” Some 70 percent of OEM respondents say they have compelling value propositions relative to offerings from smartphone makers, wireless carriers, and app makers. Tellingly, however, more than half admit they don’t have integrated solutions in this emerging field. Last year, 38 percent of OEM respondents said they intended to create their own platform for integrating digitization and connectivity.
- Costs still in the crosshairs. Despite their massive efforts to shed excess capacity, reduce legacy obligations, and streamline operations, auto executives believe there are still significant opportunities to continue cutting costs. Fully 80 percent say cost reduction remains a top priority for their company—but a minority believe cost cutting has given their company a sustainable competitive advantage.
Confidence in the U.S. auto industry is running high due to surging sales and record profitability, but executives’ optimism is tempered owing to increased competition and an expectation that growth in new vehicle sales will slow.