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Old 10th March 2017, 11:09   #1
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Default Consolidation in the Automotive Industry

Driven by the rising costs of competing to make cars cleaner, safer and more connected and once predicted as a phenomena to hit the Japanese auto industry with just 3 top players by the end of this decade is now a reality to hit in all Auto markets globally.

More mergers and alliances is inevitable for competitiveness and the trend has started to roll for consolidation.

Japan

In Japan, the current home to 8 auto manufactures led by global players like Toyota Motor Corporation, Honda motor Co, Nissan serving a 500 trillion yen economy. That is more than Germany’s 3 domestic players or bigger than the US market served by independent players like Ford, G M and Tesla Motor Inc.

Toyota has the edge in Japan:

Consolidation in the Automotive Industry-34.jpg

Quoted by Daihatsu’s chief,
“If we want to overcome the upheaval in our business environment and the fierce competition to develop new technologies and emerge stronger than ever before, we must dramatically strengthen our collaboration with Toyota”

Going by the above we see Suzuki too taking the same stand and will tread the Toyota way going forward. Capital alliance (expected 5% of Suzuki) with Suzuki is not yet stated but a possible one.
Mazda too has links with Toyota but not yet on the capital sharing front.

Honda: Honda also has signalled it’s willing to diverge from its usual strategy, expressing interest in deepening its collaboration with GM. their cooperation on hydrogen fuel cell technology has gone well and should end up being used in a future vehicles.

Nissan- Renault- Mitsubishi
Now a known alliance is indicative of both the case for consolidation and the difficulty faced in keeping stakeholders satisfied.

Europe


Though we have seen the recent acquisition of PSA Group and making it Europe’s biggest rival to VW, the leader in the auto segment. But Europe believes the brand positioning will change (e.g. EV’s, self-driving and new mobility service) and consolidation in the traditional ones.

Major players like VW will rather see JV’s or technical collaboration with auto companies in designated markets for consolidation on huge investments and resources. They have done so in China and is in exploratory phase in India.

Fiat on the other hand envisaging a consolidation need in auto industry is finding it tough to find the right partner. GM and VW has spurned such moves on consolidation from FCA.

Forward Trend: The trend in consolidation is just set in the auto industry and is a slow and long process with twists and turns; But It is coming, signs of acceleration seem to be visible. In some cases it might not be a capital share alliance but will collaboration with a win-win situation based in designated segments and markets.

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Last edited by volkman10 : 10th March 2017 at 13:58.
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Old 10th March 2017, 15:00   #2
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Default re: Consolidation in the Automotive Industry

Thread moved out from the Assembly Line (The "Assembly Line" Forum section). Thanks for sharing!
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Old 10th March 2017, 15:40   #3
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Default re: Consolidation in the Automotive Industry

Consolidation is not really a new trend. Its been going on for years. How else would Fiat own so many brands like Ferrari and Maserati, etc. Even Hyundai has taken over Kia, Mahindra with Sangyong and Tata with JLR, not to forget Ford and GM of yore where they own so many brands between them.

I think the problem is that every brand should add value to the parent company. VW and Fiat own the best combination of brands in my opinion.

VW can make mainstream cars, Skoda can be slightly more economical, and then they have the luxury marques like Bentley and sports cars like Lamborghini and Porsche.

Same with Fiat.

The problem i feel is of overlap. Skoda is not a luxury brand but in India it started as a luxury brand so now VW has a problem with their products being more expensive in our price sensitive market and Skoda also using same VW parts and vice versa.

Also i think its high time some brands were allowed to die like for example do we really need Opel ? i loved the Opel Astra which was in India but at the end of the day profitability, reliability and customer service would be key words for any company.

Lets hope by all this cross buying of brands and consolidation we dont get stuck in a Monopolistic situation as buyers and even Companies dont get stuck with brands not working so they cannot focus properly thus churning out rubbish products and eventually going into massive losses.
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Old 10th March 2017, 15:42   #4
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Default re: Consolidation in the Automotive Industry

With the growing need for expansion in vehicles running on alternate energy, this was bound to happen in the coming years.

Smaller players do not have the R&D capability, technical know-how and extra cash to spend on development of vehicles running on electricity and fuel cell. Companies such as Suzuki, Daihatsu, Mazda, may not be able to develop these technologies independently, and hence, it is important for them to tie-up with larger players such as Toyota, Volkswagen.

At the same time, ever tightening emission norms are also playing a role in this development, as reducing the emissions further will also require a specific level of technological input and cash influx.

Moreover, by acquiring smaller players, or merging with similar sized players, the companies are also reducing their competition in the industry with can result in increased sales and revenues.

In my opinion, in the future, there will be very large players (Toyota, Volkswagen, GM), niche players (Ferrari, Lamborghini, Porche), and players focusing on technology (Tesla, Google). Other players such as Suzuki will be limited to a specific geography or will operate under some of the larger players in the form of subsidiary, joint ventures, or any other form.
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Old 13th March 2017, 10:24   #5
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Quote:
Originally Posted by M00M View Post
Consolidation is not really a new trend. Its been going on for years.
Consolidation in past was was a collaboration in either organic growth and with your specific reference to VAG involved in owning the sub brands with capital investments.

Now a new breed of consolidation is taking place and is a matter of survival. No capital investment but will share investments that seem prohibitive if going alone.

There are many areas — like connected vehicles, safety, driver less vehicles, alternative fuel technology — where alliance will be the only way to leverage the strengths of like minded companies for a win-win situation.

Examples of the consolidation currently brewing are the Toyota - Suzuki, VW- Tata alliance ,etc.
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Old 13th March 2017, 13:24   #6
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Default re: Consolidation in the Automotive Industry

Consolidation should be between companies with similar philosophies, or atleast one company should accept the supremacy of the other. Or else it will fail, like what happened to Daimler-Chrysler.

Quote:
Originally Posted by M00M View Post
How else would Fiat own so many brands like Ferrari and Maserati, etc.
VW and Fiat own the best combination of brands in my opinion.
Ferrari is not part of FCA anymore.
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Old 13th March 2017, 13:48   #7
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Default re: Consolidation in the Automotive Industry

Sergio Marchionne (FCA visionary) had forecast, proposed and executed such mergers and consolidations successfully and unsuccessfully. He was one of the firsts, to have predicted the inevitable. Yet, the market seemed to have not so warmed up to his call. With rising input costs, tougher and tougher emission norms (really??) and a gradual shift towards electrics: consolidation would be the norm, IMHO, for passenger cars. Low quantity high margin products like earth-movers, commercial large vehicles etc. would be the area where the "identity" would still be maintained. A heavy torque beast as in a tow crane, can never be replaced by an equally cost effective and performing electric. Never. So oil burner research would continue with a different focus. Something revolutionary, even: just like the MJD in small cars. I don't know. One big consolidation that I see is in the battery technology for EVs. Any material science research is too tiring, expensive and time taking.

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Old 13th March 2017, 14:54   #8
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Default re: Consolidation in the Automotive Industry

INDIA to be 3rd largest car market by 2020.
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Old 13th March 2017, 15:44   #9
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Quote:
Originally Posted by MercFan View Post
INDIA to be 3rd largest car market by 2020.
And yet, our motor laws are so archaic that this will become the world's largest dump yard for previous gen vehicles.

As for the consolidation, there are mergers happening every day at the parts-components layer that it's so difficult to analyse who's doing what nowadays. A company making ball-bearings for two manufacturers merges with a company making wheel hubs for another three manufacturers and now all of a sudden they are the world's largest supplier to ten companies for ball bearings and wheel hubs. (just an analogy - this is not from any source) You get the picture.

I also don't entirely trust this country-wise data as accounting principles drive this cash / R&D numbers, which we all know can be easily manipulated.
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Old 13th March 2017, 19:20   #10
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Default re: Consolidation in the Automotive Industry

Consolidation should be taken with a pinch of salt. Ultimately, what needs to be seen is whether consumers are actually reaping the benefits of technology sharing and economies of scale and the resulting lower costs

Consolidation should also stop at a point where the act of consolidation means that the consortium approaches a monopoly and the consumers have no say in prices.

It is more like the soft drink market in India. The global players like Coca-Cola and PepsiCo are so huge that they have simply lapped up or crushed Indian soft-drink manufacturers of the yore (Gold Spot anyone?). Sometimes, these two behemoths also seem to act in unison. If Coca-Cola reduced their prices, then PepsiCo would follow suit. The same goes for price increases too.
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Old 16th March 2017, 09:30   #11
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Default Re: Consolidation in the Automotive Industry

Quote:
Originally Posted by volkman10 View Post
Fiat on the other hand envisaging a consolidation need in auto industry is finding it tough to find the right partner. GM and VW has spurned such moves on consolidation from FCA.
While Asia the start of the subject consolidation is way ahead, this cannot be ignored by European and American Auto manufacturers.
The brewing pact between

1. VW - FCA could start ( merger or tie-up?)
2. Ford- Mahindra on joint tech., product and component development.

Link2

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Old 2nd April 2017, 10:41   #12
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Default Re: Consolidation in the Automotive Industry

From manufacturing and sharing platforms to mobility solutions consolidation in rapidly increasing to secure the future of the automotive business.

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Amid all this, the centre of gravity is shifting — from the west to the east and from the developed countries to emerging markets. The Toyota- Suzuki and the recently announced VW- Tata alliance are the testimony to the above fact.

Technology disruption:

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Quote:
A 2013 McKinsey report on disruptive technologies (it counts autonomous driving among the top 12) forecasts that factors like improved safety, lower emissions and increased fuel efficiency could create an economic impact of $200 billion-1.9 trillion
Quote:
Autonomous technology is seeing the biggest action. Intel just acquired Israeli firm Mobileye for $15 billion whose technology allows cars to have 360-degree vision. Late last year, Samsung Electronics acquired auto infotainment provider Harman International for $8 billion. Another area seeing lot of action is IT and electronics. Till now, Google’s Android Auto and Apple’s CarPlay have controlled how drivers connect their smartphones to their vehicles.
To counter this domination, in January, a consortium led by Ford Motor and Toyota began to develop an open-source platform as an alternative for in-vehicle and car telematics. “Increasingly, features and electronics rather than power trains are becoming the basis of competition
Quote:
Alliances are also being struck to develop clean energy technologies. In January, 13 firms from energy, transport and industrial sector, including Toyota, BMW and Daimler, joined hands with oil and gas giants like Royal Dutch Shell, Total SA and Alstom to invest $10.7 billion in developing hydrogenrelated technology within five years. Betting on fuel cell technologies, they see it as a good alternative to battery-powered EVs to cut emissions. In fact, Toyota is betting on fuel cell vehicles to cut 90% of carbon dioxide emissions from its vehicles by 2050
Despite the rush to form alliances, the journey will not be easy. Experiences from past Mercedes- Nissan alliance, BMW and search giant Baidu's experiment with autonomous cars are examples of failed allainces.

Underlying the success it should be a Win- Win situation for the involved stakeholders.
Quote:
The fundamental principles are to find common ground and insist on winwin — and not win-lose — projects, meaning both companies would benefit from doing a project

Link

Last edited by volkman10 : 2nd April 2017 at 10:42.
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