Talking Gearheads: The Auto Market in 2015

As promised, Jim Motavalli and I have enagaged in Round 2 of what we hope will become a recurrent feature: periodic debates on issues related to the global auto industry. Jim regularly writes for the New York Times’ Wheels blog and contributes to a variety of other publications (see below for his full bio). He’s also posting our debate at Mother Nature Network, as he did with Round 1, when we discussed the future of the electric car.

This time around, we’re trading thoughts on the future of the entire global car business. Everything is in flux at the moment, with giants such as General Motors (GMGMQ) falling and upstarts, such as Tesla Motors and Tata Motors, rising (sort of). Some predictions follow, so beware. What will the industry look like in 2015? If you agree or disagree with us—or have a different POV altogether—please join the conversation, in the comments.

Matthew DeBord: Let’s start with some math. No one seems certain of what size the North American auto market, much less the global market, will be in the future. Will North America support 14 million new cars annually? Or 16 million? Or will it be significantly smaller? This is important for our 2015 projections because there may not be enough demand to keep Ford (F), Chrysler-Fiat, and New GM in business. Here’s what the new Chrysler CEO, Sergio Marchionne, said last year: “We’re going to end up with one American house, one German of size; one French-Japanese, maybe with an extension in the U.S.; one in Japan; one in China and one other potential European player.” According to Marchionne, each of these survivors will need to produce 5.5 million cars per year to survive. That would suggest that by 2015 we might have fewer players, or that no one will ever recover to the levels of market-share domination that GM enjoyed in its heyday. So who's going to make it, and in what form? The automaker I’m most concerned about is GM. I think it needs to radically reinvent, not simply try to come back as a smaller version of its old self.

Jim Motavalli: I think the car market may take a decade to recover, or it may never get back to 16 million. But I’m not sure I agree with Marchionne that bigger will be better in the new auto industry. GM’s size was one of its problems. It could, for example, spend $300 million developing the EV-1 electric car and then millions more trying (successfully) to kill the market for the car in California. I like the model of smart and mobile auto startups hawking EVs from Silicon Valley. They’re headed by some of the same entrepreneurs whose previous venture ended in “.com.” I predict that in 2015 we will still have much-reduced versions of the Big Three, but they will be joined by the Small 20. I think companies like Tesla, Bright Automotive, Brammo, Coda, Think Global, and Fisker will be players, along with new names we haven’t heard yet.

DeBord: The Small 20! I love it. However, I don’t think small is going to be the new big in the auto industry. I think medium will be the new big. Market share along the lines of what Toyota has in the United States—less than 20 percent—will make more sense, as new players enter the game. I look for Hyundai, some of the Chinese manufacturers, and even Tata to join the fray. I'm far more skeptical about the prospects of the Silicon Valley-oriented startups, although Tesla continues to surprise me. I don’t think the innovation will necessarily go away, but I think it will be absorbed by ... what should I call them? The Medium 10? And of the survivors of the recent meltdown, I’m most optimistic about Chrysler-Fiat. Of the newbies, I have the least confidence in Better Place, the company that wants to transform the filling station into a battery-swapping station.

Motavalli: Maybe the Medium 15 is a better name. There won’t be hundreds of players but definitely a lot more than there are now. The smart companies are the ones that find and exploit a niche—that’s why I’m betting on Bright Automotive, which will build fleets of plug-in hybrid panel vans and sell lots of them to cost-conscious customers like Coca-Cola (KO). I agree that China (and, to a lesser extent, India) loom large—the Chinese already have electric cars on the market, and they’re likely to have a charging grid before North America does, too. A new report by Pike Research, "Electric Vehicles on the Grid," says that by 2015 the global EV charging network market will be at $1.9 billion annually, and China will account for almost half (47.8 percent) of total sales. Shai Agassi of the aforementioned Better Place (I also have a problem with the company’s battery-swapping model) told Wired Autopia that China is on the verge of green-lighting electric cars in a big way.