Morgan Stanley predicts radical auto industry consolidation

Sun, 30 Mar 2014

A lack of technological foresight and changing economic conditions may bring dramatic consolidation to the auto industry in the next 15 to 20 years. Industry analyst Adam Jonas at Morgan Stanley believes that the number of major automakers could go from around 30 today to as few as 6 in that time. However, a catastrophe is avoidable.

Jonas' argument is that the world has more automakers than it can sustain. He contends that too many of them are more focused on next year's models than attempting to adapt to technological change. Without looking forward, they won't survive.

Tesla might be the lighthouse leading automakers away from the rocks. While still quite small, it has disrupted the status quo and shown that there's more than one way to prepare for new innovations. "With proper execution, Detroit may thank Tesla Motors for being that stiff board in the back of the head right when they needed it," said Jonas to The Detroit News.

This isn't the first time there has been such doom and gloom about the industry. During the financial crisis, there were similar forecasts, but in most cases governments helped support weakened automakers. According to The Detroit News, there's been some consolidation among parts suppliers, but not as much as originally predicted. If Jonas' theory is correct, it could mean not only a huge shakeup in the industry, but a massive change in the world economy given how many jobs are connected to building cars.

By Chris Bruce