By Tom Ballard, Chief Alliance Officer, PYA
Disruption is coming to the all-important automotive industry, but a seasoned industry expert says that the State of Tennessee and the local region are well-poised for change.
Dennis Cuneo, former Senior Vice President for Toyota Motor North America and now a strategic advisor and consultant, spoke at the East Tennessee Economic Development Agency’s “Annual Site Consultant Luncheon” on Thursday.
“You are well-positioned, you’ve got a lot going on,” he told attendees, frequently citing an already established base of suppliers like DENSO Manufacturing Tennessee Inc., the engineering programs at the University of Tennessee’s Knoxville campus, and the research in a variety of technologies underway at Oak Ridge National Laboratory (ORNL).
Noting that the state’s automotive companies account for 135,000 jobs and represent almost $6 billion in investment, Cuneo started his presentation by recalling a 1965 song recorded by Barry McGuire. Remember the song? The title was “Eve of Destruction.”
It was a reminder that what has been will not always be what continues unchanged into the future.
Cuneo said the automotive industry is at a “perfect disruptive storm.” Apple, for example, is reportedly exploring some sort of automotive initiative and has $244 billion in cash, more than enough to buy every automotive original equipment manufacturer (OEM). And, there’s Tesla which has a market cap of $60 billion even though it’s only made a profit in one quarter, but has already passed Mercedes in sales and is poised to do the same with BMW.
You get the picture. It’s an industry undergoing change, in part because of innovation and in part because of policy decisions, many yet to play-out.
Cuneo cited three significant disrupters for the industry, starting with President Donald Trump whom he labelled the “disrupter-in-chief.” Whether using the Presidential pulpit to cause several domestic OEMs to shift planned investments from Mexico to the U.S. or threatening to impose tariffs of up to 25 percent on imported vehicles, Cuneo said the industry is clearly taking note.
“We in the industry don’t view these as hollow threats,” he said.
Take the tariffs as an example. The U.S. currently imports about 8.3 million vehicles annually. The renegotiated North American Free Trade Agreement, now known as the United States-Mexico-Canada Agreement (USMCA), will cover about 50 percent of those imports, but there is the other one-half that will be impacted just as some early signs of a slowdown in vehicle purchases are appearing.
A second big disrupter is electrification – the shift to hybrid or fully electric vehicles – as more countries are imposing restrictions that will significantly reduce use of internal combustion engines in the future. It’s already something that the industry has to address in California, and Cuneo noted that “we in the auto industry don’t see this (global) regulatory push easing-up.”
Not surprising, technology was the third big disrupter.
“The car of the future will be the most powerful computer you will ever own,” Cuneo said. That, in turn is helping propel the growth in autonomous vehicles with Waymo, a spinout from Google, being the industry leader.
“It’s not a question of if,” Cuneo said of the autonomous vehicle wave. “It’s a question of when.”
There are positive impacts that will come from autonomous vehicles. Projections say there will be 90 percent fewer accidents, a $190 billion reduction in damages and healthcare costs as a result of injuries, a 25 percent reduction in needed parking spaces, and the resulting freeing-up of 5.7 billion square meters of land that can be developed.
If you wonder just exactly how much space that is, we asked Google to do the conversion. The answer is nearly 1.5 million acres.
Cuneo, who visited ORNL before the luncheon presentation, sees technology opportunities in software development, cybersecurity, sensors, batteries, semiconductor chips, and lightweight materials. Many of these are areas where ORNL scientists are already working.
“3D printing (here) is a tremendous economic development asset,” he said in relation to ORNL’s Manufacturing Demonstration Facility. “Take every prospect there.”
Cuneo also noted that more electric vehicles translates into more battery manufacturing plants, and more Chinese OEMs offers opportunities for new Chinese suppliers, a reality that came as the Asian and German manufacturers moved into the Southeast, bringing their own suppliers from overseas.
“East Tennessee should go harder and deeper in the new technology sectors,” he advised.