TrueCar: Automakers must be flexible
Detroit — Automakers must become more flexible and diversify their offering if the industry is to survive a sudden spike in gas prices or a drastic shift in consumer demand, an executive with the California-based research firm TrueCar said Tuesday.
John Krafcik, TrueCar president, said most automakers should have a relatively balanced mix of revenue among four key segments: cars, pickups, utilities and luxury vehicles. Most manufacturers don’t, choosing to focus on certain profitable segments. And that, Krafcik said, could hurt the industry if trends change,
“My concern is automakers may not have the flexibility they need if things should shift very, very quickly,” Krafcik told reporters after addressing a luncheon of the Automotive Press Association at the Detroit Athletic Club. “As an industry, we become comfortable with our product portfolio. The reality is, these companies have to be thinking ahead 10 years about different scenarios.”
Since 2009, automakers’ revenue has increased from less than $300 billion to more than $520 billion, with car companies on pace to sell 16.4 million vehicles in the U.S. this year. In 2009, pickups and utilities represented 44 percent of industry sales; today, they represent 50 percent. Krafcik suggested, in an ideal world, automakers want a 30-30-20-20 revenue split among cars, utilities, pickups and luxury vehicles.
For individual automakers the revenue mix across the four segments varies considerably, Krafcik said. “Some are overly reliant on mass-market cars — notably Volkswagen Group and Hyundai-Kia — while others are significantly overweighted in pickup and utility segments, such as Fiat Chrysler. Remarkably, no automaker has a revenue mix even close to the consumer-driven industry mix.”
Toyota, Krafcik said, comes the closest of any automaker to achieving that revenue balance.
“Toyota has the benefit of a truly global framework,” Krafcik said. “Some of the other automakers are getting there. Toyota’s been doing it for a long time.”
He said other automakers have a unique opportunity to balance their portfolio now, a time of revenue-growth that he called, “the best year the industry’s ever had.”
One opportunity for revenue balance would come if Fiat-Chrysler would merge with Volkswagen, Krafcik said. FCA’s profitable pickup portfolio represents a segment Volkswagen lags in, and Volkswagen’s strong luxury brands would interest Fiat-Chrysler.
“I think it’s such a natural possibility,” he said. “You get a pretty interesting hypothetical company that covers all of those bases pretty well. For sure, those two companies have a natural attraction to each other.”