Boom times help fuel a transformation of the industry — but to what?

The auto industry seems to be roaring like a massive freight train into a neatly defined future — a brave and unmistakable new world of vehicle electrification, autonomous driving and shared mobility.

But hold on.

At a gathering of executives and thought leaders here last week, auto execs sounded far from certain about this future thought to be so cool and clear-cut.

Like a kid standing at the end of a high diving board for the first time as the crowd below coaxes him to jump: He knows he’s going to jump. He just wants to think about it for another minute.

“When you’re running the company, you have to make decisions,” Don Walker, CEO of Magna International, North America’s largest auto supplier, told the audience at ​ the Center for Automotive Research’s annual Management Briefing Seminars.

Walker captured the complicated anxiousness of the moment.

“If we went all in on electric vehicles,” he said hypothetically, “and we thought it was going to be 20 percent penetration in 10 years, and it’s only 8 percent, then we’ve overcapitalized, and we quoted wrong.

“The investors can change just like that — and sell the stock. So we really need to look at what is really going to happen and make the right investments in technology and in product strategy.”

Implicit in Walker’s comment and echoed throughout the week: This is one of the most high-stakes moments in auto industry history.

Who’ll do what?

Automakers and their technology suppliers, along with bold new competitors from other industries, are conjuring up a radically different transportation world. Cars will detect crashes before they happen. Vehicles will be made of lightweight materials that present new manufacturing questions. Steering wheels will disappear into dashboards as cars speed along without human control. Vehicles will drive and park themselves. Cars no longer will have engines or transmissions.

But unclear in August 2017 is how soon those things will occur. Will they happen to the degree the industry appears to believe? And if they happen as envisioned, who will play what role?

Walker and one of his competitors, Denso Corp. — the world’s fourth-largest auto supplier — spoke last week of a need to look beyond the next four or five years. They want to look out 25 to 40 years.

Denise Carlson, vice president of Denso’s North American Production Innovation Center in Southfield, Mich., told the gathering that Denso is contemplating 2050 in its planning — far beyond the uncertainties of this waning decade. And what it sees there, she said, is prompting Denso to transform into a company with a new focus on services, such as vehicle diagnostics.

These have been heady times for the industry given the record light-vehicle sales of the past few years. Indeed, Michelle Krebs, a senior analyst with Autotrader attending the event, said the boom times are what have funded the industry transformation. And that’s one more reason companies suddenly may be feeling clammy — the sales outlook is darkening.

“We’re at this precipice of incredible change in the automobile itself,” Krebs told Automotive News. “But we’re also in the post-peak era of car sales, and that’s what’s been funding a lot of this mobility technology. Companies are going to have to give a lot more thought to strategy and placing more solid bets on the future.”

Yes, the industry seems to be asking, but how?

“I came here for answers,” said Tim Glock, vice president of sales and marketing for Japanese transmission maker Jatco USA Inc. “We know everything’s changing. And we need to change. I just want to know how we need to change so we can get it done.”

Amid last week’s conversation, right on cue, automakers reported July light-vehicle sales, and they were not rosy. U.S. sales fell 6.9 percent from a year earlier, the industry’s seventh-straight monthly decline. New-vehicle incentives rose 4.7 percent from a year earlier, according to an estimate from ALG. And sales of cars fell 15 percent.

Against that backdrop, Mike Jackson, head of strategy and research for the Original Equipment Suppliers Association, urged parts companies to be judicious about which vehicle programs they bid for in the next few years. Some will bring disappointment, he counseled.

“You have limited resources,” he reminded the audience. “Scarcity, in terms of technical talent and financial resources. Where do you want to allocate those?

“You have to be far more aggressive, far more mindful and far more engaged in terms of looking at future opportunities to make sure your business is going to remain relevant.”

Even the EPA signaled last week that it wants more information before it makes critical decisions.

The agency is reviewing the 50.8 mpg corporate average fuel economy target for the 2025 model year that it set in January. Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality, told his audience here that the agency is seeking more data than ever to review the target.

The EPA fuel economy target has been a prod for the past five years, pushing the industry to redesign parts, downsize engines, adopt electric powertrains, switch to new materials and rethink product portfolios. There is no certainty that the new EPA review will result in a lower target that eases the pressure on automakers. But to complete its review, Grundler said last week, it is asking for additional data from far corners. They include vehicle tear-downs and analyses of efficient new internal combustion engines, and even consumer feedback on how people feel about their cars and trucks.

Is electrification a given?

Robert Davis, senior vice president of special assignments for Mazda North American Operations, questioned the industry movement toward electrification.

“The internal combustion engine has a strong future role in transportation,” Davis said.

“Let the industry find the best way to meet the clean air standard,” he said. “Make it CO2, make it grams per mile, fuel economy — whatever feels best. But don’t mandate the particular powertrain.”

He said the industry business plan of using EVs to meet federal fuel economy goals “really doesn’t make sense to us at Mazda.”

Eric Fedewa, senior manager of global market intelligence for Eaton Vehicle Group, agreed.

“Everybody is fixated on connected, autonomous and electric, but I think you’re still going to see a lot of progress on conventional combustion engines,” Fedewa said.

“There’s a reason we have a billion of these vehicles on the road. They’re durable, the infrastructure’s in place to service and support them, and consumers know how to use them. Engineering resources are not being diverted away from internal combustion engines just to focus on autonomy.”

He cautioned the industry not to place all of its bets on autonomous cars and other “shiny objects.”

Magna’s Walker explained why.

While Magna expects its autonomous-related business to rise in the coming years, he said, the industry transformation will take longer than many seem to think.

Some companies are telling the public that self-driving vehicles will be on the road by 2021. Walker predicted that as late as 2025, 17 percent of new vehicles sold will contain no autonomous technology, while another 79 percent will have only Level 1, 2 or 3 autonomous technology.

“A full autonomous vehicle is a long way off for lots of reasons,” he said. “Because of legislation, class-action lawsuits, all the complexities and the costs associated with it.”