The deals General Motors struck with American Honda and Nikola are the latest in a compendium of evidence that supports the late Sergio Marchionne's 2015 theorem: Automaking is too expensive to do alone.
The growing list of the industry's various partnerships — Renault-Nissan-Mitsubishi, PSA-FCA, Volkswagen-Ford, Toyota-Mazda-Subaru-Hino-Daihatsu — is impressive.
Marchionne's basic premise from his "Confessions of a Capital Junkie" presentation in April 2015, that automakers wasted capital by insisting on engineering and making like products, remains true today. But recent collaborations within the industry point to a broadening recognition of that truth, and a new resolve to finally do something about it.
For too long, investors have turned up their noses at automotive stocks in part because of a lack of return relative to other sectors. Rather than address this problem head-on, the industry spent decades simply absorbing the added costs of capital and going about its business as usual. But when two expensive projects landed simultaneously — vastly reducing emissions through electrification and improving automotive safety through development of autonomous driving technologies — the price of going it alone proved untenable.
For dealers and consumers, these partnerships ultimately will mean a less diverse marketplace, or at least one in which the variance between brands and individual vehicles is likely to shrink over time. This is not necessarily a bad thing, however, if industrial concentration allows automakers to continue to improve the design and manufacturing quality, dependability and efficiency of their products and spread their added costs across a broader number of vehicles.
Among various constituencies, the global supply network is most likely to feel pinched by automaker pairings, both in the short and long term, especially those small suppliers most vulnerable to automaker demands for cost savings. Here, too, a wave of consolidations and partnering agreements has helped and can help suppliers continue to profitably thrive, even if their number of automaker customers declines.
This industry is in the throes of a bold transformation, one sure to loosen some long-held beliefs about what it means to profitably design, develop, manufacture, market and sell an automobile. Change is a constant in the auto industry, but Marchionne was right about this one — it was overdue.