Auto disruption: APMA focuses on tech, trade and Trump

Disruption isn’t just about the rise of transformative technology, it’s a mindset, and it’s one automotive manufacturers in Canada would be wise to embrace as the industry enters a period of uncertainty, but also opportunity.

That was the message at the 2017 edition of the Automotive Parts Manufacturers’ Association’s (APMA) annual get-together in Windsor, Ont. in mid-June. The conference was transformed this year into a fast-paced one-day event highlighted by a number of concurrent sessions focused on topics including lightweighting, advanced manufacturing and (the contentious) Industry 4.0. While much of the talk on the main stage focused on advancements related to autonomous vehicles and the state of the world economy, there was also a healthy sprinkling of commentary related to technology, trade and Trump.

The US president’s tough talk on NAFTA and import tariffs has caused a stir among Canadian assemblers and auto parts producers that depend on the US for a significant portion of their businesses. Yet, the 450 or so attendees who represent the collective automotive brain trust across Canada were urged to relax during an opening keynote by Peter Hall, chief economist at Export Development Canada (EDC).

Hall, a mainstay at the annual event, touted the benefits of globalization, particularly in an industry such as automotive, which is crucial; and suggested the US could do more damage to itself by making drastic changes to trade deals, or imposing import tariffs and border taxes. That, however, shouldn’t stop Canada from pulling out all the stops to ensure the new US administration doesn’t settle on a plan to disrupt established integrations of the US and Canadian automotive supply chains.

“[The US] doesn’t care if Canada whines,” said Hall. “The real effort by Canada has to focus on showing them how millions of American jobs are tied to open trade across our borders.”

He also noted Trump’s habit of pulling U-turns on campaign promises that, now in office, he realizes are harder to achieve and may be detrimental to US jobs.

“Logic is a word that seems to have been deleted,” said Hall. “But logic always comes through.”

General Motors’ chief economist Mustafa Mohatarem also acknowledged the great change barreling toward the auto industry at what seems like breakneck speed. While scary, he said, these new challenges are rooted in opportunity.

Record sales

Mohatarem said auto production and sales are at record levels, and there’s little cause for that trend not to continue as the growing number of millennial car buyers buoy the sector now that the job market is growing. These young people are becoming the fastest-growing consumer segment despite being viewed by the industry as most likely to turn away from vehicle ownership.

This is not a soley North America trend. It’s happening in developing countries, especially China and India. Hall echoed that sentiment, suggesting there’s a growing global effort to lift millions of people out of poverty, thus creating new markets for vehicle ownership.

Indeed, three new Chinese auto manufacturers joined the million-unit club last year, said Joe McCabe, president and CEO of AutoForecase Solutions LLC in Philadelphia. While he acknowledged China’s production was equivalent last year to North America’s in 2010, he forecasts the number of Chinese-made vehicles to double the North American figure by 2024.

And it’s in those places where Canada can shine. Flavio Volpe, APMA’s president, touted Canada’s research know-how and its global potential as technology reigns supreme in the next generation of automotive manufacturing. Mohatarem cited four “game changers” among auto’s biggest disruptors: connectivity (more digital platforms); sharing (Uber, Lyft are redefining mobility); alternative propulsion (EVs, hydrogen); and autonomous vehicles.

Closer to home, many auto producers are unhappy with Ontario’s plan to raise the province’s minimum wage to $15 per hour. The province is home to about 96,000 of Canada’s auto workers, and their companies argue the higher minimum wage will make them even less competitive. They are already stick-handling high-electricity rates, an unpopular cap and trade emissions reduction program and higher labour-employment costs.

Brad Duguid, Ontario’s minister of economic development, defended the move in a keynote speech. He outlined a scheme to offset the additional costs by reducing red-tape, with a focus on streamlining Canadian and international standards to deliver cost savings to manufacturers. He said the eight-point plan could reduce costs by billions (see Red tape reduction).

Advanced technologies

Duguid also noted Ontario’s strengths in innovation and research, which he predicts will be important as advanced technologies continue to blend with automotive developments.

McCabe told conference delegates only 0.02% of car sales in 2010 were electric vehicles, and sales aren’t expected to push beyond 1.5% by 2024, but Duguid is confident new platforms will prove popular with customers as awareness grows.
Advances in propulsion technologies will be complemented by developments within a vehicle’s “brain,” said Deepak Anand, who leads Google Canada’s automotive division, during a 30-minute talk to close the conference.

“Change is inevitable, it’s a constant,” he said. “The industries that have embraced technology move quicker and grow faster.”

He touched on how machine learning, which he works closely with on a daily basis, has changed everything, and it’s only a matter of time until advances are felt in the auto sector.

Google’s Android Auto, introduced to the world in 2015, allows Android-powered smartphones running the Auto app to be operated in cars through its dashboard head unit. The app provides control over GPS navigation, music playback, speech-to-text messaging and web search. It’s supported by hands-free operation via voice command, which Google describes as a significant safety feature.

The Hyundai Sonata was the first vehicle to feature this technology.

And Anand promises the app is just the beginning of the internet giant’s foray into the auto sector.
“Computers aren’t programmed for A to B. As the machine learns the smarter it gets,” he said, adding although driverless vehicle can’t be programmed to learn every possible scenario it may encounter, but continues to learn along the way.

Like speakers before him, Anand acknowledged the need for Canadian auto manufacturers to embrace technology.
Doing so requires a change in mindset that includes worrying less about Trump, NAFTA, tariffs and taxes while focusing more on leveraging global opportunities for growth.