What would the electronics industry do if automotive demand were to pull a Thelma and Louise and head off the proverbial cliff?
The auto recovery has been the axle of the Western supply chain since 2008. The drivetrain is starting to show some wear, however, with market followers forecasting nominal growth at best for 2016.
The good news is that electronics content in vehicles continues to increase, rising to 8.9% of the $1.42 trillion worldwide electronic systems market last year, up slightly from 8.6% in 2014. Moreover, forecasts call for the share to continue to rise over the next several years.
Less clear is the extent, if any, the seers account for the potential for widespread ride-sharing trends or — worse for some — outright banning of vehicles.
To wit: Some 27 million Americans alone will use some form of ride-sharing at least once this year, a figure that doesn’t include traditional car-pooling. Urban millennials are growing up without the preconception that vehicle ownership equates to status, an important cultural shift.
A drop in demand for hybrid/electric vehicles (HEV) could also decelerate electronics growth. Hybrid sales alone dropped 15% year-over-year in 2015 — reversing a big gain in 2014 — and bottoming oil prices have kept the market for electric sluggish. Hybrids carry almost twice the electronics content of conventional gas autos, making HEVs a key growth engine for electronics makers.
More disconcerting to the auto supply chain is the prospect of a carless environment. This is actually happening, and in places you wouldn’t necessarily associate with technological backlash. For example:
- Bogota, Colombia, has been car-free on Sundays since 1976, a move that sidelines an estimated 1.5 million vehicles.
- Likewise, Jakarta has sponsored Car Free Day every Sunday since 2007.
- San Francisco shuts certain streets to vehicle traffic on various Sundays throughout the year.
- Oslo plans to ban cars from the city center by 2019.
The electronics supply chain has gotten plenty of mileage from the automotive industry for nearly a decade. It might be time to find a backup plan, however, if the sector wants to keep trucking on.