Workers assemble Mercedes-Benz AG G-Class automobiles on the production line at the Magna International Inc. plant in Graz, Austria, on Thursday, Dec. 3. 2015.Akos Stiller
Magna International Inc. is forecasting steady increases in vehicle production globally until 2024, but the growth of ride-sharing services and autonomous vehicles and the decisions cities make about traffic and pollution could begin to affect output by the following year.
The world's auto makers cranked out 95 million vehicles last year, and production is expected to grow to 109 million by 2024, Magna officials said Wednesday at an investor day presentation in New York.
But the industry is being transformed by unprecedented disruption as new players enter the sector and governments put measures in place to combat global warming.
"If mega-cities say, 'We're only going to allow golf carts running around,' then obviously vehicles will be different" from those now on the road, Magna chief executive officer Don Walker told the meeting.
Mr. Walker made his comments shortly after Rome announced that it will ban diesel vehicles in its city centre by 2024 – one day after a court in Germany ruled that cities in that country can enact a similar ban. And in Britain, Oxford is proposing to create a zero-emission zone in its city centre by 2035.
Those moves clearly show that support for the car as the primary means of personal transportation is eroding. Even small initiatives, such as the limits placed on cars and trucks along Toronto's King Street, a downtown corridor, in favour of streetcars signal how the world is changing.
"Over time, we do see a plateau in production volumes," said Jim Tobin, Magna's chief marketing officer. That is perhaps seven to 10 years down the road, Mr. Tobin added, and will depend in part on the growth of ride-sharing services, such as Uber, Lyft and others. The cost of such services is between US$2 and US$3 a mile, but companies are targeting a cost of US$1 a mile, he said.
"Once they get to that cost, there's going to be a compelling change in the industry, but right now it's just too expensive," he said.
Mr. Walker said he doesn't believe anyone in the industry knows precisely what impact ride-sharing and autonomous vehicles will have on production. But company officials said Magna sees a huge market in making components for autonomous vehicles and is already receiving inquiries from ride-sharing services about whether its Magna Steyr vehicle assembly business could make or help develop vehicles for them.
Magna sees the market for advanced driver assistance systems (ADAS) used in autonomous vehicles worth between US$80-billion and US$95-billion annually by 2030.
As for assembling vehicles for new entrants to the market, Magna has "an excellent position because we don't have our own brand," Magna Europe president Guenther Apfalter said.
On a separate issue, Mr. Walker said Magna's forecast of free cash flow of US$6-billion between 2018 and 2020 puts the company in a strong position to make acquisitions in the event of an industry downturn. The auto parts giant hoarded cash during the 2008-2009 recession, he said, when then-controlling shareholder and company founder Frank Stronach insisted Magna not go into debt.
"We would have been much more aggressive making acquisitions then, but Frank didn't want to get into debt at that point in time," Mr. Walker said, while he and chief financial officer Vince Galifi did not want to dilute Magna's shares by issuing equity to make purchases.