Sign in Subscribe
Strategy

Strategy Byte 86 – The Evolution Part III

How the car industry changed from 1990 to 2026: hybrids, China's rise, EVs, software, autonomy, batteries and critical minerals. Part 3.

Anand N Panicker

• 8 min read
Share
Wall mural of classic cars arranged by decade on arrow-shaped panels, a metaphor for the car industry's evolution
Photo by sina rezakhani / Unsplash

Table of Contents

  1. Recap
  2. The 1990s
  3. The 2000s
  4. The 2010s
  5. The 2020s (to 2026)

Recap

In Part 1 we covered the 1900s to 1930s, and last week in Part 2 the 1940s to 1980s, using five headings:

  1. Technology - What was the technology used & what new was introduced during the period under discussion which led to newer models &/or facilities in the car
  2. Market - What was the market position of the automotive industry during the period
  3. Business & Operating Model - What was the business & operating model of the automakers during the period
  4. Rules & the State - Major regulations introduced during the period
  5. Companies - Who were the companies in the news & their major activities during the period

This week we cover the decades from 1990s till present.

The 1990s

  • Technology: Toyota launched the Prius (1997), which Toyota calls the world’s first mass-produced hybrid passenger vehicle. Mercedes says it introduced the ESP stability system (1995), and Alfa Romeo says the 156 was the first common-rail diesel car (1997). US vehicles grew heavier and more powerful.
  • Market: trucks went from 29.6% to 41.2% of US production. China built only 1.5–1.7m vehicles in 1999.
  • Business and operating model: Japanese plants in the US accounted for about 10% of US sales. VW moved to shared platforms (1994), ran its Pacheco plant in Argentina on a module system (1995) and put its China investments into one holding company (1999).
  • Rules and the state: Japan’s US export cap ended in 1994. China’s 1994 rule allowed at most 50% foreign ownership of a joint venture, and at most two per vehicle type. France sold part of Renault in 1994 and completed the privatisation in 1996.
  • Companies: Daimler–Chrysler (1998) and Renault’s 36.8% stake in Nissan (1999). VW bought Bentley, Bugatti and Lamborghini; BMW bought Rover (1994), Hyundai bought Kia (1998) and Ford bought Volvo (1999).

The 2000s

  • Technology: Toyota passed 2m hybrids sold in 2009, and Tesla’s lithium-ion Roadster arrived in 2008. Diesel was 46% of Western Europe’s market.
  • Market: China grew from just over 2m to more than 13.6m vehicles. US car registrations fell 21.2% in 2009.
  • Business and operating model:
    • Detroit’s cost base became a burden. A report for the Big Three put workforce, retiree and health-care costs at $1,200 or more per vehicle (2004), and GM’s CEO said health care added $1,525 to each GM vehicle built in North America (2005). In 2007 the UAW agreed to take over retiree health care through a union-run trust from 2010.
    • The supplier spin-offs (GM’s Delphi in 1999, Ford’s Visteon in 2000) unravelled. Delphi filed for bankruptcy in 2005 and GM took a $5.5bn charge. Ford took back about half of Visteon’s US plants, and Visteon filed in 2009.
    • In finance, GM sold 51% of GMAC for $7.4bn to a consortium including Cerberus (2006). Ford kept Ford Credit and, according to the CRS, mortgaged its assets for $23.5bn of financing (2006).
    • Elsewhere, Renault and Nissan bought parts jointly: about 30% of their purchasing in 2001, set to rise to 70% from 2004 and 90% by 2008.
    • Low-cost cars appeared for emerging markets: Renault’s Dacia Logan (2004), which Renault describes as a family car with a €5,000 price tag, and Tata’s Nano (2009). Production moved abroad: Toyota says its overseas output passed its domestic output for the first time in 2007, and Hyundai opened its Alabama plant in 2005.
  • Rules and the state: On joining the WTO, China cut car tariffs from 80–100% to 25% but kept requiring joint ventures. Treasury put $17.2bn into Ally, GM’s former finance arm.
  • Companies: Daimler sold Chrysler to Cerberus (2007). Toyota passed GM in 2008, ending what ABC News called GM’s 77-year run as top seller. GM and Chrysler went bankrupt in 2009. Chery, Geely, SAIC and BYD emerged, and Tesla was founded in 2003.

The 2010s

  • Technology: Nissan introduced the Nissan LEAF (2010). Batteries fell from over $1,100 to $156/kWh, and code in some cars grew from about 10m to 150m lines.
  • Market: World car registrations were flat at 72.8m (2015) and 74.9m (2019). China’s share rose from 26.4% to 28.2%, and EVs were 2.6% of sales in 2019.
  • Business and operating model: Tesla sells direct through its own stores, and dealer groups challenged that in court.
  • Rules and the state: China’s tax exemption for EVs and plug-in hybrids came in 2014. The US EPA’s Dieselgate notice to VW came in 2015.
  • Companies: Geely bought Volvo (2010). In 2015 Toyota sold 10.15m vehicles and VW delivered 9.93m. GM sold Opel and Vauxhall to PSA in 2017.

The 2020s (to 2026)

Now that we are in the present, I will change the format a bit to highlight the technologies & supply chain developments which have evolved over the last several decades & have scaled in 2020's to disrupt (& still disrupting!!) the automotive industry.

Manufacturing

a building that has a tesla logo on it
Photo by Maxim / Unsplash

Automobile manufacturing is getting "automated" with robots along with the evolution of the core manufacturing process. The conventional method which is still used for most cars is to build the body from many stamped steel parts joined together.

A new process called "Giga-casting" changes that by making large sections of the car body as single Aluminium pieces. The companies claim the new process cuts cost & assembly steps. Tesla uses it in production and Toyota plans it for its next-generation EVs.

Software

the dashboard of a car with a gps device
Photo by Patrick Langwallner / Unsplash

Cars are becoming computers on wheels where over-the-air updates add features and fix faults without a garage visit. Tesla fixed a large recall in China this way. BMW says its new Neue Klasse runs on a few central computers with far less wiring. Paid software subscriptions are growing at Tesla, and at GM for its Super Cruise driver assist.

Electric Vehicles (EVs)

Electric car charging at a modern home with solar panels
Photo by Christian Rebero Twahirwa / Unsplash

EVs have gone from niche to majority of new-car sales in China, hold a growing share in Europe, and remain a small part of the US market. In China, most battery-electric cars now cost less than their petrol equivalents before incentives, and the price gap is narrowing in Europe and the US.

Autonomy

A waymo self-driving car is seen in the city
Photo by Aamy Dugiere / Unsplash

Driverless taxis have scaled up, led by Waymo, which sells rides in a growing number of US cities, and Baidu’s Apollo Go in China; Tesla runs a robotaxi service in several US cities.

Critical Minerals

China dominates the refining of most battery minerals and the processing of rare earths used in magnets. Its rare-earth export restrictions have disrupted car production.

Batteries

a close up of a battery on a table
Photo by Newpowa / Unsplash

Battery costs have fallen sharply over the past decade. Lithium iron phosphate (LFP) cells, a cheaper chemistry, now make up the majority of EV batteries worldwide, although outside China nickel-based chemistries still make up most EV batteries. BYD’s Blade battery simplified pack design by setting cells straight into the pack without modules.

Now that we understand the history & major developments along with how the industry evolved, next week, we deep dive into industry structure.

time lapse photography of cars on road during night time
Photo by FlyD / Unsplash

Sources & Citations

The 1990s

The 2000s

The 2010s

The 2020s