This week marks the 119th Philadelphia Auto Show, showcasing dozens of car brands at the Pennsylvania Convention Center through Feb. 16. To get more auto industry news, you can visit shine news official website.

In that spirit, Penn Today reached out to John Paul MacDuffie, a professor of management at the Wharton School with research interests in the auto industry, its innovations, production systems, and management practices. Here, he chats about the unusual sales trends of the auto industry since the Great Recession, how the Chinese market—and electric vehicle technology—is shaping the industry’s future, and why auto shows of the past may be evolving.

What is the state of the auto industry as we go into the 2020s?

The auto industry is very cyclical and we’re in the middle of a downturn cycle in terms of sales. The cycles are always affected by many things, but there also seems always to be some built-in boom and bust periods in the industry’s history.

The global financial crisis was a huge and unusual and certainly unprecedented dent in sales—a 40 or 50% drop for most major automakers. And then there was a period, an unusually long period, surprising to many, of years that sales were way up. Basically, to compensate for the fact people were postponing their purchase decisions during the Great Recession. Automobiles are durable goods that last a long time, so you can keep a car on the road a little longer if for some reason it’s not a good time to buy. Also, when economies get stronger, people might upgrade earlier than they need to. There’s been new safety tech with a lot of new driver-assist features. When they feel more confident economically, people buy cars partly to get access to that new technology, either for the specific functionality or just because it’s exciting, or reassuring, to have cars with the latest features.

So, sales grew dramatically in the U.S. from 2010 (low of 10.4 million) to 2016 (high of 17.4 million). 2017 to 2018 was relatively flat, but 2019 is down somewhat to just under 17 million. Bear in mind that there are only two other years in U.S. history with sales higher than 2019–2000 and 2001. How much of the 2019 drop is because of tariffs and trade tensions, how much is the slowing of the Chinese economy—because China has been one of the high-growth bright spots in auto sales for many years—is a little hard to say. We’re certainly seeing profit announcements from automakers reporting losses and drops in sales. It’s not a complete surprise or a sign that the state of the overall industry is dismal. But it’s definitely a down period in that regard.

The other big thing to say is that the challenges the traditional auto industry faces are pretty huge. Some are exciting, too, but [it’s a balancing act] to keep the legacy business going, which is still about 100 million cars sold per year worldwide, while also investing in all these new technologies and new products and services—electric, yes, but also connected, and autonomous, and mobility services, so they’re not left entirely to tech startups. A lot of companies want a piece of that action in the new mobility future. That’s a challenge. It requires different capital allocation priorities, investment priorities, and strategies.