How to be No. 1: facing future challenges in the automotive industry

The automotive industry is a growth industry. It has broken record after record in recent years, with no end in sight. Sales and production in China are booming. On the other side of the globe, a strong recovery in the US continues to surpass expectations.

But along with record growth, the industry is also facing unprecedented challenges:

  • Demographic changes and profound shifts in global economic power are causing massive upheavals in demand.
  • Consumer expectations are changing radically.
  • New technologies are dramatically changing vehicles, from the advent of the ‘connected car’ and enhanced driver support to better fuel efficiency and new or improved powertrains.

Automotive manufacturers and suppliers are confronted with increasing complexity as a result of increasing numbers of products and options, shorter technology cycles, increasing pressure to innovate and global supply networks.

And at the same time they need to balance the needs and demands of customers, investors, regulators, non-governmental organisations (NGOs) and the public. But without pressure, there would be no diamonds. Tough competition makes efficiency, inventiveness, flexibility and decisiveness mandatory. What are some of the keys to success in this fast-moving environment?

  • Know your markets
  • Build the brand
  • Adapt production strategies
  • Take a long-term view.

Those leaders responsible for driving automotive companies have important decisions to make. They need to create a coherent strategy, define goals and find ways and the right people to meet them. This report doesn’t have all the answers, but we hope it will provide some useful starting points for further thought and discussion. We’re looking forward to continuing the conversation with you.

Know your markets

Europe has faced tough times, but may have turned the corner. The BRICs are still vital, but while China is booming, Brazil, Russia and India have slowed down. And North America continues to regain the ground it lost during the crisis. While these are some highlights of the automotive markets, we think it’s also critical to go deeper. There are significant variations in the health of European markets, for example, and while China is booming, some Tier 1 cities may already be saturated.

Automotive executives should pay close attention to market dynamics and position their companies to take advantage of them.

Build the brand

For most consumers, the decision to buy a car is made at both a rational and an emotional level. So for manufacturers, developing strong products is the essential starting point. But enhancing service is important too – and remembering that every contact with the customer is a chance to build a relationship.

Brands need to resonate with car-buyers who choose with their heart as well as their head. Emotional marketing isn’t just a fad; it’s an important trend that automotive producers need to embrace.

Adapt production strategies

Even those companies that have been successful need to keep transforming their business – standing still means falling behind. That means moving to the markets that are growing, like China and South East Asia, Brazil, Russia, India – all will be increasingly important. The industry’s regional footprint will need to change substantially – a process that’s already begun.

Production will also need to be networked and flexible. And automotive companies need to able to cope with complexity. For executives, that means fully understanding the true direct and indirect costs of complexity, but also its benefits, so they can make better decisions.

Set the right priorities

The automotive marketplace is transforming, and so is the relationship between OEMs and suppliers. Some automotive suppliers are becoming important partners in innovation; others are making big strides in efficiency. And many are joining automakers as they move to growth markets.

Every supplier will need to carve out a solid position in an extremely complex global network. That means managing relationships and building on your strengths.

Take a long-term view

Automakers are facing increased pressure from regulators and consumers to improve the environmental performance of their products. They’re already making significant progress, and they’re improving their own environmental performance too. But that’s only the beginning of developing a truly sustainable business.

Economic and social factors are also important. Better transparency across the whole supply network will help automotive producers understand their true impact on the environment, economy and society. It can help reduce business risk too. Corporate sustainability isn’t just ‘nice to have’– it’s a prerequisite for future success.

 

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