of automotive CEOs say customers have a ‘significant’ influence on their business strategy.
The automotive industry's global footprint is changing radically
Over the longer term, we expect to see rapid growth in emerging markets, with growth in mature markets stagnant or sluggish. Already, nearly as many automotive CEOs expect foreign markets to drive growth as are looking to increase at home. China and Brazil (together with the US) top the list of countries where automotive CEOs expect to grow this year.
Big shifts will be needed to build cars and their parts and components where they’ll be sold. 42% of automotive CEOs actually expect their revenues in Western Europe to shrink this year, compared to just 22% across the total sample. But CEOs see strong prospects for revenue growth elsewhere, like in North America and Latin America. In our view automotive companies may still need to cut capacity in some mature markets, but increase it in others.
That’s probably why manufacturing capacity is one of the top three investment priorities for 38% of automotive CEOs. China stands out. A full 62% of the automotive CEOs who expect China to be a key growth market say one of their top objectives there is building manufacturing capacity. That’s far more than across the sample as a whole and reflects China’s growing clout as the world’s largest automotive market.
But raw materials shortages are looming
For one-third of automotive CEOs, another important reason to be in China is accessing raw materials or components. That’s probably because China controls a large percentage of the world’s rare minerals and metals, some of which are critical for manufacturing automotive parts and components. Finding alternatives to ‘conflict minerals’ – minerals or metals sourced from conflict-affected and high-risk areas – may also be on the minds of many sector executives. 72% of automotive CEOs see energy and raw materials costs as cause for concern this year, compared to just 52% of the total sample.
A smaller shoe-size will be required
There’s considerable pressure from governments and consumers alike for automotive companies to reduce their environmental footprint. Half of automotive CEOs say they plan to intensify efforts to do just that over the next twelve months.
Working together on tomorrow’s technologies
There are a whole range of new technologies which are reshaping the automotive industry, from electric vehicles and fuel cells to integrated in-vehicle electronics. So it’s not surprising that 40% of automotive CEOs say they nurture many strategic initiatives, allowing the strongest to succeed, rather than focusing on just a few key plans.
Suppliers, OEMs and automotive retailers are already working together to develop the next generation of vehicles – and that’s having an impact on how they run their organisations. Half of automotive CEOs say that supply chain partners have a significant influence on their business strategy.
While getting closer to customers
But when it comes to influencing company strategy, by far the most important stakeholders for automotive CEOs are customers. 86% say they have a significant influence on strategy. That’s a risk – nearly half are concerned that shifts in consumer behavior could slow down growth – but it’s an opportunity too. Consumers are now expecting far more from their vehicles – and companies that can deliver will have a competitive advantage. To understand them better, 45% of automotive CEOs are planning a major change in how they engage customers. For many social media is an important tool to reach out to customers and other stakeholders alike – 37% say they’ll make major changes in engaging users of social media.
And looking for the people to make it all happen
To succeed, automotive companies will need to keep innovating. And that means finding and keeping the right people. Like their peers in other sectors, many sector CEOs worry that skills shortages could hamper growth. More than half don’t think the government has been effective in helping create a skilled workforce, so they’re taking the initiative. 63% of automotive CEOs say they’ll increase their investments in creating and fostering a skilled workforce over the next three years.