Successfully shifting from fossil fuels to full electrification
is a challenging enough objective for the automotive industry to
wrestle with during the decade ahead. The fact that the 2020s began
with a pandemic has only served to accelerate the need for industry
transformation, as the monumental impact of COVID-19 brought many
more disruptive macroeconomic issues to the fore.
This year’s AlixPartners Disruption Index reports
that COVID-19 features low down the list of top concerns for
automotive executives, but there is little doubt that the events of
2020 have magnified the intensity of the other trials ahead.
Indeed, respondents in the industry display confidence levels some
way below the all-industry global average when it comes to their
businesses’ ability to withstand disruptive forces, with less
than a third reporting high confidence in this area.
We were told that protectionism and tariffs, electric vehicles,
and new or evolving competition or business models are the top
three issues keeping executives awake at night. It is a trio of
intrinsically intertwined challenges, all present before COVID-19
struck, but since supercharged from the events of the past 16
months.
Supplier shortages and shifting consumer preferences
Showroom shutdowns and a drop in demand presented automakers
with the headache of accurately anticipating the timing and level
of industry uptick. Further, manufacturing plants were brought to a
standstill at times, as a worldwide semiconductor shortage set in,
stifling OEMs’ ability to return to full production during the
second half of last year. As forecast in our 2021 Global Automotive Outlook, the cost of
this stuttering restart, specific to semiconductor availability, is
expected to cost automakers around the world nearly four million
light vehicles of lost production, worth $110bn.
These direct economic impacts are stark, at a time where the
evolution to a cleaner automotive future – and the huge
levels of enabling investment required – is dominating the
long-term roadmaps for every player in the industry, governments,
and consumers.
Changes to consumer behaviour because of the pandemic, including
increased financial concern and heightened environmental awareness,
will continue to adapt the automotive landscape in terms of length
of vehicle ownership and number of vehicles owned per household.
This appears to be of particular concern in China, where 50% of
respondents identified changing consumer demographics as being very
or extremely impactful, versus 27% globally. The online second hand car sales market is also
booming, and as cost and infrastructure barriers around
electric vehicle adoption persist and the uptake of alternative
emerging micro-mobility models increases, it’s clear that there
is yet more disruption in the market for OEMs to contend with
beyond COVID.
The need to deliver on technology – and talent
Disruption Index respondents cited investment in new technology
as the top strategy to counter disruption. With all roads leading
to electric in the future, this may come as no surprise, but
adjacent to this is a firm focus on better strategic hiring
decisions. Our study told us that 62% of automotive C-suite
respondents agree that there is a talent gap in their organisation
that makes them vulnerable to effectively navigating
disruption.
As traditional manufacturing and technology continue to converge
in automotive, digital and tech skillsets are becoming increasingly
desirable to catalyse and effectively manage transformation
efforts. However, all industries are now driven by a digital-first
mentality and the battle for the top talent will only intensify
over time.
Perhaps this eye on where talent will need to over-index in the
future is why 48% of respondents expressed concern over job
security – most acutely observed in Japan at 77%. Long
periods of enforced human absence (or much reduced) from
manufacturing plants due to COVID restrictions have seen an
acceleration in integrating artificial intelligence equipment that
increases efficiency and effectiveness during production, also
carrying employment implications.
Suppliers will come under increasing pressure to adapt under, in
some cases, the existential threat of an electric future, where
powertrain component complexity drops dramatically and electrical
operability and connectivity needs continue to rise. COVID-19 has
highlighted that any fragilities in supply chains can have
catastrophic consequences, and OEMs will do as much as they can to
develop strategic alliances to shore this up for the future,
strengthening purchasing power and aligning with the optimal
network of innovative partners who can help them deliver on the
bold electric visions they have set out.
Ambitious targets require boldness in transformation
Global industry sales data suggests a strong post-pandemic
recovery to date, spurred on by a positive macroeconomic outlook,
but a return to pre-pandemic volumes is likely to be at least four
years out. The need to maintain strong revenues now to fuel
investment in electric means the race is already on to emerge as a
new-world winner when government EV targets for 2030 are on the
immediate horizon and OEMs’ individual targets for electric
propulsion share are being counted.
As consumer preferences continue to shift, the prize is immense
for developing the right product at the right price that can also
deliver healthy profitability after such heavy up-front
investment.
In times of such intense disruption, the need for transformation
is inevitable. The automotive market leaders that emerge in the
all-electric world will undoubtedly have displayed the agility,
innovation and speed to action to harness the huge opportunity that
now exists.
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