The Future of Automotive

Five Things Manufacturers Should Consider to Dial-in their Recovery Effort

1.

Increase collaboration with dealer networks to accelerate the adoption of digital tools designed to create frictionless engagement and meet customers where they want to do business. Even though the jury may still be out as to whether consumers will migrate en masseto buying cars fully online, there are still many areas where integrated digital tools can have a transformational impact on the vehicle purchase process and overall brand engagement. At the same time, manufacturers can accelerate the deployment of digital tools back through the supply chain to maximize transparency and to detect potentially crippling issues early on. Establishing digital supply networks and deploying artificial intelligence can enable smarter planning decisions and improve overall agility through a deeper and broader understanding of the system.

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2.

Maintain the manufacturing discipline gained through the last upcycle, focusing on producing vehicles that consumers want to buy. In fact, companies that are trying to restart assembly operations under a pre-pandemic strategy may need to be much more agile in order to respond to shifts in the vehicle mix caused by a growing consumer affordability issue.

3.

Deploy technology transformation tools to identify and prioritize further cost-cutting opportunities while protecting critical investments that can yield significant forward benefits (powertrain electrification, smart factory, etc.). Cost cutting in a downturn is certainly not revolutionary but knowing which investments in innovation to protect given longer-term macro trends can be a critical success factor for automotive companies moving forward. For example, driving forward with smart factory implementation strategies could yield significant competitive advantages related to throughput, quality, safety, and revenue growth.

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4.

Isolate areas of the business that represent a cash drain and make the hard decisions required to rehabilitate, sunset, or divest underperforming assets. Continuing to prop up unprofitable assets will be increasingly difficult moving forward, particularly manufacturing operations that struggle to meet a minimum capacity-utilization threshold.

5.

Ramp up the exploration of strategic partnerships to maintain a focus on innovation while sharing investments and minimizing risk. Traditional notions of competitive exclusivity between OEMs may be giving way to the realities of emerging market conditions. Finding ways to collaborate on innovation may become a strategic imperative for automotive companies.

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The pandemic started just as the global automotive industry was headed into a cyclical slowdown with a potential for a more permanent, structural downshifting in demand. It is also playing out against a backdrop of global automakers already under intense pressure to maintain massive research and development spending with no guarantee of a return on investment, and a critical need to develop new business models. The full impact of the pandemic will likely remain unclear for at least several more months. What is becoming very clear, however, is the need for industry stakeholders including manufacturers, suppliers, retailers, financial institutions, and governments to come together in a focused dialogue to understand exactly what actions are needed in order to tackle these incredibly complex issues and get the global automotive engine running smoothly again.

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