The automotive sector faces many opportunities and challenges. Executives in the sector expect major changes, including in powertrains, carmakers' relationships with customers, revenue models, production processes, technologies and data flows.
This is according to research by KPMG among 910 executives in the automotive sector worldwide. Almost a third of the respondents were from Western Europe. More than three quarters of the Western European participants see inflation, energy prices, higher interest rates and scarcity of raw materials, among others, as threats.
Availability of materials and components
The availability of materials and components is also a cause for concern. A large proportion of respondents reported being concerned about this. The disappearance or curtailment of subsidies for electric vehicles (EVs) also worries managers in the sector.
At the same time, respondents are positive about profit expectations for the next five years. For instance, some eight in 10 Western European executives in the automotive sector expect the sector's profitability to grow faster in the next five years than before. Last year, this growth stood at 44%, reports KPMG.
Observing implications
The study identifies four implications that leaders in the automotive sector should take into account, according to KPMG. The first is about preparing for unknown scenarios. Several strategic questions need to be asked here:
Which assets should the organisation dispose of or attract, for instance?
Is continuing to produce petrol-powered vehicles worth it?
Is it wise to continue working with a contract manufacturer?
What software development should carmakers do in-house?
KPMG argues that all options should be on the table here, and established ways of thinking are not sacrosanct either. Companies should develop a culture to support such a way of working.
Developing new skills
The study also highlights the need for developing skills that fall outside current competences. These include software development and Software-as-a-Service. The latter term describes software available through an as-a-Service model, where users pay for its use. However, also consider competences in artificial intelligence and deep learning algorithms, as well as analytics and working with large data sets.
Respondents see revenue-generating opportunities in selling insurance packages and providing software services 'over the air', among other things. However, think also of monetising data and offering services around electric vehicle charging. They are therefore no longer focusing mainly on selling cars, but increasingly on providing additional services around vehicles.
KPMG warns that while some of the competences needed for this can be developed organically, others will have to be obtained through alliances, joint ventures and acquisitions.
Putting customers first
KPMG also argues that the automotive industry has been relatively distant from its customers for too long. This needs to change, according to the consultancy firm. Digitalisation offers carmakers opportunities around building direct relationships with customers. These are long-term and deep relationships that are mutually profitable.
KPMG expects its success to depend on creating a seamless, multi-year customer experience based on personalisation, efficiency and trust. Especially when it comes to data.
73% of European executives expect the majority of new vehicle purchases to take place online by 2030. They also expect car manufacturers to increasingly handle sales themselves and will account for about half of all car sales. The other half is expected to be through dealerships and new online players.
Speed of change is only increasing
KPMG also warns about the speed of change in the automotive sector. "If executives believe that events are racing, they can expect the clock speed of change to be even faster in the coming years," KPMG writes in the report.
The evolution of the automotive industry is accelerating at a rapid pace, reports KPMG. The winners are expected to be those capable of making decisions faster than their competitors. KPMG also warns that there are several paths to success, but many will also be unsuccessful.
Author: Wouter Hoeffnagel
Photo: Free-Photos via Pixabay
