Automotive

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The automotive market is being transformed. It is no longer just about going from point A to point B in comfort. Both OEMs and Tier 1 and Tier 2 suppliers are rallying around common themes including mobility-as-a-service, electrification, autonomous functions, and over-the-air software updates.
Covid-19 has caused car sales to dive, and the demand uncertainty will be around for a while. However, as each country’s economy restarts, the automotive industry will get back to its transformational challenges. Carmakers will release model updates more frequently than the typical multi-year cycles that are standard today. And a more diversified ecosystem and changing demographics will mean software and services are now primary sources of differentiation. The competitive landscape in the auto industry for both OEMs and suppliers will get more complex as the dominant revenue model shifts from car sales to on-demand data services and software upgrades.

 

Every industry sector is affected by the pandemic, some positively, but most negatively. The pain and opportunities are not evenly distributed. Recent forecasts suggest the global auto industry will see 2020 global revenue contract by 10% as unemployment spikes and incomes fall. Altran, part of Capgemini, has identified four areas of business activity for automotive companies to accelerate business recovery.

Customer expectations for product and service experiences will be different than before the pandemic, so companies must continuously level-set on their customers’ new realities.

Social and physical distancing restrictions will be part of our lives and will influence our behavior for the foreseeable future. Carmakers across Europe and North America have reopened assembly plants by implementing new processes with a focus on safety and cleanliness, from decontaminating the workplace and mandatory masks to tracking the health status of employees. They are also aligning with the way customers are thinking about private, shared, and public transportation. During the rebound, there are vital actions that will help accelerate the recovery.

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We won’t snap back to the way we worked before. Many companies will reevaluate their global supply chains and streamline the way their people work together, virtually and more autonomously. They must monitor employee wellbeing as part of the “new normal” to ensure a safe and secure work environment.

At the top of the list of urgent actions for automakers and their suppliers in the new normal is bringing people back to work safely—in offices, factories, and facilities—while maintaining the option for virtual work without compromising employee security or increasing risk. Just as necessary is the need to ensure supply chains are resilient, meet customer delivery and service expectations, and minimize cost, complexity, and risk.

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Companies will accelerate differentiation of their offerings, so services play an even more critical role, including digital platforms, engineering automation, and broader collaboration to solve challenging problems more quickly.

Automakers build cars and trucks that people love to use every day. That will not change. However, the way they design, develop, and produce cars and trucks will. The necessity of social distancing, even after companies get back to work, is a catalyst for greater automation in factories, offices, and other facilities. Cloud-native automakers and those in the process of transitioning to cloud-based digital platforms have done relatively well during the Covid-19 crisis as demand fluctuates. Car companies will see this as an opportunity to accelerate model-based systems engineering, virtual analysis, and digital threads to reduce cost and streamline operations.

On the revenue side, it may be a clarifying moment to figure out how to make services an equal partner to the physical product to enhance the driver experience. Whether it is services for commercial or passenger vehicles, OEMs need to lead by transforming their core business to stay relevant and competitive. This is easier said than done because of the high capital cost and core competency of manufacturing cars. Tesla is a good example of a company that has mastered a new way of valuing its vehicles with regular over-the-air updates. However, when it comes to investment in new ridesharing businesses, the opportunities have faded with the pandemic as demand drops.

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Covid-19 is a tailwind for companies to consider stakeholder demands for greater environmental responsibility that will impact the R&D agenda for initiatives in preventative healthcare, smart cities, urban mobility, green flight, and other areas.

Governments and businesses will learn many lessons during the Covid-19 recovery. The most profound may be the newfound awareness of our planet-centricity and how fragile our interdependencies really are. There is an appreciation that we are one planet, regardless of national boundaries, and we have become more acutely aware of the need for more equitable healthcare, the importance of addressing climate change and bringing prosperity to all people.

The Covid-19 pandemic informs our planning and approach for dealing with these global challenges and the need for governments and businesses to embrace environmental stewardship to avoid a global crisis more significant and enduring than Covid-19.

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Automotive

HOW YOU GROW MATTERS POST COVID-19

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