How the growing disruption in the automotive industry could make your firm irrelevant…
The global automotive industry has been in a state of significant disruption for a lengthy period and that doesn’t look set to change any time soon. In fact, it will likely only get worse as dramatic shifts in the global manufacturing geography and increasing product complexity force even greater change.
Brought about by a convergence of new technology; the electrification and hybridisation of drivetrains, the industry push to zero carbon, connectivity, new mobility, shared mobility, micromobility, MaaS, CAV, changing consumer demands, evolving financial models, ‘non-traditional’ suppliers entering the supply chain and the redistribution of value from hardware to software, big data and cyber security – the disruption seems endless.
Geo-political factors including USMCA, Brexit, US-China trade wars, relocation of supply chains away from China for some APAC auto makers, the relocation of traditional manufacturing centres to emerging world economies such as India, Brazil, Morocco and CEE countries, only exacerbate the situation and create additional challenges for the auto industry.
And as if all of this were not already enough, the industry is now struggling to recompose itself after the global pandemic lockdown, compounded by an anticipated cyclical industry downturn and an ageing work-force quickly approaching a critical mass in retirement age – Add all of this together and we have a perfect storm for the biggest disruption the industry has ever seen.
These challenges are felt nowhere more keenly than across the entire breadth of the automotive supply chain. If automotive OE suppliers do not adapt and respond to the evolving industry, they could easily be left behind and quickly become irrelevant.
When we accept that change is inevitable, the need to remain relevant becomes paramount
In business, irrelevance is your funeral. If you are no longer relevant you will no longer be required. The auto industry and its supply chain have a reputation for being slow to change and evolve. But change is now forced upon the industry at a far greater pace than ever seen – and the struggle to survive is very real. Many auto suppliers now find themselves facing an uncertain future. Mass disruption has created a new market landscape which many suppliers are poorly equipped to deal with. Their brands easily pigeonhole them into specific areas with little room to adapt, to sell new product lines and expand their offerings.
Even when a supplier modernises their product lines, advances their technology and keeps pace with evolving requirements of OEMs, their brand can restrain them within the market’s perception who they are, what they do and what they supply. This can be difficult to break away from, restricting business opportunities and growth.
In addition, new challenger manufacturers such as Tesla, Rivian, Nikola, Lucid Motors and many more new OEMs are entering the industry with new, ever more complex products, disruptive technology and sales models. Will they seek out the traditional suppliers, who are often seen as dinosaurs, with product ranges and brands associated with fossil fuel and ICE technology? Probably not – after all, it’s not a part of their brand DNA.
But the future doesn’t need to look so bleak. In fact, wherever there is disruption, there’s opportunity. OEMs have been forced to uncover new suppliers, turning to those who can maintain continuity and keep production lines running. They’re now collaborating more closely with their suppliers to improve transparency and manage the requirement to provide stock for the right kinds of vehicles. The political landscape has changed the geography of the supply chain, creating further opportunities for those prepared to adapt.
In the search for suppliers who fit the new requirements of the auto industry, is your brand relevant to the industry’s changing needs?
Many auto suppliers have been operating comfortably with OEMs and in their supply chains for long periods of time. Their businesses have evolved slowly and they have built their reputations based on traditional and historical supply. As technology has evolved and vehicles become more complex, so have many products, with incremental leaps in tech, engineering, manufacturing, materials, and quality. Auto OE suppliers are forced to maintain pace with the latest vehicle developments. But if suppliers are investing in their technology, engineering, new materials and so forth, do they communicate these changes to the market? Sadly, in many cases, no.
Having worked with many companies in the automotive supply chain, early in the process of rebranding, we often approach our clients’ customers for research, opinions and feedback on their brands. One surprisingly common discovery is that most of them still had clients that didn’t fully understand the complete product ranges or services they provided. More importantly, they were losing business because their existing clients were looking elsewhere assuming, often wrongly, that our client didn’t supply what they needed.
Clearly this is just down to poor communication. But the ability to adapt and evolve must reach far beyond product engineering and development. Strong communications and branding that drives relevance for your customers and prospects is essential. Taking a robust brand approach will ease your business growth, sustain profitability and add to your bottom line.