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Caution: a twisting road ahead for automotive

C-suite leaders know more needs to be done to navigate the curves

Caution: a twisting road ahead for automotive

We believe the auto industry is likely to witness more changes in the next decade than in the last 20 years. They point toward the need for a radical pace of change, whereas, looking at the automotive C-suite’s agenda, they appear to focus on progressive change.

Two new EY automotive and transportation reports highlight the immediate concerns of C-suite executives while looking to the broader changes that will define the sector over the next decade.

In Automotive change drivers for the next decade, we show the six main trends that will have an impact on multiple stakeholders across the automotive ecosystem over the long term, and in Changing lanes, we interviewed over 140 global executives to understand their boardroom agenda for the next 18 months.

Read on to explore those six change drivers, as well as to learn more about the current environment, the C-suite’s immediate priorities and challenges, and how to bridge the gap between the two.


EY - Changing lanes 2016–17 Download Changing lanes 2016–17 as a PDF

EY - Automotive change drivers for the next decade Download Automotive change drivers for the next decade as a PDF

EY - global car-sharing memberships by 2020 26 million global car-sharing memberships by 2020 (from 6.5 million in 2015)

Current environment

The mix of markets driving the global automotive sales has changed yet again. Growth has shifted to markets such as the US, Western Europe and China, while the emerging markets have cooled off. Also, the pace of global vehicle sales growth is expected to slow over the next few years.

Meanwhile, the industry faces more scrutiny from regulatory bodies, more challenges from disruption and changing consumer tastes, and more geopolitical uncertainty in a world of change. We believe the automotive industry is likely to witness more changes in the next decade than it saw in the last 20 years.

The C-suite thus needs to focus on how to be more agile in identifying emerging trends and on how to change strategies faster. Our discussions with them confirm that the factors that will drive economic value in the ecosystem will be very different from the past. Their views for the future recognize the urgency to shift from a product-oriented model in the past to a service- and digital-based business.

The top five drivers of value overall

  1. Digital experience, including engaging customers across multiple digital touch points
  2. Evolution of demand in mobility and vehicle types, as the ride-sharing market surges
  3. Data management and analytics, relying on more data with greater insights
  4. Innovation management, addressing how to drive the benefits and mitigate the risks
  5. Organic growth strategy, in products, services strategy and innovation

Immediate priorities for the C-suite

Unprecedented shifts will have impact on the future viability, strategy, business model and performance results of multiple stakeholders across the automotive ecosystem. They point toward the need for a radical pace of change, whereas, looking at the automotive C-suite’s agenda, they appear to focus on progressive change.

In short, the only way the auto industry executives can expect to bridge the gap will be to drive the sense of urgency to change throughout their organization and also business ecosystem.

C-suite priorities over the next 18 months

  1. Fulfill the demand for mobility innovation, fleet management solutions and an engaging digital customer experience.
  2. Leverage big data and analytics to maximize the value of data, but also address data privacy, cybersecurity and quality risks.
  3. Cater to demand from growing regions, and look at partnerships within automotive and transportation or across sectors.
  4. Attract, develop and retain the right talent and gain access to nontraditional technology and intellectual property.
  5. Confront the uncertainty in the operating environment vis-à-vis the regulatory, geopolitical and economic realities across the globe.

That’s a tall order, and Changing lanes shows the gap between these priorities and the ability to pull them off:

EY - Integrated deal team management and process execution

A coming decade of change drivers

Looking ahead across the next 10 years, we see a landscape of several hurdles amid accelerating impacts from technology, changing consumer tastes and greater scrutiny from a spectrum of stakeholders.

1. Accelerating pace of disruptive innovation
Barriers to entry in the automotive industry are gradually tumbling. Empowered by digitalization and innovation, new competitors are challenging traditional business models. In response, we’re seeing automakers collaborating at multiple levels — not just with suppliers and competitors, but also with players outside the ecosystem. Now, the pace of innovation is challenging the established industry principles — from value proposition to cost drivers and product life cycles.

2. Battle to own relationships in a digital market
Mobility continues to be dominated by personal vehicles, and the market is far from the tipping point at which services start to generate more revenues than vehicles. But the pace of adoption of various mobility solutions does raise the risks for the auto industry losing its visibility of consumers, and it has ignited discussions on customer relationship and life cycle management among automakers and retailers.

3. Digitalization across the value chain
Increasing volumes of data and sophistication of connectivity across the value chain are impacting the entire industry ecosystem. From exploring the monetizing opportunities at the consumer end of the value chain, to transforming the workplaces by applying robotics, the potential for harnessing the power of digitalization within the auto industry is substantial. Managed, it can be a major source of competitive edge. But unmanaged, it’s a source of risk.

4. Secure resources for business continuity
With critical industry innovation being driven by nontraditional activities, disruptive market entrants are moving to stake their claims in emerging automotive and mobility ecosystems. Against this backdrop, the strategic acquisition and management of talent, knowledge and IP are imperative in an increasingly competitive and resource-driven industry.

5. Diverse sources of unpredictability
Having established a footprint across most major markets, companies across the automotive ecosystem are now being challenged by local volatilities ranging from economic uncertainty and political instability to protectionism and trade dynamics. The net effect will result in a global marketplace where it’s harder than ever to see around corners and plan ahead.

6. Unprecedented scrutiny
From dealers and captive finance companies to automakers and suppliers, there is significant pressure to deliver higher returns on the capital employed, comply with more stringent standards for products, and also offer more transparency on the use of ethical business processes. Companies across the automotive ecosystem will need to invest in monitoring, compliance and communication strategies to minimize this risk.

What can the C-suite do?

Our analysis of automotive C-suite agendas indicates that a majority of the automotive organizations – 82% – lack preparedness, execution and resource alignment to enable faster change. What should companies be doing now to prepare for a future of disruption and unpredictability?

Target flexibility across your operations to weather the ongoing slowdown in emerging markets, currency volatility and political uncertainties.

Consider in advance how best to adapt processes and product/service portfolios to meet evolving regulations and enable a holistic regulatory risk management approach.

Focus on accelerating transformation efforts to streamline distribution channels and deliver a seamless customer experience across multiple touch points. Pinpoint where on those touch points you can cross-sell and up-sell.

Use need-based and strategic alliances, JVs and acquisitions to gain technology and geographic coverage, and assess investment opportunities and risks associated with new segments and business models.

Build analytics capabilities to positively impact supply chain efficiencies and other key value chain processes.

Consider proactive monitoring of internal data to reveal compliance issues, and integrate big data and advanced forensic analytics to reduce cyber threat, fraud and corruption risks.

Align business and talent strategies, and put emphasis on innovative strategies to engage, reward and empower the workforce.

Look to extend the value chain to new industries for technology and infrastructure, and integrate government incentives, direct loans and guarantees in capital-raising strategies.



Randall Miller
EY Global Automotive and Transportation Leader
+1 313 628 8642

Anil Valsan
Global Automotive & Transportation Lead Analyst
+44 20 7951 6879

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