The global automotive industry is undergoing big changes. Emerging markets, customer preferences and technology are all playing a huge role in this transformation and its effects will result in redesigning of supply chains. As the automobile industry transforms, competition will increase and from unlikely businesses such as Google and Apple along with niche automobile manufacturers such as Tesla and startup company, Faraday Future. It is likely as competition increases, consolidation and joint ventures will follow as the Detroit 3 – GM, Ford and Fiat Chrysler, seek to maintain their leading roles within the industry.
According to the International Organization of Motor Vehicle Manufacturers (OICA), worldwide motor vehicle production increased 1.1% from 2014 to 2015 with the biggest year-over-year percentage gains reported in Africa, up 16.1%. In fact, J.D. Power & Associates note that automobile manufacturers typically build facilities in or near markets where they sell vehicles and as a means to increase efficiency, lower costs and customize offerings to local preferences. As such, J.D. Power observed that a shift occurred around 2010 in which emerging markets led by China, India, Brazil and East Europe accounted for slightly more than half of the vehicles sold worldwide. This trend has continued as middle class levels expand allowing for more consumer consumption and demand.
Brand loyalty has little meaning for many of today’s customers. Instead, social responsibility and a ‘green environment’ are increasing in importance as well as safety and lifestyle changes. According to a recent Deloitte survey, the Gen Y demographic group are more willing not to own an automobile if amenities and services are within walking distance. In addition, if this group does purchase automobiles, a majority indicated a preference for those automobiles with alternative engines – and yes; Gen Y’s are willing to pay for alternative engines.
Perhaps one of the fastest changes occurring within the automotive industry is the implementation of technology. According to AlixPartners, over the past decade, there has been a shift from traditional, hardware-centric in-vehicle infotainment and communication systems to software based connectivity solutions. The Connected Car Forum expects that by 2025 every new car will be connected in multiple ways including embedded, tethered or smartphone integration.