“The automotive industry is increasingly complex – traditional players, struggling with profitability and de-carbonisation, face unprecedented pressures from new entrants”
What are the key challenges facing the automotive industry?
Decarbonisation has been the key issue facing the industry for over ten years. On top of this COVID’s shock waves are deeper than typical economic cycles, and will have a significant impact on future value chains, technology roadmaps and revenues. These factors pose a set of existential questions for traditional players as they rebalance their product portfolios, while facing challenges from more nimble new entrants.
How do OEMs and Suppliers position themselves to ride the waves of change?
Players must actively examine their product and technology portfolios and prepare strategies to pivot away from ICE; this will require a radical rebalancing of asset bases. Even before COVID OEMs and suppliers were more indebted than at the height of the post-Lehman’s credit crunch; leaving limited cash for product and technology investments. The industry’s challenge is to accelerate the move to zero emissions, with limited resources, in the face of uncertain global economics and relentless competition.
What are the key open questions for the automotive industry?
The industry has answered many of the technical questions around electrification – how do we develop and build an EV? – but still struggles with many commercial issues – how do we build an EV that customers want, can afford and that we can sell profitably? Cost reduction is key, but the commodities that drive battery and motor costs face global market fluctuations, and are in demand across multiple industries. Traditional players also face new entrants, who bring different value chain and manufacturing approaches and often have lower capital and operating costs. Perhaps the most significant “unknown unknown” will be the impact that new ownership models and different forms of mobility as a service offerings will have on the global market and revenue streams.
No market or region is exempt from these challenges, so now is a perfect time for SE to set up a dedicated team to support the UK industry in its transformation to a zero emissions future.