Finding a new balance in the automotive industry Driving responsible innovation and transformation for the next decade Executive Summary The automotive sector’s already dizzying pace of change is accelerating. This report gives Capgemini’s perspective on the most important changes that can be expected between now and 2030, and the adaptations that automotive companies will have to make to ensure continued success. 2 Finding a new balance in the automotive industry Following eras of industrialization these requirements: Subscriptions (1920s to 1970s), globalization (late and agency sales will become more 1970s to 2015), and digitalization, a common, for example. new era of change is emerging, driven • Intelligent Industry: The next by three megatrends that automotive generation of digital engineering companies are recognizing as critical to and manufacturing will build on their future: technologies such as artificial intelligence (AI), cloud, and the • Sustainability: Societal and internet of things (IoT) to create a regulatory pressure means that data- and software-driven industry. companies need to adopt an end-to- Intelligent products and systems, end approach to sustainability that operations, and services will improve addresses not just the environmental uptime, reduce costs, and boost impact of the vehicle, but that of efficiency, and hence increase value every aspect of their operations and for companies, their customers, those of their partners. To tackle this and their partners. Software will issue adequately, Original Equipment play a crucial role in the automotive Manufacturers (OEMs) will need industry and influence it radically. to change their culture. They will also have to rethink the way they Increasingly, too, automotive companies collaborate with their suppliers and need to operate and establish a partners to realize the concept of a clear position within a wider mobility circular economy. ecosystem that includes providers of • Customer centricity: Companies public transportation as well as enablers need to cater to changing of mobility such as infrastructure and customer preferences, such as utility providers, and local and national younger individuals’ requirement governments. for personalization and online transactions. Connected services will play an increasingly important role as software proliferates inside and around vehicles, not least to support personalization. Sales models will need to accommodate 3 Success within the mobility ecosystem culture that facilitates continuous Our research indicates that the depends on three main factors: change, and aligning IT ever more automotive industry is moving towards closely with the business. Companies a new “Responsibility Era” where • Technology & software will also need to develop resilience, companies must shoulder responsibility competency: To succeed within the reacting to disruptions in a controlled for a whole range of environmental mobility ecosystem, companies will and efficient way. and social objectives. Even when new have to focus at least as much on industry trends and preoccupations software as on hardware. Automotive Building a position in the mobility come along, these responsibilities will companies will increasingly resemble ecosystem will imply adoption of be here to stay, affecting every player in technology companies such as new business models, for example the mobility ecosystem, every stage of Google, Microsoft, or Amazon. Topics around mobility services and digital the automotive value chain, and every that are likely to need high levels of mobility solutions. Any new model aspect of customer experience. competency include cloud, data and must, however, be aligned with the AI, and cybersecurity. requirements of each company’s Automotive companies must • People & organization: This new customer base, and with the demonstrate that they understand world will require new skills and company’s own core competencies and accept their new responsibilities competencies, both hard and soft, and profitability objectives. Success in while balancing them against existing new styles of leadership, and new, the mobility ecosystem also depends business priorities. By doing this, they more collaborative ways of working on complementing vehicles with the can both build a credible position within that increase agility. right range of services in the areas that the developing mobility ecosystem and • Operational excellence: A customers value most: connectivity, safeguard their future profitability. disciplined approach to the flexibility, and convenience. management of costs and efficiency will be vital and can be achieved by, for example, using analytics and AI to improve processes, developing a TRANSFORMATION FRAMEWORK FOR THE NEXT AUTOMOTIVE ERA Customer centricity Technological Software Competency Mobility People Organization Ecosystem Operational Excellence Success Factors Success Sustainability Intelligent Industry 4 Finding a new balance in the automotive industry Contents 06 INTRODUCTION 0 9 THREE MEGATRENDS THAT ARE SHAPING THE NEXT AUTOMOTIVE ERA 18 THE MOBILITY ECOSYSTEM OF THE FUTURE AND ITS SUCCESS FACTORS 28 PREPARING FOR THE RESPONSIBILITY ERA 5 Introduction In recent Capgemini studies, such as our report on the Agency Sales Model1 and our Connected Vehicle Trend Radar 2,2 we analyzed specific topics within the automotive sector. But what does the big picture look like? 1 https://www.capgemini.com/wp-content/uploads/2020/11/Automotive-Agency-Sales-Model_POV_Capgemini-Invent.pdf 2 https://www.capgemini.com/de-de/wp-content/uploads/sites/5/2020/09/ConnectedVehicleTrendRadar_2_Report.pdf 6 Finding a new balance in the automotive industry How will the automotive industry as a The industry’s recent whole evolve in the short and medium term? Will automotive players offer history and current status similar products and services to today’s, Introduction or something completely different? Will The automotive industry has been in they operate their businesses in the a state of constant change since the same way as they have done in the start of the “Industrialization Era” that past decade? began in the 1920s and lasted until the 1970s. Since then, manufacturing This new study tackles these questions, and production processes have been looking into the future of automotive enormously improved in terms of their and analyzing the whole field of mobility efficiency and effectiveness through – including not just vehicles but also automation of operations, reductions mobility-related services – from the in the length of vehicle cycles, and perspective of the automotive industry increased specialization. Within this and from different angles of the value era, the industry had a clear product chain. Based on this analysis, we share focus and specialized its operations our industry predictions for the period with regard to the purchasing, logistics, up to 2030. engineering, and manufacturing phases of the product. To provide context for these predictions, we first discuss industry The “Globalization Era,” from megatrends of both today and approximately the late 1970s until tomorrow, describing their impact, 2015, saw the end of geographic challenges, and meaning for industry boundaries that previously constrained players. Focusing on the effect of sourcing, logistics, manufacturing, and technology on key megatrends, we will sales. By opening up world markets not only assess the big picture from and establishing international trade the perspective of automotive players, alliances, products have been made but also consider the implications available to customers all over the for the most important component world and OEMs have benefited from of the automotive ecosystem: the local advantages through access to new customer. Customers’ dramatically talent, materials, and demand. This has changed behavior is the ultimate driving given OEMs the chance to develop from force for the transformation of the national or international producers entire industry. focusing on specific markets into global or multinational players. 7 The “Digitalization Era,” which began leading market is pulling the automotive technology company – and probably around 2014 and continues today, is industry out of the crisis with a V-shaped rightly so, given the need for customer characterized by disruptive innovations pattern of development. centricity and the increasing importance in the automotive market. New of software within their business. technologies have affected not only the All transformation stages, from the internal operating model of suppliers Industrialization Era onwards, have As if these factors did not put enough and OEMs, but also customers’ use brought significant new opportunities pressure on automotive players, of products. A significant proportion with them, always putting efficiency they also need to deal with clients’ of the portfolio has changed as the and adaptability at the forefront. unprecedented expectations about Digitalization Era has given birth to Nevertheless, each evolutionary stage is sustainability, convenience, affordability, digital products and services. From this also associated with challenges. Digital and personal experience among others. era onwards, OEMs and suppliers can no transformation is not an incremental Customers do not perceive vehicles and/ longer focus on engine-based vehicles innovation with minor changes, but or mobility as standalone products, but have widened and shifted their a revolutionary one – at least when it but as an