By 2020, as few as 10 volume original equipment manufacturers (OEMs) groups based in six major markets will account for 90% of global automotive sales according to a new report by Deloitte Touche Tohmatsu’s (DTT) Global Manufacturing Industry Group. In the report, “A new era. Accelerating toward 2020 — An automotive industry transformed,” Deloitte member firm senior automotive leaders foresee a new global balance that will give rise to more competitors headquartered in emerging manufacturing hubs, shifting away from the mix of 15 major players today in four markets.
“A new competitive landscape is unfolding,” says Hans Roehm, global managing partner of DTT’s Global Manufacturing Industry Group. “The global economic conditions and market dynamics will lead to some deep structural changes in the automotive industry, setting the stage for growth. China and India will emerge as stronger players joining Western Europe, Japan, Korea, and the United States as the six centers of design and manufacturing for OEMs and their suppliers.”
John Hung, Deloitte China Manufacturing Leader, agrees that China will emerge as a leading global automotive producer, but before that, the industry will undergo a period of deep consolidation, reversing the relatively weak global market share position of Chinese OEMs today. “The Chinese government has recently planned to consolidate the top 14 local automotive players into 10 within a domestic market share in excess of 90%.”
In the report, Deloitte member firm automotive leaders offer perspectives on the major technology developments, structural changes, shifts in customer preferences, and workforce trends expected to transform the global automotive industry over the next decade. It highlights three technology trends that offer important opportunities for automakers: powertrain technology and the move to electric; the shift from mechanics to electronics; and low tech mobility.
“The race for electric vehicles (EVs) is heating up,” observes Martin Hoelz, global automotive industry group leader and partner with Deloitte Germany. “By 2020, EVs and other “green” cars will represent up to a third of total global sales in developed markets and up to 20 percent in urban areas of emerging markets.”
“But, government policies and regulations, driven by different factors such as stricter carbon emission standards to independence from foreign energy, will heavily influence the marketability of EVs and other technology innovations,” adds Hoelz.
According to the report, “Green” will be one of seven customer themes for the automotive industry in 2020, including:
1. Conscious consumption – a growing emphasis on value
2. Moving up – the emergence of new wealth in emerging markets
3. Shades of green – cost vs. consciousness
4. Safety first – consumers to be attentive to innovations
5. Staying connected - the need to be networked
6. The web – internet as a sales channel
7. Changing preferences - older, more urban consumers
"Dramatic changes in customer buying preferences will play out differently according to the dichotomy that will develop between mature and emerging markets,” says Robert Hill, principal with Deloitte Consulting LLP, United States. “Customers will fragment into distinctly different segments by 2020.”
Attitudes altered by the recession will continue to evolve in mature markets, while a shift from economy cars to luxury segments will occur in emerging markets. Advancements in alternative technologies will also transform consumer mobility altogether.
“Automotive companies will struggle to make required investments and develop the capabilities to capture these trends,” adds Hill. “It will be about defining a strategy that profitably and flexibly meets regional customer requirements.”
For China, Hung says “Green” will be an important theme for the development of automotive industry. “The government has shown its support towards eco-friendly new energy cars in a series of new measures intended to boost the auto market demand. Earlier, it has announced a purchasing tax cut to 5% for cars with engines below 1.6 liters and subsidies for rural residents buying greener vehicles. It also provides research subsidies for automakers to improve their electric technology.”
The report says the new era of the automotive industry will also be characterised by different workforce dynamics.
“The automotive industry will be a vibrant and high-skilled workplace,” says Dick Kleinert, Human Capital leader with Deloitte Consulting LLP, United States. “Not too long ago, people had this image of a dark, dirty and dangerous environment, but now the industry is known for high skills, advanced technologies, and dynamic change.”
As technologies evolve, OEMs will endeavor to distinguish and develop talent pools with traditional and non-traditional workers by technology and region. Workforce requirements for each region will be determined by function and scale.
“The war for talent will intensify leading up to 2020,” explains Kleinert. “And, companies that embrace new and comprehensive approaches to workforce flexibility will succeed.”