Press release

Global automotive sector faces complex challenges ahead, despite calmer economic outlook, says survey revealing priorities of C-Suite

Geneva, 5 March 2014

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Top international automotive executives are seeking to ride the upturn and pull ahead by focusing on differentiation, innovation and partnerships, according to a new report from EY’s Global Automotive Center, Changing Lanes 2014-15: the automotive C-Suite’s agenda, released today at the Geneva Motor Show. 

  • Emerging markets are a key source of volatility, but penetrating and succeeding in high growth markets identified as a primary source of competitive advantage
  • The C-Suite is challenged to effectively redeploy capital, considering that the top 10 global carmakers alone were sitting on more than US$221 billion of cash at the end of 2013
  • Big focus this year is expected on accessing and retaining talent to drive innovation
  • Urgent need identified for carmakers to reinvent the retail experience to attract and retain customers, through enhanced vehicle connectivity

“Pressures in the global economy may be easing,” says Mike Hanley, EY’s Global Automotive Leader, “but automotive companies still face complex challenges and must implement a range of strategic initiatives geared to enable agile, efficient and innovative operations.”

Based on a survey of 100 global C-Suite automotive executives and in-depth industry research, the report identifies five key themes that will shape the industry over the next 18 months:

New sources of volatility: Market volatility has escalated significantly in the past 12 months. The vast majority of carmakers surveyed (90%) say emerging markets are key sources of volatility, while 68% of suppliers identified volatility in demand from both developed and emerging markets. Eighty-four percent of executives expect negative impact from fluctuations in currency rates and commodity prices, with 56% believing a slowdown in emerging market demand will have a negative impact on the industry. Automotive companies must enhance operational capabilities to enable enterprise-wide scenario planning, agile decision-making and flexible manufacturing processes.

Getting closer to customers: Sixty-seven percent of carmakers and dealers selected connectivity and infotainment as a key value proposition driver, and 74% of suppliers identified ownership of innovation and platform consolidation. With enhanced vehicle connectivity, automakers must provide customers adequate assurance on data privacy to drive acceptance of the features. With potential buyers spending a significant amount of time online before making a purchase decision (almost 5.3 months on average in the US) and a reduction in the number of dealer visits before purchase, there is an urgent need for carmakers to reinvent the retail experience to attract and retain customers.

Multidimensional competition: Seventy-seven percent of executives surveyed said penetrating and succeeding in high-growth markets is a primary source of competitive advantage. Carmakers are also adding new revenue streams based on connectivity, mobility and aftersales customer care to stay competitive. While collaboration has been trending since 2013, the 2014-15 survey shows leaders are intensely focused on partnerships to derive greater value from technology sharing and increase the speed of innovation to market.

Operational efficiency: While just over 50% of carmakers identified a range of IT and data-oriented processes as being critical to drive profits, 80% said customer analytics is even more critical. With more than one trillion pieces of traceable data generated each year by carmakers for regulatory and warranty/recall compliance, it’s clear that greater data analytics would provide extensive benefits and solve business problems.

Resource management: Accessing and retaining talent remains a core concern for the industry, with more focus on fostering the talent to drive innovation. More than 65% of executives identify talent for innovation and talent for technical functions as critical. The majority of carmakers also said supply chain security and visibility in emerging markets is a key business continuity issue. The C-Suite is also challenged to effectively redeploy capital, considering that the top 10 global carmakers alone were sitting on more than US$221 billion of cash at the end of 2013.

Hanley adds: “In 2013, we saw automotive executives prioritizing operational and financial efficiency, both in their own organizations and across their supply chains. In today’s volatile global market, margin improvement remains high on the agenda for all companies, but automotive executives are also focused on embedding the flexibility they need to react to the unexpected – whether in currencies, resource availability, competition or emerging market economic conditions.”


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