5 minute read 16 Mar 2021
Tilt shift image of traffic on a highway

How mobility companies prepare for uncertainty despite renewed demand

By Randall Miller

EY Global Advanced Manufacturing & Mobility Leader

Passionate about manufacturing, mobility and disruption. Champion for women and diversity & inclusiveness in the Advanced Manufacturing & Mobility industries.

5 minute read 16 Mar 2021

Agile decision-making, resiliency in operations, accelerated digitalization and leaner cost structures helped the sector manage challenges. 

In brief
  • Automotive companies are seeing a sharp recovery in consumer demand, but operational and manufacturing disruptions continue to affect performance.
  • There continues to be a strong focus on competitive positioning, with companies trying to remain viable in a recovering market.
  • Several companies are reporting performance improvement due to lean cost structures and rationalizing product portfolios toward high-margin segments.

The mobility sector is witnessing recovery in consumer demand across subsectors while the pandemic acted as a catalyst for the shift in consumption pattern toward e-commerce and sustainability. So far, agility in decision-making, resiliency in operations, accelerated digitalization and leaner cost structures have been crucial in managing the challenges laid out by the pandemic. However, the medium- to long-term impact of COVID-19 on the geopolitical environment is just beginning to crystallize. The dynamic policy environment globally is increasing volatility while recovery across sectors could further exacerbate shortages of raw materials. Mobility companies need to prepare for rising uncertainty as the industry has started witnessing newer challenges and associated political risks.

The Mobility Quarterly analyzes the top 10 themes discussed by 28 mobility peers during public earnings calls with analysts in February and March 2021. This update tracks the movement of these themes from quarter to quarter to provide a perspective on shifts in the sector landscape.

The top three themes for this quarter are:

  1. Developments in end markets is the top theme during this quarter. Automotive peers are witnessing a steep recovery in consumer demand across subsectors. Operational and manufacturing disruptions continue to reflect on performance and could further exacerbate the situation in 2021. Rising e-commerce demand continues to drive growth for logistics and cargo revenues for airlines sector.
  2. Competitive positioning continues to be the second theme. OEMs have set up a strong product pipeline with focus on sustainability and connected vehicles. Major airlines have started diversifying their international network, while logistics peers continue to add new facilities and aircraft to their overall fleet.
  3. Business reorganization emerged as the third theme. Several peers are reporting performance improvement on the back of lean cost structure and rationalization of product portfolio toward high-margin segments. Airlines are aligning costs with capacity and preserving the flexibility to respond to customer demand, while logistics peers are undertaking cost reduction programs, and divesting low-return business divisions.

We have delved down deeper to analyze the top themes for each of the mobility subsectors.

The top five themes observed during the quarter are discussed in detail for each subsector:

  • Automotive (passenger vehicles, commercial vehicles, component suppliers and automotive retail)

    1. Developments in end markets
    • The automotive industry is witnessing acceleration in electrified powertrain due to stricter emission regulations, policy support and shift in customer attitudes toward sustainability.
    • Component suppliers are witnessing increased demand for advanced safety, connected solution and powertrain solutions from the new emerging electric vehicle (EV) original equipment manufacturers (OEMs).
    • The commercial vehicle (CV) industry is witnessing market recovery across end industries. High demand from the logistics sector is driving demand for on-road CVs, while growth in construction activity is driving the off-road CV segment.
    2. Competitive positioning
    • Automakers continue with investment plans covering electrified, connected and autonomous vehicles to maintain competitiveness in a recovering market.
    • Optimum product price and customer mix remains a top priority; several OEMs and suppliers are increasing product prices to offset inflation, currency pressures, commodity prices and increased environmental compliance costs.
    • Suppliers are launching smart vehicle architectures and delivering speed to market through technological advancements with commercial scalability.
    3. Sustainability initiatives 
    • Mobility peers are promoting circular economy on a global scale to reduce their carbon footprint across the product value chain.
    • Several automakers are driving modularization and leveraging existing architectures across the ICE portfolio to drive productivity.
    • Stricter emission regulations, electric vehicle policy support and shift in customer attitude toward electric mobility and sustainability are driving automakers’ long-term vision and strategy around vehicle electrification and carbon-neutrality goals for manufacturing.
    4. Business reorganization or restructuring
    • Several peers are reporting performance improvement on the back of lean cost structure and rationalization of product portfolio toward high-margin segments.
    • Automotive peers are pursuing mergers and acquisitions for building digital capabilities and resilient revenue streams from connected, electric and shared mobility services.
    5. Product design and innovation
    • Passenger vehicle (PV) peers are accelerating the transition to electrification not only by launching new models and setting electrification targets but also by introducing new branding solutions.
    • The CV industry is experiencing a shift toward electric and hydrogen-fueled vehicles with a continued focus on decarbonization, expanding alternative fuel offering on the back of government support and R&D investments.
    • Fleet management solutions are widely adopted by OEMs, suppliers and dealer groups. Several companies are deploying digital platforms and expanding connected solutions to enable end-to-end fleet management solutions.
  • Transportation (airlines, logistics and shipping)

    1. Developments in end markets
    • Logistics and shipping companies are witnessing an unprecedented increase in e-commerce activity across sectors and strengthening supply chain solutions to support the pharma and health care sectors.
    • For the airlines industry, corporate travel remained subdued while leisure travel showed recovery; cargo segments continue to witness strong growth on the back of vaccine delivery and rising e-commerce demand.
    2. Business reorganization or restructuring
    • Logistics peers are refining their business models to cater to the spike in e-commerce demand and optimizing network utilization and portfolio mix with a higher share of business-to-business (B2B) customers.
    • Airlines are simplifying fleets by retiring less-efficient aircraft and aiming to achieve a higher-gauge fleet with lower seat cost.
    3. Competitive positioning
    • Airlines are setting up targets to drive higher system utilization and align costs with capacity while preserving the flexibility to respond to customer demand.
    • Logistics peers are undertaking cost reduction programs, and some have divested low-return business divisions to improve margins.
    4. Financial or capital strategy
    • Logistics and shipping peers are leveraging strong cash flows for reducing debt while resuming dividend payouts and share buybacks.
    • Airlines are reducing non-aircraft capital expenditure and managing aircraft expenses; payroll support funds are critical in saving jobs during unprecedented demand decline.
    5. Product design and innovation
    • Logistics companies are tracking goods in real time and digitalizing back-office operations to improve productivity, as well as investing in autonomous robots to improve warehouse efficiency.
    • Select airline peers are adding digital capabilities and other services to enhance customer experience.

Summary

The mobility sector is witnessing recovery in consumer demand across subsectors, with the pandemic acting as a catalyst for the shift toward e-commerce and sustainability. But the medium- to long-term impact of COVID-19 on the geopolitical environment is just beginning to form. Mobility companies will need to prepare for rising uncertainty as the industry begins seeing newer challenges and associated political risks.

About this article

By Randall Miller

EY Global Advanced Manufacturing & Mobility Leader

Passionate about manufacturing, mobility and disruption. Champion for women and diversity & inclusiveness in the Advanced Manufacturing & Mobility industries.