5 !{ArticleDetails-ReadTime} 16 Dec 2019
Bay bridge of san francisco

How sustainability and long-term value are pertinent for mobility companies

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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.

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5 !{ArticleDetails-ReadTime} 16 Dec 2019

Mobility leaders discuss the top focus areas affecting the sector.

The mobility sector is constantly evolving. Innovation cycles are shortening, new technologies are pushing old ones into obsolescence and customer experience is driving the accelerating pace of change. Therefore, to stay relevant in this transformative era, mobility companies need to balance the increasing business complexity while improving the value they generate. 

The 3Q19 Mobility Quarterly analyzes the most important issues influencing the industry covering passenger vehicle (PV), commercial vehicle (CV), automotive suppliers, logistics and airlines sectors. 

The key discussion points are illustrated below:

1. Geographic developments

In the US, favorable consumer economic conditions are driving growth with strong retail and e-commerce sales. Latin America has also started seeing healthier trends driven by growth in vehicles sales. However, on the other side of the globe, most mobility peers are witnessing a sales growth decline, particularly in China. When it comes to Europe, the performance remains weak, and automotive companies are forecasting 2020 production to decline year over year. On a more positive note, product categories related to safety, new technologies and electrification are witnessing an uptick.

2. Operating costs

The mobility sector is facing headwinds from major currencies including the euro, British pound and Japanese yen as they continue to weaken against the US dollar. There is also the depreciation of the Chinese yuan, which is offsetting improvements in profits and sales growth in the Chinese operations of global companies. On the upside, companies are still investing in launches and R&D, and automotive companies are restructuring wages with new labor agreements, offering voluntary buyouts to increase manufacturing flexibility. 

3. Restructuring initiatives

A major change in the sector is the restructuring of initiatives that firms have taken seriously. Companies have begun to launch business-wide efficiency programs and are examining each component of their cost structures from a strategic point of view. PV peers and suppliers have also begun to reduce headcount as they optimize their manufacturing capacity and realign their corporate structures. And this trend seems to show no signs of slowing down.  

4. Evolution of mobility

The real game changer that the industry awaits is the launch of fully electric vehicles. While CV peers continue to focus on autonomy, semi-autonomy and remote operations, PV peers are working on the joint development of autonomous vehicles (AV) with other automakers and technology companies. And major logistics companies are leveraging alternate delivery vehicles (ADVs) built on autonomous, electric or a combination of both technologies. It is exciting to note that some of these first- and last-mile solutions are being applied successfully in the real world.

5. Organic growth

The entire sector is focused on developing products, service strategy and in constructing new and innovative methods to help their businesses. Mobility companies are strengthening their existing product but at the same time, are also developing digitally allied platforms. Logistics peers are also heading in the same direction by expanding their current portfolios with e-commerce deliveries so that they can cater to a broader consumer and geographic base. 

6. Working capital and cash flow management

Contrary to what was seen in previous quarters, mobility companies, in general, are witnessing improved cash flows after making discipline in working capital a top priority. Positive trends such as flexible production and agile supply chains are helping companies right size inventories at the micro level. And shorter lead times are allowing dealers to maintain less inventory and freeing up working capital. The only negative drift is that a few of the automotive peers reported leaner-than-warranted inventory due to reasons such as strikes.

7. Product evolution

Mobility, like all industries, is looking for new ways to evolve its products to meet customer demands. Logistics peers are the flag-bearers here, stretching their capabilities to make their offerings speedier and more convenient for customers. Owing to synchronization of automation with the delivery, warehousing, tracking and sorting processes there is an increasing interest from stakeholders to amplify their investments and speed to market of such technologies.

8. Inorganic growth (M&A, JVs and partnerships)

There are great efforts being made to increase market share, innovate products and services, and advance technical capabilities in the sector. While PV peers target collaborations and partnerships to develop their capabilities, logistics companies are forming new strategic partnerships with retailers for exclusive shipping to customers. And national airline peers are partnering with regional ones to expand their geographic footprint.

9. Manufacturing and supply chain management

There is a focused effort on the part of airline and logistics companies to modernize aircraft fleets and deliver networks in a bid to optimize their cost structures and enhance their competitiveness. Automotive companies are also following suit as they modernize their manufacturing facilities. 

10. Financing, pricing and affordability

Global trade tensions have affected the mobility industry just as it has affected every other industry. Logistics peers are reducing prices to increase affordability and maintain the freight volumes while several PV companies have prioritized price realization to counterbalance increases in manufacturing costs. 

  • Scope, limitations and methodology

    This analysis reviews the top themes discussed by leaders of 23 automotive and transportation companies (including passenger vehicle, commercial vehicle and automotive suppliers) during public earnings calls with analysts. Our report tracks the movement of these themes from quarter to quarter to provide a perspective on shifts in the sector landscape.

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The mobility sector is facing real challenges from weakening currencies, global trade tensions leading to forced price reductions, sales decline and production dip. However, the industry is also at the precipice of a transformational change with the emergence of electric vehicles, budding digital platforms, delivery automation, restructuring of strategies, and new partnerships. Focused efforts to increase market share, innovate products and services, and advance technical capabilities are helping the cause.

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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.

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