Every industry in the automotive sector will be facing strong global headwinds for 2020. Manufacturers must find unit growth somewhere in the world while dealing with the challenge of an environmentally sound vehicle.
Seven Challenges Confronting the Automotive Industry for 2020
The automotive market in China is the largest in the world, calculated by unit number. Automotive builders must choose; does the compromise of doing business in China outweigh the yield of giving up this enormous market. Competition is fierce; however, the China market will be distinctly different ten years from now.
- Extreme market fragmentation
- Intense governmental pressure on pollution
- Expansion of a used car market.
Challenge: The automotive market must overcome crippling tariffs and punishing pollution regulations.
Alternative Fuel Vehicles
The alternative fuel vehicle debate will be a transformative event or take decades to achieve. There is a tremendous volume of news coming from every corner of the globe, dealing with electric cars and trucks, alternative fuels, and hybrid technology. Scientists, engineers, and every automotive brand on the planet are doing their best to improve on current alternative based fuel technology. Vehicles, including biodiesel, ethanol, solar, and electric are going mainstream.
AFV cars and trucks have the potential to curtail carbon emissions drastically. Current technologies make any AFV vehicle extremely cost-prohibitive for a vast majority of individuals. However, as continuing technology advances AFV, a modern standard of production could flourish.
Challenge: No one contests the advantages of alternative fuels on greenhouse emissions. The universal challenge is the absence of broad availability of the fuel. Other common complications are extreme climates make these fuels difficult to use.
Building Brand Loyalty
Increased competition effects every business on the planet in some manner. Automotive competition is intense. The concern is the peak demand for their product may have reached its potential. The decline in automotive sales is universal, with most European and American markets down nearly 5%. Japan and European markets are major deterrents to automotive sales expansion. Japan has become an exceedingly aging society, and Europe has serious environmental concerns. Europe has implemented some of the most restrictive regulations ever seen.
Challenge: Automakers must focus their efforts on programs that build brand loyalty. However, customer retention or loyalty in the automotive industry is a solitary expression. According to IHS, only half of all US new car buyers remain steadfast to the brand they already own. These dismal statistics must change soon.
Choosing the Correct Powertrain Technology
Regulations and powertrain technology development must balance themselves. Every region in the world has implemented some form of regulation on controlling exhaust emissions. Europe has transformed the direction of the entire automotive industry with its unprecedented emission regulations. Diesel engine builders have produced extraordinary strides in recent decades to contain toxic nitrous oxide emissions. The landscape for auto builders is complex. They must discover a means to compete globally with the increasing emission regulations while growing unit production.
Challenge: Making the right powertrain technology choices which will define the future of the automotive trade. Society preferences change rapidly. Manufacturers must recognize what combinations of technology work best for the business. If manufacturers do not carry out these constructive advances, governments will.
Global automotive manufacturers are bracing for global consolidation. One of the main factors that hinder car builders is the disparate platforms from one manufacture to the next. The movement is towards a “mega platform” or modular technology. The emphasis is on a more basic architecture or common platform. Engineering continues to deviate toward this new platform. Silicone is replacing steel, and technology advances are outpacing basic automotive structures. Recent statistics bear out this unification trend. In 2005 there were an estimated 277 individual platforms from the leading producers. It is believed by 2020, that figure will drop to 195. The modular concept has shortcomings such as greater upfront costs and individual component failure procedures. However, the gains far overshadow the drawbacks.
Challenge: Carry out the plan. Automotive manufacturers recognize the breadth of this project is enormous. Several challenges exist. Fault and recall is the most significant. Third-party suppliers need to be on board for this to work. Without a means to get the exact part when required, there is no way to keep a car or truck on the road.
The Automotive Supply Chain
Supply chains for automotive manufacturers are the most complex process in the world. Change is developing rapidly to this old boy network, and some are not prepared. Disruptive trends influence the chain, from build to delivery. Cost is invariably a consideration for any business. In the automotive business, if costs are not under control profit evaporates immediately. Global expansion continues to pressure the chain. The process itself, consumer demand, and basic components are being constrained.
Challenge: The automotive supply chain is decades old. An immediate objective is to bring the supply chain to the 21st century and eliminate failures. A delay of one hour in the chain can mean a production line being shut down. Another significant facet supply chains are the routing of individual parts. Again, an improvement in just one operation can mean an extra few dollars when the vehicle sells.
Reconnecting With Shoppers
Global automotive sales are not exempt to the effects of online shopping. No other trend has as much impact on the delivery of cars, trucks, and parts to end-users than online sales. The world and especially Americans have a love relationship with cars. However, they detest the car dealership. The car business has been desperately struggling to change this dynamic. The hatred goes back decades and is unlikely to diminish. The internet and Amazon have forever altered the landscape of car sales and parts. Consumers can choose, financing, and having their vehicles brought to the front door. Do we see the end of the car dealership?
Challenge: Car and truck builders must reconnect with shoppers. The disgust for the dealership was formed over decades of suspicion. The challenge for car builders is to identify an approach that will coincide with present technologies rather than challenge. Online shopping is here to stay and is spreading fast. Consumers still want to touch and feel a product. Car dealerships should study the writing on the wall.