“Anyone who looks at the auto industry is looking at an industry that has gone through a chain of crises in recent years and is still going through it,” says Fabian Brandt (46), head of the global automotive business at the management consultancy Oliver Wyman. Shock news followed shock news.
Fabian Brandt
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Photo: Oliver Wyman
is a Partner at Oliver Wyman and leads the global Automotive and Manufacturing business in strategy consulting. The graduate business economist with an additional degree from Harvard has worked for Oliver Wyman for over 20 years and managed the Munich office, among other things.
In 2018, after about two decades of boom, business broke for the first time China Yes, in 2019 things went down even more in the world’s largest car market. In 2020, the corona pandemic scrambled all plans; global sales fell by 12 million to 64 million vehicles. In 2021, the semiconductor crisis massively disrupted the supply chains and production. Thanks to China’s comeback, the industry’s sales increased again – but the sales volume shrank again.
And 2022? The consequences of the chip crisis are by no means over, Corona can still paralyze entire factories in the short term, for example Tesla’s gigafactory in Shanghai. In addition, the industry is under the impression of the Ukraine war the assembly lines of the largest car factories across Europe came to a standstill has brought. Industry experts assume that the sales volume will fall by 1.4 million vehicles this year and by as much as 1.6 million in the coming year.
“The effects of the war hit European manufacturers above all,” says consultant Brandt. He is relatively confident that the current difficulties can be solved. “The question is always how crisis-proof the individual countries are and how much resilience you want to afford.” Some manufacturers, on the other hand, are expected to have adjustment problems for months – with consequences for the market.
Who are the largest car manufacturers in the world?
Measured by the number of units sold Toyota the world’s largest automaker in 2021 Volkswagen. As in the previous year, the Japanese were able to trump the Wolfsburg-based manufacturer after it had held the top position since 2015.
However, if you compare the sales of the groups, a different picture emerges: Volkswagen is ahead of Toyota here – provided the Japanese forecast is correct. Overall, the total turnover of the top corporations grew by almost 12 percent in the past year compared to 2020, but was still below the pre-crisis level of 2019, according to the management consultancy EY in a recent study.
This second ranking should be particularly exciting for investors. “I believe that the number of cars sold will become less and less important in the next few years,” expects car expert Brandt from Oliver Wyman. In the times of crisis, the car manufacturers noticed that they could make more money despite declining sales. “This is usually achieved by switching to higher-quality models and equipment variants.” For example, Volkswagen had the scarce chips within the group primarily to the highly profitable subsidiaries Porsche and Audi delivered – at the expense of business in China, for example, where the profits have to be shared with the joint venture partners.
In the past, manufacturers would also have built cars with which they hardly earned any money, the number of units sold was synonymous with size, according to the consultant. “But I think the market will change in a revolutionary way: from the push model to the pull model.”
Instead of forcefully pushing a large number of cars onto the market, often combined with discount campaigns and considerable discounts, the focus is now more on high capacity utilization in the factories, based on demand. Manufacturers have already significantly reduced the range of models. “This will make the industry much more efficient,” says Brandt. And she can push through higher prices. “It could be more expensive for customers.”
This has already paid off in terms of profits. “Despite lower sales, everyone earned more last year,” says Brandt, summing up the year 2021. Margins were at record levels. According to the EY study the operating profit of the 16 largest car manufacturers worldwide rose to a total of around 134 billion euros.
For all companies, however, the size of the portfolio remains important, says Brandt. Because “without size, the manufacturers cannot handle the huge investments that the technological advancement of the automotive industry requires”. A merger like Stellantis just be consistent. Also the splitting of Daimler There is great potential in Daimler LKW and Mercedes-Benz, since both can now develop more freely.
Five criteria for success
In Brandt’s view, manufacturers who want to be successful must meet several criteria. The most important thing to survive in the market is a convincing electrical strategy. According to the industry expert, the massive increase in fuel prices as a result of the war is likely to further accelerate demand for electric vehicles. Range, performance and value are the basis for long-term success. “In ten years, volume vehicles will no longer be differentiated by electric vehicles. Then the interior and design will be even more important than before,” predicts Brandt. Tesla would have implemented this well, but ford and some Europeans would have caught up. Brandt currently sees the greatest need to work on an electric strategy at Toyota.
“The next big step is a software operating system for cars”
Fabian Brandt
Second important issue is the software. “The next big step is an operating system for cars,” says Brandt. So far, the various programs from different developers ran side by side as a hodgepodge. Only Tesla currently has a real operating system in which central functions run via one and the same program. The car manufacturers compete in the development with tech giants like Google, Amazon or Apple. “I could imagine that there will later be several relevant operating systems for vehicles – similar to cell phones with IOS and Android.”
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Third criterion for future success: Presence in the growth markets. China, in particular, as the largest single market, should continue to offer great potential, according to Brandt. After the weakness in recent years, growth would have picked up again. “The need for individual mobility is unbroken.” However, the more things move in the direction of autonomous driving, the more difficult it is to comply with local regulations. Experts assume that it will then become more difficult to be successful in China.
In addition, the fourth criterion is a classic: the corporations must continue to optimize their costs and production. “The overall product complexity is higher than it should be,” the expert judges. In his opinion, it would be better if the manufacturers worked with modular kits and offered different design surfaces.
And fifth: Manufacturers should create customer experiences for their brands. According to Brandt, this applies in particular to premium brands. “I imagine it similar to Apple.” The US group would offer a consistent customer experience. The consultant sees opportunities in direct sales, for example. Car manufacturers would have the opportunity to control the life cycle of the car over the entire time. Local dealers would then act as intermediaries, and the purchase contract would not be concluded with them, but with the manufacturer. “The fact that as a customer I then drive from seller to seller to get the best offers, these days could possibly be over.”
But before that happens, the priority for the corporations should initially be to cushion the effects of the current crises and disrupted supply chains. 2022 is another year of challenges, that’s for sure.
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