Automotive Industry: Dissecting Performance, Capabilities, Goals, and Strategies for Success

How is the Automotive Industry Performing?

In the throes of unprecedented disruption, the automotive sector has demonstrated remarkable resiliency. However, traditional aspects of the business—facilities, products, and services—are under intense profit pressure. New vehicle sales margins continue to shrink due to overcapacity and price transparency, while parts and service struggle to maintain their contribution. Despite these challenges, the industry retains significant upside potential, as technology-driven innovation compels a shift towards new mobility models.

What are the Capabilities Required for Success?

The successful automotive players of the future will require a vast array of capabilities. These include agile production systems that can flex like a tech startup in the face of fluctuating demand, allowing for customization while minimizing waste. This agility is also needed in supply chains, which must adapt to the changing ingredients of vehicle production, namely batteries and software. Another critical capability is data intelligence—we're in an era where data silos can be a source of strategic disadvantage.

What Goals and Strategies Can Drive Success?

In the race to inventory-lean, digitally charged, customer-centric business models, the most critical goals for automotive industry participants revolve around differentiation, digitization, and disintermediation. Strategies should be centered on positioning brands and offerings to cut through the clutter and generate customer preference. Furthermore, driving higher digital engagement and leveraging network effects towards creating self-reinforcing customer relationships should also be in focus. Lastly, reconsidering physical distribution as a source of friction in the customer journey can unveil new opportunities.