alling vehicle sales, with a drop of up to 18 percent in August 2024 alone is just one sign of the growing urgency for change facing OEMs in Europe¹.
Rising costs, shrinking margins, and the transition to electric vehicles (EVs) are significant challenges that also require immediate attention. And increasingly, these economic factors are deeply tied to the responsibilities of the Chief Technology Officer (CTO).
Download the full Insight now!
It is the first article from our series „R&D Efficiency“. Next publications will release insights and experiences from seasoned professinals sharing their view on success factors, possible shortcuts and mistakes to avoid.
024 was tough, 2025 remains tough. There is news from Berylls by AlixPartners. Supplier experts Alexander Timmer and Jürgen Simon have taken a look back and ahead at the industry and in particular at the top 25 global players. Bosch and ZF are not included in the overview because the companies do not publish quarterly figures.
As anticipated in our analysis last year, 2024 began with a noticeable headwind for suppliers. The quarterly figures for Q1 to Q3 2024 confirmed the increasing challenges for the automotive industry.
And there is no short-term improvement in sight. Our experts forecast that 2025 will be as critical for suppliers as the pandemic crisis, with an increasing risk of insolvency, especially for small and medium-sized companies.
However, a look at the attached charts also shows that OEMs are also suffering from declining margins, despite a slight increase in revenue. They fell from 8.9 percent in 2023 to just 7.2 percent in 2024 – figures that suppliers are nowhere near. Their average margin in 2023 was 5.9 percent, falling to just 5.5 percent in 2024. However, many suppliers are not achieving this average, which makes it difficult or even impossible to operate profitably.
China, which remains the most important market for the automotive industry and its suppliers, is dampening business with a persistent real estate crisis and the resulting economic downturn. In future, China will not be able to maintain the high growth rates of the past and is expected to remain at an annual level of two percent, which is only slightly above the expected global growth in car sales. The threshold to stagnation therefore remains within reach here too. Above-average growth in record sales figures is a thing of the past.
The tariffs announced for 2025 on vehicles produced in China are further exacerbating the situation. At the same time, the pressure on margins in the EU for e-mobility is growing because the emission limits for new vehicles are becoming considerably stricter.
ith Audi in China and Jaguar's global rebranding, we are currently observing how established brands are reacting to weakening sales by radically breaking with their tradition.
For this reason, we looked at the risks car manufacturers are taking with such a move and analyzed how other manufacturers are dealing with their heritage and incorporating it into brand names, communication and product design. Although heritage is generally an opportunity, it can also be a burden in some situations. The decisive factor is how the public and, above all, target customers perceive this.
In a very short time, we have seen two manufacturers in the automotive market turn their backs on parts of their brand and history and redefine them in an unusually radical way.
In November 2024, Jaguar launched a widely publicized rebranding: The font was fundamentally modernized and the classic visual Jaguar logos, the leaper and the growler, were swapped for a monogram – a development that has also been observable at numerous fashion brands in recent years. Jaguar seems to want to detach itself completely from its heritage. In the media, this approach has been received very critically.
Concrete plans from Audi also envisage a break with brand tradition: The German manufacturer has developed a sub-brand specifically for the Chinese market. Although it is called AUDI, it dispenses with the traditional four rings. The products that AUDI will sell under this brand from 2025 will be developed by Chinese partner SAIC and produced locally – a radical shift in value creation. By abandoning the four rings, AUDI is attempting to preserve its brand essence of Vorsprung durch Technik. This core should not be directly associated with the vehicles developed by SAIC. At the same time, they are consciously setting aside this claim in order to be able to reposition themselves as a brand in the Chinese market. A radical step, but one which is not only met with skepticism.
These examples illustrate that the topic of heritage can certainly be a burden for car manufacturers steeped in history. In critical situations, for example when sales figures plummet, there can be good arguments for turning away from (large) parts of its history.
Both brands see their future viability at risk: both Jaguar and Audi have been fighting – globally and especially in China – against a dramatic decline in sales for years. Jaguar’s market share has disastrously collapsed from a good two percent in the early 2010s to just 0.08 percent. Audi recorded a double-digit percentage drop in sales in China last year. The radical rebranding (coupled with a new vehicle substance) is intended to stop the downward trend, or at best reverse it, and shows that both manufacturers see their history as a burden rather than an opportunity – in the case of Audi, only in China for the time being. The change in brand image is the visible expression of a manufacturer’s turnaround for every customer. The aim is to create a fresher, younger and future-proof image in order to create a positive assessment of its own innovative ability and local proximity. With the concept car presented, Audi is already demonstrating that it is about far more than just a realignment of the brand. Jaguar has also announced a completely new all-electric product orientation and market positioning, while at the same time halting current production.
Despite all the criticism, Jaguar’s chosen path may well lead to success. It has the potential to tap into new target groups with its radical approach, especially in China. Jaguar may be able to reach customers who have not yet experienced the brand and its history. The provocative design of the first study gives a glimpse of how Jaguar will position itself as an expressive, modern status symbol. However, in a market dominated by domestic BEV manufacturers, entering the market will by no means be easy. At the same time, Jaguar must reinvent itself as a global brand and identify and largely recapture its target group in all regions. This is because traditional Jaguar customers have so far been rather negative about the brand shift. Jaguar is willing to accept losing them with the realignment of the brand.
Other car manufacturers show in a variety of ways how they link their history with the future and incorporate it into important touchpoints with the customer.
Mercedes-Benz has been incorporating its history into its communication for years: This includes regularly referring to itself as the inventor of the automobile or remaking iconic models such as the Vision One-Eleven. This trend is finding its way into the product lines for the first time: The G-Class is being extended by the all-electric EQG and Mini-G to form an entire product family. The iconic vehicle design is thus being further cannibalized, although the characteristics of these new models are far removed from the competencies of the original G-Class (which are irrevocably linked to the “G” product brand). This is not a harmless balancing act between preserving the heritage and expressing the future.
At Porsche, heritage is also heavily reflected in the product portfolio. The iconic design of the 911 is purposefully cited in every other production model from the manufacturer. Every customer, regardless of which Porsche model they buy, acquires a piece of Zuffenhausen sports car history. In the form of the 911 model series, Porsche often embeds its heritage directly into the current product portfolio via limited special models or homage equipment. Although this approach has been successful for many years, it is not a universal remedy: recent sales challenges – particularly in China – show that vehicle sales are not automatically a guaranteed success. Here, the racing victories of the past play no role at all with the often very young customers.
Heritage can be an opportunity and be woven into the growth and future history of a brand to create value. However, success requires an “organic” connection in the story that is understood by the customer. A strong awareness of one’s own origins, positive experiences in dealing with them and a clear strategic direction are therefore indispensable.
Particularly beyond the automotive industry, this combination of tradition and innovation in product and communication is a tried and tested recipe. Louis Vuitton pushes its heritage as a suitcase manufacturer on the one hand – in product lines, in the names of the products or with the iconic LV pattern. At the same time, they engage trend-setting designers such as Virgil Abloh and Pharell Williams to constantly reinvent the brand. Chanel recently ventured into the design of tech wearables – yet hardly a collection goes by without a reference to the world-famous Chanel tweed costume.
However, we are not talking about fashion brands here, but about tech companies – they must stand for innovation per se. So repositioning the brand and placing a clearer focus on innovation is not necessarily wrong. However, it is advisable not to completely throw away heritage as a trump card up the sleeve of a long-standing brand, but to weave it in in a meaningful and reinterpreted way. After all, it is the long-standing history of a brand that really sets it apart from younger players in terms of credibility. To completely turn away from this would be like throwing away potential for a unique selling point in a highly competitive market.
The examples above show different areas of action in which heritage can be further incorporated:
A radical change can help a brand on the brink of collapse to regain its economic momentum. Audi’s Chinese partner SAIC has already made a name for itself as the savior of a brand that was thought to have gone down – with its subsidiary MG, SAIC has breathed new life into a former British icon and achieved mid-single-digit market shares in the growing electric vehicle segment in core markets such as Germany in just a few years. Apart from the familiar octagonal logo, the MG brand has been left with little from the past.
The final verdict on the approach to heritage will be made by the end customers. They either punish the loss of trust and misunderstandings with their purchasing behavior – or they become advocates and (new) fans of the brand.
n a significant advancement for the automotive industry, Berylls by AlixPartners proudly announces the launch of elyvate.ai, an innovative digital platform that fundamentally transforms how automotive task forces operate and deliver results.
This groundbreaking solution represents a leap forward in automotive project management, seamlessly integrating decades of specialized industry knowledge with state-of-the-art digital technologies to establish unprecedented standards of excellence in the automotive sector.
„Our vision is to make ourselves redundant,“ declares Dr. Ralf Walker, Partner und Managing Director of Berylls by AlixPartners at the outset of each product demonstration, exemplifying their unwavering dedication to maximizing efficiency and driving innovation forward. Born from the company’s rich history of successfully managing critical task forces across the globe, this platform now emerges as a comprehensive public solution, making expert-level task force management accessible to the broader automotive industry. Under the visionary leadership of distinguished industry veterans Dr. Ralf Walker and Peter Trögel, elyvate.ai tackles one of the most persistent challenges in task force management: transforming the traditionally cumbersome reporting process into a seamless, natural extension of project execution. This transformation is achieved through an extensive suite of sophisticated task management features, including intuitively synchronized list and kanban board views, a meticulously designed roles and responsibilities framework, and revolutionary one-click standardized reporting capabilities that eliminate administrative overhead.
Initial deployment has surpassed expectations, significantly reducing weekly administrative workload for organizations. This substantial time savings enables consultants to dedicate more attention to their essential responsibilities: ensuring the security of critical production components and enhancing product quality standards across automotive manufacturing operations. A particularly revolutionary aspect of elyvate.ai is its sophisticated shop floor integration capabilities, delivering real-time KPI updates and comprehensive performance analytics directly from the production environment. The platform’s advanced KPI Wizard, incorporating Berylls‘ extensive task force expertise accumulated over decades, enables teams to establish, monitor, and achieve their goals with unprecedented precision. The system’s flexible KPI updating capabilities – whether by shift, hourly intervals, or real-time monitoring – provide manufacturing operations with a level of operational visibility and control previously unattainable in the industry.
The evolution of elyvate.ai represents more than just a technological advancement; it embodies a strategic commitment to revolutionizing automotive project management for the future. The journey began with an innovative proof of concept within the Berylls Digital department, progressing through multiple iterations of refinement guided by extensive user research and real-world feedback. Through a strategic partnership with a specialized South African development firm, the company has established a dedicated team of experts focused on continuous platform enhancement and comprehensive consultant support, ensuring the solution remains at the cutting edge of industry needs.
For automotive manufacturing organizations grappling with the complexities of modern production environments, elyvate.ai delivers an unparalleled combination of industry-specialized project management capabilities and advanced shop floor integration features. The platform’s remarkable ability to optimize operational processes while upholding the highest standards of quality control establishes it as an indispensable tool in the arsenal of automotive task force management solutions, setting a new benchmark for excellence in the industry.
To explore the full range of capabilities and transformative potential of elyvate, please visit elyvate.ai
he importance of software partnerships in Automotive
The automotive industry has long been known for pushing the boundaries of engineering and design. However, the car as we have known it is now being reimagined. As a consequence, OEMs are undergoing a profound transformation, where innovation is not defined solely by engine performance and efficiencies, but becomes focused on the complex software systems that will control the cars of tomorrow.
Vehicles are now defined by their software and digital capabilities, and OEMs must prepare for the new era of the SDV, in which seamless vehicle integration with other digital devices and ecosystems becomes the norm.
Download the full insight now!
he shift from conventional engines to battery electric vehicles (BEVs) is revolutionizing the auto industry. However, until battery performance and cost improve, BEVs will continue to struggle to take over from gasoline-powered vehicles as the mainstream choice for drivers.
Widespread adoption of BEVs is essential to meet emissions reduction targets and for OEMs and suppliers to see a return on their huge investments in the engine technology. Achieving it hinges, in part, on critical advancements in battery technology.
Undoubtedly, the BEVs available now offer a number of benefits, including lower emissions and less engine noise. However, limitations on range, long charging times, high cost and safety concerns are dampening consumer enthusiasm for the electric vehicle transition. Improvements in battery technology hold the key to solving these critical issues, particularly advancements in energy density, charging speed and safety. In this article, we assess the changes in battery technology that could unlock the full potential of BEVs, focusing on solid-state batteries, long held out as the solution to longer battery life.
The success BEVs have had to date only became possible through advancements in lithium-ion (Li-ion) battery technology. Li-ion batteries offer medium-to-high energy density, storing a significant amount of energy per unit weight compared to other battery technologies, giving them a longer driving range. Li-ion batteries also have a comparatively long life cycle, meaning they can be recharged and used hundreds to thousands of times before capacity and performance starts to diminish. This translates into a longer lifespan for the battery pack in BEVs, reducing replacement costs, decreasing maintenance needs, and minimizing the environmental impact of battery production and disposal.
Compared to newer technologies still under development, Li-ion battery production is also well-understood and efficient. An established manufacturing process has resulted in greater cost-effectiveness, driving down the overall cost of BEVs and making them more accessible to a wider range of consumers.
However, charging a Li-ion battery still takes significantly longer than refilling a car’s gas tank, even using a fast charger. The average refueling time for a vehicle with an internal combustion engine is less than 5 minutes, while charging time for a BEV with a 65 kWh battery using an ultra-fast 150 kW charger is around 20 minutes. This can be inconvenient for drivers, especially on long trips, and doesn’t suit driving habits that have come to rely on making quick stops to refuel. Faster charging is crucial for improving the overall driver experience with BEVs.
Another key downside is in the supply chain. Production of Li-ion batteries relies heavily on the key components of lithium, nickel and cobalt, which are only produced in large quantities in a limited number of places around the world, creating supply chain vulnerabilities and raising ethical concerns regarding sourcing practices in certain regions. Finding alternative materials or more sustainable sourcing methods is essential for the long-term viability of BEV technology.
Several new battery technologies aim to solve the shortcomings of Li-ion. Sodium-ion-graphite batteries, for example, have been in development over the past few years but have not yet progressed to commercialization due to their current high cost and lower energy density. Lithium-sulfur batteries are in the early stages of research and development so less is known about their potential, but they cost roughly the same as Li-ion batteries and have a higher energy density. Lithium-sulfur batteries have relatively low performance in charging speed, safety, and battery lifetime, but will likely progress with further development.
Source: Berylls by AlixPartners, FFB Münster
One of the main focuses in current battery R&D is solid-state batteries (SSBs). Unlike traditional lithium-ion batteries that rely on liquid electrolytes, SSBs use solid electrolytes. These come in different forms, including oxide, sulfide and polymer. One of the most exciting aspects of SSBs is their potential for significantly higher energy density compared to the Li-ion batteries being made today. This means longer driving ranges and faster charging times for BEVs, which could eliminate range anxiety, one of the major barriers to widespread BEV adoption.
SSBs also have a significant safety advantage over lithium-ion batteries. The absence of flammable liquids or gases in the solid electrolyte minimizes the risk of explosion or fire compared with traditional lithium-ion batteries, which could be a major selling point for consumers hesitant about BEVs due to safety concerns
There has been significant global interest in SSB technology from OEMs (including Stellantis, BYD, Toyota and GM), incumbent battery suppliers (CATL, Samsung and LG, among others) and startups (including QuantumScape, Solid Power and Factorial Energy). The major SSB players are primarily in the US, East Asia, and to a smaller degree Europe. OEMs are engaging in partnerships with SSB startups – Volkswagen’s joint venture with QuantumScape for example – to capitalize on the technology’s potential when it becomes available on a commercial scale. New collaboration models like China’s CASIP (China All-Solid-State Battery Collaborative Innovation Platform), a consortium of battery incumbents, startups and OEMs, highlight the technology’s significance and the resource commitment being made by many stakeholders.
As the chart below shows, other cooperation models already underway include silent investment, for example by Toyota and Nissan, and technology “openness”, as seen in Factorial’s technology development partnership with Mercedes-Benz.
Note: CASIP: newly established R&D network named China All-Solid-State Battery Collaborative Innovation Platform
Source: PEM Motion, Berylls by AlixPartners
For all these reasons, SSBs have considerable promise for the auto industry. However, there are two fundamental challenges hindering their widespread adoption at scale: production difficulties and technical hurdles.
Production difficulties: Transitioning from established Li-ion battery production to SSBs requires transformational changes in manufacturing. Producing solid electrolytes involves complex processes that are quite different from the well-established methods used for lithium-ion battery components. Developing and scaling up this technically difficult production process will take significant investment in new manufacturing infrastructure. High costs and quality control issues, particularly for oxide and sulfide-based electrolytes, also pose major challenges to mass production and further contribute to the higher cost of SSB production.
Technical hurdles: Materials are one of the key challenges for solid-state battery technology because the solid electrolyte (separator that allows ions to pass) needs to be both ionically conductive and mechanically robust. This ensures efficient operation and prevents leaks or degradation within the battery. Additionally, interface compatibility between the electrodes (the positive and negative battery terminals) and the electrolyte is crucial. Dendrite formation (needle-like lithium structures) and lithium loss can occur at the interface, leading to a reduced cycle life (the number of times the battery can be charged and discharged) for the SSB.
There is an appetite for SSB investment – and startups are benefitting
Overcoming these production and technical challenges is vital in order to manufacture SSB batteries on the scale needed for the auto industry. Fortunately, there is significant investment going into R&D and production capability, and the global market for solid-state batteries is forecast to grow substantially. Optimistic estimates¹ suggest production capacities could reach 420 GWh by 2035, reflecting a potential compound annual growth rate (CAGR) of 21%. Polymer electrolyte-based SSBs are expected to have the highest market share by 2035 (224 GWh, or 53%) followed by sulfide (117 GWh, 28%) and oxide (78 GWh, 19%).
SSB startups have benefitted from the interest in the technology with more than $4bn invested to date. That compares with investment (or planned investment) of >$10bn across the industry including OEMs and incumbent battery manufacturers. Larger startups have seen the bulk of this funding, however, with the top seven receiving around 85% of the investment, leaving 37 companies to compete for the remaining 15%. This is likely to lead to consolidation, so that only the largest players survive the race to develop SSBs at scale. The charts below show where funding has gone to date, and the key investors:
Note: Selected companies based on relevance
Source: Crunchbase, Leap435, PEM Motion, Berylls by AlixPartners
While there is great theoretical potential in SSBs, we believe the industry is still five to 10 years from a commercially viable product. For OEMs considering how, or indeed whether, to invest in the battery technology, Berylls’ solution is to take a three-pronged approach, made up of a 360-degree partnership assessment, tech and competitor benchmarking, and strategy development.
Berylls’ partnership assessment takes a 360-degree view of selected dimensions, including value creation and risk management to quantify performance levels, thus revealing strengths, weaknesses and potential for optimization. The key goal is to identify and make transparent the gaps in partnership and collaboration approach to build the foundation of a sustainable improvement program.
Technology and competitor benchmarking uses Berylls’ comprehensive quantitative and qualitative datasets as the basis for customized and expanded assessments of how peers are performing in specific SSB use cases.Our proprietary database continuously tracks more than 3,000 startups and scaleups across the mobility value chain, including around 250 battery-related companies and around 50 automotive SSB startups and scaleups.These are technology-based profiles, including KPIs for battery energy density and charging cycle efficiency, as well as our proprietary research insights into industry claims.
Our standardized strategy development process then uses the results of the partnership assessment and benchmarking, combined with comprehensive internal and external analysis, to define and implement a data-backed strategy. It takes in future customers, competencies, and strategic direction to set automakers on the best path forward.
To discuss your solid-state battery ambitions with our team, please contact Dr. Alexander Timmer.
¹ Joint study conducted by Berylls by AlixPartners and PEM Motion
erylls by AlixPartners schließt sich mit dem KI-Unternehmen FULLY AI zusammen, um einen virtuellen, KI-basierten Assistenten zu entwickeln.
München, 30. September 2024 – Die Berylls by AlixPartners Marketing und Sales-Experten rund um Jonas Wagner, geben eine Partnerschaft mit FULLY AI bekannt. Das Unternehmen, mit engen Beziehungen zur Tech-Szene des Silicon Valley, entwickelt zukunftsweisende KI-Lösungen nach höchsten Standards in Bezug auf Datenqualität und -sicherheit. Gemeinsam wollen die Partner die Automobilbranche grundlegend verändern und setzen in ihrer Zusammenarbeit bei der Customer Journey an.
Die gesamte Pressmitteilung ist zum Download verfügbar.
ISILLUSIONMENT SETS IN WHEN LOOKING AT E-MOBILITY
In our yearly study, we interviewed executives of 77 European automotive suppliers from various sectors (e.g., powertrain, E/E, interior, exterior, body, software) and of different sizes (including several TOP 100 suppliers), most of which are dependent on the internal combustion engine (ICE) for a significant proportion of their revenue. The main goal was to gauge the impact of e-mobility on their respective businesses and assess how prepared they are for this major transformation.
Download the full insight now!
argin pressures for OEMs and suppliers are here to stay and increasingly make the competitive difference - our self-assessment tool identifies the areas for action that will boost performance across the production network.
Since ever, the OEMs have been the driver for their suppliers to both diversify and grow their installed manufacturing capacities. And this was part of the “old rule” as suppliers had also been slightly outperforming OEMs on EBTIDA profitability level. However, since 2021 the usual pattern has been disrupted and the profitability has flipped the first time since more than a decade. OEMs now outperformed their suppliers by 3.5% points on profitability level – until today. The profitability of both automakers and suppliers has suffered in recent years, as the industry has navigated a series of major external crises while also managing its own transformation for an electric future. And there is no soft landing in sight – auto industry margins will remain under pressure from multiple economic challenges.
These include new forms of protectionism that are likely to hurt the car industry’s global supply chain – for example, the estimated $500bn-a-year cost of planned import taxes in the US if Donald Trump wins the presidential election in November, including a 60% tax on all goods from China. At the time of publication, the European Union was also planning to introduce tariffs of up to 38.1% on Chinese EVs amid an anti-subsidy investigation. Workforce issues are also disrupting production – the lack of skilled workers in Germany will cost the country’s economy around $52bn this year, estimates show, and a six-week strike by United Auto Workers union members in the US last year cost OEMs an estimated $10.4bn.
There is also the overarching challenge of climate change, both the changes required by regulators to reduce vehicle and factory emissions, and the impact of more frequent extreme weather events on production and supply chains.
So how to get back on profitability track given the installed production network?
As a result, every department of an automotive company should be asking itself what it can do to stop the slippages of margins. In this piece we look specifically at operations, and what major levers are available to chief operating officers (COOs) to protect and increase profitability in the production network. Especially, how and what levers you can trigger with a competitive payback period within 2-3 years? You can also take our benchmark assessment at the end of the article, and we will share our insights directly with you.
In short, we believe the major opportunity for COOs is to rethink their approach to steering plants – to shift their focus from optimizing individual factories to the performance of the production network as a whole. Five key differentiators will enable this change:
1. Network design
2. Sourcing excellence
3. Industrialization excellence
4. People and talent
5. Sustainability
In recent years, disruption to production has had a major negative impact on profitability as carmakers and suppliers have faced high volatility in order levels, and multiple issues in global supply chains ranging from pandemic shutdowns to attacks on shipping in the Red Sea.
In a period of so much geopolitical and economic uncertainty, OEMs and suppliers know they need to increase the flexibility and resilience of their supply chains. Operating factories as part of a network, where another plant can take over the work of one that has been impacted by shutdowns or disruption to its supply chain, requires companies to define a clear steering concept for the network, made up of governance, allocation and incentivization.
Governance: A certain degree of standardization is required to enable overall management and leverage potential across the entire network. This can be achieved by harmonizing definition and calculation of KPIs, transparency around production performance or current challenges, consistent use of network-wide MES and maintenance software and standardized supplier management processes and standards in product design and material usage.
Allocation: To hedge against order volatility and absorb high demand at peak times, COOs should be looking at ways to balance capacity between plants, and increasing the flexibility of production lines, to make it possible to quickly rethink product allocation when needed.
Incentivization: To increase network profitability, automotive companies and suppliers need to secure buy-in from all their plants, down to the level of individual employees. To incentivize teams to support the network concept, plant managers will have goals that are, at least in part, based on achieving network profitability rather than only their single plant’s profitability. This of course includes any intercompany complexities.
1. Network design
Is network design a continuous task? Yes – it should be a continued optimization once set up. The way the production network is designed and set up is crucial to making it highly profitable. At some point in time, it is also right to question the status quo and initiate a more structural footprint transition including re-allocations, downsizing or consolidation. Payback ratio here should not exceed 3 years. However, those costly restructuring efforts can be avoided by risk prevention actions.
For instance, OEMs and suppliers should have the maximum level of standardization across all plants, along with the ability to be both highly flexible when needed and to give enough power to individual plant managers to be able to delegate complex issues locally, decentralizing decisions where possible.
Of course, achieving this is very challenging. Planning robustness is key. The major risks to profitability are volatility in orders and customer requirements, which make it difficult for OEMs and suppliers to plan for the right production volumes; shortages of resources, both components and staff, which lead to constant changes in production schedules and potentially shutdowns; and external risks to production locations. We should note here that handling overcapacity by identifying the best and most efficient production footprint is something that only a few automotive suppliers have successfully achieved. More information and guidance on this topic can be found in this Berylls publication (link)
To build in the right level of standardization and flexibility in production, COOs need to take the following steps:
Making these changes will allow automotive companies to radically improve their existing asset structures and increase cost competitiveness, which in turns allows for higher flexibility. For more on the topic of future-proofing supply chains, download our report here.
2. Sourcing excellence
Sourcing and supply chains are fields where the automotive industry has been very efficient for decades. However, the multiple crises of recent years, including Brexit, the US/China trade war, COVID-19, the wars in Ukraine and Gaza, and escalating tension between China and Taiwan, have made clear that the industry’s global supply chains are far from shock-resistant. Volatile commodity prices, particularly for parts destined for EVs, also require new competencies in modern purchasing organizations.
Building a robust supply chain now means striking a balance between cost, resilience and flexibility. OEMs and suppliers need to actively manage supply chain risk, assessing where the next problem is likely to arise, as well as actively managing suppliers. Potential solutions and approaches include:
3. Industrialization excellence
Despite working as hard as they can to keep production timelines on schedule and within budget, we estimate car manufacturers lose more than €4bn a year due to poorly managed launches. The biggest challenges in the auto industry today arise from industrializing new technologies, as software increasingly becomes the key differentiator between vehicles. Suppliers and OEMs are mastering new production technologies, and shorter product lifecycles with increasing development complexity. Integrating customer requirements throughout the industrialization phase is another challenge.
Against this backdrop, the key success factors when industrializing new programs are:
4. People and talent
Digital twins are now commonly used in production and the first production-relevant AI use cases are coming through, but the automotive industry still relies heavily on the skills of the people working in it. However, the skills that are needed are changing as greater automation and digitization in factories replaces or changes roles. OEMs and suppliers also find themselves competing with other industries for the best-qualified employees. There is an urgent need for companies to both ensure their current workforce is trained with the right skills and hire new people to supplement existing resources as technology advances and the way cars are made changes.
To help overcome workforce hurdles, COOs should:
5. Sustainability
Environmental, social and governance (ESG) performance is increasingly important for key stakeholders, as well as a regulatory requirement. Carbon emissions are now a leading consideration when it comes to supplier selection, drivers increasingly want products that can be reused or recycled which means the automotive industry has to deliver these, and strong environmental performance is one of the elements of corporate culture that really matters to current and prospective employees. Make ESG an economic KPI to be measured and to gain benefits on the P&L and cash flow statements.
COOs must guide the production organization to play its part by:
COOs and production organizations that actively address the challenges described above by managing their operations as a network can really make a positive difference to profitability.
Berylls and AlixPartners have extensive global project experience in managing production networks and has gathered data that has been invaluable to our work with clients in recent years. If you are interested in finding out more, complete our self-assessment (see below) on the key differentiators in order to:
As soon as you provide your data we will assess the input and provide you with insights into your network profitability benchmark and ambition levels within two weeks.
Copyright Berylls by AlixPartners
