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Online car sales have been slow to take off – how OEMs can change that

Munich, June 2024

Online car sales have been slow to take off - how OEMs can change that

Munich, June 2024
B

erylls’ Online Sales Acceleration Assessment can help automakers understand their current performance and identify the obstacles holding back online purchases

Expectations were high when leading OEMs first announced their ambitions to sell a significant share of vehicles online    within only a few years. Mercedes-Benz was first to put a number on it in 2019, with the goal of achieving 25% of sales online by 2025. BMW followed two years later with the same target. Other OEMs including the Stellantis group and Volvo have since raised the bar even higher, aiming to generate a third and 50% of sales online by 2030 , respectively. However, most OEMs have neither publicly revealed their online sales objectives, nor their progress in reaching those.

For OEMs, the benefits of selling online are various. From greater efficiency in their sales processes, meeting customer demand for omnichannel experiences, and using the data generated by digital interactions to continuously improve customer service and product offerings.

The definition of an online sale for this article is the purchase of a vehicle in which most of the sale journey – including an initial information search, vehicle selection and contract closure – is completed online. However, even during an online purchase, customers may have offline touchpoints including a test drive or dealer consultation.

Figure 1: OEM Online Sales Targets

Source: Berylls by AlixPartners

Yet online car sales have still not fully taken off. Even after spending multi-millions to ramp up their online sales capabilities and build their own online sales platforms, OEMs are still struggling to consistently draw customers into their digital channels, beyond early-phase information searches and vehicle configuration. In Germany recent figures show that the revenue generated from online vehicle sales was actually 14% lower in 2023 than in the previous year.

So why are online sales lagging behind OEMs’ ambitions? Inadequate digital solutions cannot be used as an excuse anymore. In fact, digital channels now provide additional benefits such as convenient self-service options that reduce the pressure some customers may feel when they visit a dealer.

We wanted to dig deeper to understand the root causes of the slow pace of change, and developed our Online Sales Acceleration Assessment. This assessment evaluates the current performance of OEMs’ online purchase journeys and uncovers the underlying challenges that are still holding customers back from buying a car online.

Time to look below the surface

The fact that customers are used to buying a car in person from the dealer, or are not aware of the latest online buying options, is only the tip of the iceberg. To fully understand the online sales environment, we must look below the surface and also go beyond the customer journey. Here are some of the key questions that OEMs need to answer:

  • What are the customer perceptions and expectations of online sales in each local market?
  • Are there attractive online-only offerings or incentives to encourage customers to shop online?
  • Are retailers incentivized to support online sales?
  • How is the broader sales organization set up to support omnichannel sales?
Authors
Henry Lundt

Principal

Philipp Purrucker

Senior Associate

Henri Laux

Associate

Pia Wurst

Analyst

Figure 2: Potential online sales challenges

Source: Berylls by AlixPartners

The Berylls Online Sales Acceleration Assessment helps to answer these questions by following a structured approach that can be broken down into three clear steps:

1 Reverse journey root cause analysis

2 Conducting the Online Sales Acceleration Assessment

3 Developing online sales acceleration levers

1. Reverse journey root cause analysis

    1. Start with the number of digital leads that are converted into sales. Here, investigating the retailers’ involvement and what technical, financial or online sales mindset obstacles they face can reveal initial obstacles to achieving the targeted level of online purchases.
    2. Secondly, look at the vehicle offers available and how attractive they are to potential customers. OEMs need to ask what would draw a customer to carry out the purchase online in the first place and investigate if the online offers are a good fit for the market.
    3. Next, take another step back through the customer journey and assess the website, to understand how the online sales options are presented to customers and if customers are guided and supported to find the right choice for their budget.
    4. Lastly, analyze the current marketing strategy to validate if it is successfully increasing awareness of online sales options and communicating them proactively to the customers. Is there enough focus on the transaction as well as the brand?

Figure 3: Root cause analysis: Sales Journey in reverse

Source: Berylls by AlixPartners

The root cause analysis is enriched by field interviews with retailers and gathering the views of management teams, to support quantitative data with qualitative insights. This first step gives us a solid foundation of information, to which we can apply our proven Online Sales Acceleration Assessment.

2. Conducting the Online Sales Acceleration Assessment

While generating insights using the reverse journey approach, we match the findings into our six enablers acceleration framework. Working with clients, we have found that any of the gaps that hinder OEMs from reaching their target levels of online sales can be attributed to one of the six enablers. For each, we list here some of the key success drivers in our Online Sales Acceleration Assessment checklist:

Figure 4: Six enablers acceleration framework

Source: Berylls by AlixPartners

  • Online product offering is attractive to customers (for example, online exclusive models)
  • Online journey can be adapted to different customer segments (for example, direct to consumer or to a B2B customer)
  • The full range of the product portfolio is represented online
  • Physical stock is fully available online
  • Customers view the brand as one that offers convenient online sales
  • Customers land on the online sales tools at an early stage of the purchasing process
  • All steps in the purchasing journey integrate online sales elements
  • Digital touchpoints are transactional
  • Digital features are fully functional and don’t have bugs
  • Digital features are easy to understand and use
  • There is a good balance between the number of features and their relevance for customers
  • The features are on a par with or better than those of competitor brands
  • Customers report they are happy with the online purchase journey and its stages
  • Retailers are incentivized to promote digital channels
  • Retailers understand the benefits of digital channels
  • Retailers have the tech skills to use and promote digital channels
  • There is transparency about the number of online sales, and figures are communicated to teams on a regular basis
  • Online sales are clearly defined and understood by the relevant stakeholders
  • There are quantitative online sales targets and KPIs
  • Online sales data is presented in a dashboard that is used by key decision-makers
  • Conversion along the entire sales funnel is monitored and evaluated
  • The impact of online sales on cost and process efficiency is analyzed and known
  • Integrated backlog for cross-team prioritization
  • Streamlined development cadence
  • Online sales targets apply to the broader organization (e.g., HQ and NSCs)

In carrying out the Online Sales Acceleration Assessment, we identify and prioritize the gaps between success driver potential in the six categories outlined above and the OEM’s current maturity, using a standard scoring system.

We also recommend structuring the assessment by markets – or at a minimum by geographic regions. That allows OEMs to take account of market differences both internally, for example different levels of sales organizations’ online sales maturity in different countries, and externally, to include local market conditions, legal requirements, and customer demand for online sales. The assessment can be applied to OEMs’ direct and indirect sales models.

3. Development of online sales acceleration levers – two examples

We are aware that knowing where the areas for online sales improvement are is only the first step. Taking the right action to close the gaps is what will differentiate OEMs’ online sales performance. From our experiences on a range of client projects, we bring proven approaches to increasing online sales, as these two examples (one from marketing and communication, and one from customer and product) show:

Transactional marketing campaigns

Transactional – rather than brand-focused – marketing campaigns build engagement with customers by showing them how they can jump directly into the online purchase journey. They also create awareness about online buying options in the first place. Transactional campaigns create direct business impact by matching available vehicles with interested customers.

In our previous engagements, generating transactional campaigns has resulted in a triple-digit increase in conversion rates compared to generic ads. Naturally, they are not relevant for every potential customer and usually play a bigger role later in the purchase journey, once the customer has developed a high purchase intention for a specific vehicle. Transactional campaigns may range from informal presentation of available cars, to sophisticated one-to-one offers on cars from nearby retailers for prospective customers that have directly or indirectly expressed an interest already. Specific purchase prices and leasing or subscription rates create transparency and trigger the commitment to buy.

Figure 5: Exemplary Campaign

Source: Berylls by AlixPartners

B2B Online Sales

Today, many OEMs limit their online sales tools to their direct-to-consumer business. However, premium brands in particular primarily sell their new vehicles to business customers in many European markets. Adapting the online purchase journey to include business customers can therefore help OEMs reach a much bigger share of their potential market. In Europe, and especially in Germany, not being able to address this target group would leave out more than half of the potential customers for many premium OEMs.

Large fleet customers will most likely not be the target group, but smaller businesses and self-employed customers may contribute a significant share. Their customer experience could be significantly enhanced online, for example by showing relevant vehicle specifications and prices, or by offering individual packages, discounts and bundle offers.

Just as for individual consumer sales, B2B purchase journeys don’t need to fully happen online, but increasing the share of online interactions can reduce selling costs and ensure a better customer experience, thanks to higher levels of standardization and control.

 

HOW WE CAN HELP ACCELERATING ONLINE SALES​

As we develop and implement different types of online sales acceleration levers with clients, we build on tried-and-tested approaches. These focus on delivering fast solutions that generate customer feedback early, ensuring iterative development and continuous improvement.

In summary, by carrying out Berylls’ Online Sales Acceleration Assessment, OEMs create transparency about the root causes slowing down their online sales ramp-up. The assessment also helps carmakers to prioritize the most promising levers that will efficiently speed up online sales and establish their reputation as a brand with a seamless online sales process.

If your organization is struggling to scale up online sales and the assessment approach sounds interesting, please reach out to Berylls Mad Media and we can discuss together an approach customized to your specific needs.

Henry Lundt

Henry Lundt (1984) is a Principal at Berylls Mad Media (part of Berylls Group), the experts for transforming sales & marketing in the automotive industry. He is an expert in digital automotive commerce as well organizational transformation and can look back on many years of consulting experience in various roles.

Henry Lundt has been digitizing automotive sales & marketing for manufacturers and suppliers since 2009 and has experience in the areas of holistic strategy development, digital product development & applying and optimizing agile working models. Beyond this, Henry Lundt built expertise in digital automotive commerce, consulting our clients to build and optimize transaction journeys. Prior to joining Berylls Mad Media, he set up Berylls Digital Ventures as first Berylls Group entity – prior to joining Berylls, Henry Lundt was Head of Automotive at TD Reply, a marketing & innovation consulting firm, focused on digital business.

He graduated as business economist from the University of EBC Berlin in marketing & media with a combined studies in Business Management in University of Sunderland & University of Newcastle upon Tyne (UK).

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When the shock hits the stock: Why there is more to a resilient supply chain than inventory increase

Munich, June 2024

When the shock hits the stock - Why there is more to a resilient supply chain than inventory increase
Munich, June 2024

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rom 2021 to 2023, selected leading OEMs in Germany, the US and China have increased their inventories on average by 50%. While this may be a measure to address turbulent supply chains, it is time for OEMs to think more radically to safeguard their supply.

For a more resilient supply chain OEMs and suppliers should focus on enabling the procurement organization for taking a more holistic view on the supplier award as well as on smart product design and further vertical integration in the supplier network.

Ultimately, OEMs and suppliers need to make long-term thinking a virtue, integrate supply chain thinking and stay alert for the next crisis.


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When the shock hits the stock Insight
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Authors
Timo Kronen

Partner

Fritz Metzger

Partner

Hendryk Pausch

Associate Partner

Eren Duygun

Senior Consultant

Fabian Dinescu

Senior Consultant

Julius Gaupp

Consultant

Fritz Metzger

Fritz Metzger (1986) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, in February 2021. He is an expert on automotive operations.

Since 2011, his focus has been on strategic alignment and operational efficiency improvement of automotive manufacturers and suppliers. He also advises top management in critical situations, including R&D and industrialization task forces and relocation and restructuring initiatives of plants and complete suppliers. The challenges of e-mobility are always in focus.

Before joining Berylls, he was a director at international strategy consultants PwC Strategy&, as well as a sales and project manager at a medium-sized supplier and mechanical engineering company.

Fritz Metzger is a trained industrial engineer with a degree from ESB Business School Reutlingen. He also holds an MBA from the University of Salzburg.

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Timo Kronen

Timo Kronen (1979) is partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors) with focus on operations. He brings 19 years of industry and consulting experience in the automotive industry. His focus is on production, development and purchasing as well as supplier management. Some of his recent projects include:
• Restructuring of the Procurement Function (German Sports Car OEM)
• Supplier Task Force for a HV battery cell (German Premium OEM)
• Strategy Development for the Component Production (German Premium OEM)
Before joining Berylls, Timo Kronen worked at PwC Strategy&, Porsche Consulting Group and Dr. Ing. h.c. F. Porsche AG. He holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT).

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The final wake-up call for Aftersales – Spotlight on Germany

Munich, May 2024

The final wake-up call for Aftersales

Munich, May 2024

F

or as long as we can remember, the aftersales business has been the cash cow within the automotive industry. Both OEMs and dealers willingly accepted lower vehicle sales margins, knowing that aftersales services contribute significantly to annual profits.

Now is the time to identify known and emerging problems in software supplier management, and re-think supply processes end-to-end.

As software-defined vehicles revolutionize the automotive landscape, effective management of the software supply chain becomes paramount. Discover the challenges OEMs and suppliers face and seize the opportunity to redefine end-to-end supply processes.

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The final wake-up call for after sales - spotlight on Germany
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Authors
Paul Kummer

Partner

Florian Tauschek

Associate Partner

Tobias Detzler

Project Manager

Paul Kummer

Paul Kummer (1983) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, as a partner in October 2021. He is an automotive downstream expert.
He has been advising automotive manufacturers in a global context since 2010. He has in-depth expert knowledge in the areas of sales and aftersales. His other areas of expertise include growth strategy development, business model development, portfolio optimization and digital transformation.
Prior to joining Berylls Strategy Advisors, he worked for Monitor Deloitte and Accenture.
Paul received his MBA from WHU Otto Beisheim School of Management and his Industrial Engineering degree from DHWB Mosbach.

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Driving Success: Strategic Management of Automotive Software Projects

Munich, May 2024

Driving Success: Strategic Management of Automotive Software Projects

Munich, May 2024

T

The software supply chain is becoming increasingly critical to automotive success – yet OEMs and suppliers often struggle to manage it effectively. 

Now is the time to identify known and emerging problems in software supplier management, and re-think supply processes end-to-end.

As software-defined vehicles revolutionize the automotive landscape, effective management of the software supply chain becomes paramount. Discover the challenges OEMs and suppliers face and seize the opportunity to redefine end-to-end supply processes.

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Berylls Insight
Driving Success: Strategic Management of Automotive Software Projects
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Authors
Christian Grimmelt

Partner

Sebastian Böswald

Associate Partner

Fabian Dinescu

Senior Consultant

Julius Gaupp

Consultant

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

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Semi-annual Index Rebalancing

Munich, April 2024

Semi-annual Index Rebalancing

Munich, April 2024

T

he year 2023 was characterized by changes in the automotive industry. 

While numerous new suppliers and OEMs are trying to gain a foothold, the established OEMs are fighting for their position and strug- gling with their strategic realignment.

A high interest rate environment and low consumer spending due to the high inflation period suggest that 2024 will be another subdued year. Geopolitical tensions and disruptions in supply chains continue to prevent a sigh of relief.

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Semi-annual Index Rebalancing WTCAR 2024
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Authors
Dr. Jan Burgard

CEO

Malte Broxtermann

Partner

Björn Simon

Senior Consultant

Moritz Nold

Consultant

Dr. Jan Burgard

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer. In October 2011, he became a founding partner of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

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Malte Broxtermann

Malte is an expert in the development and implementation of automotive digitization strategies.

He focuses on helping clients scale (generative) artificial intelligence to improve their bottom line across the entire automotive value chain. His primary customers are automotive manufacturers and their suppliers, especially those active in the Software-Defined-Vehicle space.

Before his time at Berylls by AlixPartners (formerly Berylls Strategy Advisors), he advised leading North American utility companies. Prior to that, he saved lives as emergency medical technician. Malte holds master’s degrees in economics from Maastricht University and Queen’s University in Canada.

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Navigating the labyrinth toward a regional sales & marketing organization

Munich, April 2024

Navigating the labyrinth toward a regional sales & marketing organization
Munich, April 2024

T

he automotive industry is in the midst of immense transformation, affecting all departments and established industry mechanisms. 

As part of that, sales and marketing functions are undergoing a huge shift toward a direct retail sales model. 

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Navigating the labyrinth toward a regional sales & marketing organization.
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Authors
Jonas Wagner

Partner & Managing Director

Theresa Stütz

Associate Partner

Philipp Enderle

Associate Partner

Paul-Alexander Bures

Senior Consultant

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Jonas Wagner

Jonas Wagner, born in 1978, is a Partner and Managing Director of Berylls by AlixPartners (formerly Berylls Mad Media). With around 20 years of consulting experience in the automotive industry, Jonas is a trusted advisor for top management, specializing in strategy, organizational development and large transformation programs for leading, global automotive manufacturers.

Jonas excels in guiding automotive companies through the transformation of their sales and marketing functions. He has a proven track record in digitalizing customer interfaces to enhance customer experience, sales conversion and loyalty. His expertise includes introducing and implementing new sales and business models tailored to the evolving market landscape and developing data-driven sales and marketing organizations to optimize performance and efficiency. His expertise includes all on- and offline touchpoints as well as business segments, ranging from sales, after-sales, financial services to new business models.

Before joining Berylls, Jonas was a leading consultant within the Automotive Practise of Oliver Wyman, where he worked with global automotive manufacturers, enhancing their strategic initiatives and operations.

Jonas holds a degree in Business Administration from the Aarhus School of Business and the University of Mannheim, with a focus on International Management, Marketing, and Controlling. Combining deep industry knowledge with strategic acumen, Jonas Wagner is a valuable partner for automotive leaders navigating complex transformations.

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Theresa Stütz

Theresa Stütz (1991) joined Berylls Strategy Advisors in December 2017. Meanwhile she is associate partner and automotive downstream expert.

She has been advising automotive manufacturers in a global context both in the luxury and premium segment. She has in-depth expert knowledge in the areas of sales and marketing, particularly in the context of customer experience strategies. Other areas of expertise include strategy development processes, Go-to-market strategies and transformation management.

Theresa received both Bachelor and Master of Science in Management and Technology (Mechanical Engineering) at Technical University of Munich.

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Contact us More about Berylls

The Battery Electric Vehicle „Dilemma“

Munich, March 2024

The Battery Electric Vehicle "Dilemma"?

Munich, March 2024

H

ow OEMs successfully navigate an insecure environment with volatile incentives and reluctant customers as well as retailers.

In 2024, the automotive industry is supposed to be at the tipping point of the transformation to the battery electric vehicle (BEV). This paradigm shift is exemplified by the imminent launch of over 50 new battery electric vehicle models in Germany alone, coupled with more than 15 Chinese brands operating in the fiercely competitive European market.

But will the shift happen, or will it be dismissed? The dramatic drop of BEV sales in December 2023 (compared with 2022), shows clear signals of a weakening commitment and volatile demand. So how do you navigate through this difficult time without wasting effort and budget?

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Berylls Mad Media Insight: The BEV "Dilemma"
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Authors
Jonas Wagner

Partner & Managing Director

Sascha Kurth

Partner

Nikolas Schoenenwald

Senior Associate

Henri Laux

Associate

Jonas Wagner

Jonas Wagner, born in 1978, is a Partner and Managing Director of Berylls by AlixPartners (formerly Berylls Mad Media). With around 20 years of consulting experience in the automotive industry, Jonas is a trusted advisor for top management, specializing in strategy, organizational development and large transformation programs for leading, global automotive manufacturers.

Jonas excels in guiding automotive companies through the transformation of their sales and marketing functions. He has a proven track record in digitalizing customer interfaces to enhance customer experience, sales conversion and loyalty. His expertise includes introducing and implementing new sales and business models tailored to the evolving market landscape and developing data-driven sales and marketing organizations to optimize performance and efficiency. His expertise includes all on- and offline touchpoints as well as business segments, ranging from sales, after-sales, financial services to new business models.

Before joining Berylls, Jonas was a leading consultant within the Automotive Practise of Oliver Wyman, where he worked with global automotive manufacturers, enhancing their strategic initiatives and operations.

Jonas holds a degree in Business Administration from the Aarhus School of Business and the University of Mannheim, with a focus on International Management, Marketing, and Controlling. Combining deep industry knowledge with strategic acumen, Jonas Wagner is a valuable partner for automotive leaders navigating complex transformations.

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Sascha Kurth

Sascha Kurth (1987) is a Partner at Berylls by AlixPartners (formerly Berylls Mad Media), a company specializing in the automotive industry. He is an expert in building, transforming, and restructuring sales and marketing organizations and has experience from more than 30 projects in this context. From his perspective, it is particularly important for sales and marketing organizations to have clear and measurable goals and a clear and comprehensible strategy for achieving them. Subsequently, the focus is on creating an effective, efficient, and self-optimizing organization from the right people, processes, partners, and necessary governance. Technology and data are crucial enablers for leveraging the efficiency and effectiveness of the resources used multiple times. This is essential to be competitive, remain competitive, and develop competitive advantages for the future. However, they are not an end in themselves but always enablers to achieve the goals (better). Sascha Kurth is convinced that building effective and efficient sales and marketing organizations is a crucial long-term competitive advantage for the entire company and that paid advertising (especially increasing the budget) should be one of the last initiatives to achieve strategic goals.

Sascha Kurth has been supporting automotive manufacturers in a global context since 2013. He has extensive expertise in goal-oriented sales and marketing planning, Paid, Earned, Owned- funnel management, data management platforms & customer data platforms, e-commerce platforms, programmatic advertising, customer relation management, smart KPIs, and management dashboards.

Prior to joining Berylls Mad Media, he supported leading OEMs, e-mobility start-ups, telecommunications companies, and fast-moving consumer goods manufacturers in their sales & marketing transformation at various consulting firms.

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Decision time: Making the right production footprint choices in a volatile market

Munich, April 2024

Decision time: Making the right Production footprint choices in a volatile market

 

Munich, April 2024

U

ncertain demand in a weak economy, a mix of powertrains, skills shortages and the influence of subsidies are making network design more important - and more complex

Automotive suppliers and OEMS are being forced to make hard decisions about their production networks, as they focus on efficiencies and protecting margins in an uncertain economy. Existing footprints are also being challenged by the electric vehicle (EV) transition, sustainability requirements, new skills needs and more political influence in the form of national subsidy programs.

Supplier ZF Friedrichshafen, for example, announced plans in January to close two plants in Germany with the intention of moving production to lower-cost locations in eastern Europe or India, and the future of Audi’s plant in Brussels is in doubt, according to multiple news reports. At the same time, Chinese EV maker BYD is building its first European factory in Hungary, which has a growing car battery industry.

Footprint decisions for suppliers are always complex because of the high costs involved – particularly after the rise in interest rates from years of historic lows – and the social and political impact of closures and job losses. But the range of current considerations, including the impact of generous new EV subsidies in the US under the Inflation Reduction Act, are making the process even more challenging.

Here we look at how suppliers can asses their overall network capacity in light of current and future market demands, to align with their strategic objectives.

Decision-making in uncertain times

Suppliers currently face complex additional footprint considerations, the first of which is undoubtedly politics. Governments are exerting more influence over where OEMs and suppliers locate production than they have done for a number of years, as national subsidy programs linked to the EV transition significantly affect the business case for factory locations.

The biggest is the US Inflation Reduction Act (IRA), signed into law by President Joe Biden in 2022. The IRA promises $433 billion of investments in the US economy, of which $369 billion are for energy security and climate change. The measures that directly affect the auto industry include tax incentives for consumers to buy EVs and grants to retrofit factories for low-emissions vehicle production. However, the subsidies only apply to EVs that are made with a proportion of materials that are sourced in the US or countries with US free trade agreements, such as Japan. The proportion was 30% in 2023, rising to 80% by 2027.

The earlier Bipartisan Infratsructure Law, signed in 2021, also awarded $6 billion of grants for companies investing in battery manufacturing and components.

The intention of the legislation is to build up the US’s domestic battery and EV production and reduce reliance on Chinese components, and the result is that OEMs and suppliers will have to move production to the US in order to sell EVs and components there.

We believe the effect on the automototive labor market will go beyond job losses in Europe and Asia if new factories are located or older ones re-located to the US. Tech talent is also likely to move to the US, because subsidies are focused on future clean technologies, and innovation will go with them. This will cause Europe to lose further ground against the US.

This is not to say Europe is stepping back from the race to build up its EV and battery production capacity. EU member states made €6.1bn available to support battery innovation and production through two Important Projects of Common European Interest (IPCEI) agreed in 2019 and 2021. There are no restrictions on the origin of the raw materials for batteries, in order to build up production of EVs and battery cells in the region.

From 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) means companies will have to pay for certificates to cover the cost of emissions created during the production of goods they import, making low-carbon local production sites more financially attractive.

There are also EU subsidies available to build up manufacturing in less wealthy parts of the bloc such as eastern Europe. Building new plants with the latest automation and digital production tools will increase efficiency and likely will cost less than modernizing an existing production site. The cost advantage will be a strong factor in suppliers’ footprint decisions.

A transformed workforce

Beyond politics, new types of workforce considerations are also now affecting footprint decisions. The first issue is the availability of people with the right skills: new, highly digitalized and automated factories need workers with a broad range of technology skills, including engineering, computer science, robotics and experience with artificial intelligence (AI). Creative problem-solving by humans will become increasingly important as routine production tasks are taken over by machines, and we see a growing need for hybrid experts, who combine technical skills with creativity.

We expect a significant impact on traditional factory job profiles as a result of increased digitization and automation, especially at the operational level in factories making lower-cost, mass-produced models (we define these as volume or variant champions here). We see the number of shopfloor logistics roles declining by 63% in volume champion sites and 56% at variant champions’ plants by 2035 while the number of factory operator roles will shrink by 53% and 40% respectively, and the number of line managers by 24% in both types of factories.

In their place, we see high demand for new job profiles as the use of smart machines increases, and databases and data flow become more important. The number of data engineer roles is expected to increase by 78% in volume champion factories and 98% in variant champions’ sites, for example.

For employers, recruiting people to fill these roles will be highly competitive because their skills are in short supply across all manufacturing sectors. Suppliers will need to adjust wages accordingly and offer additional benefits to attract skilled staff to their production sites. The location of plants will become increasingly important – factories close to existing tech or automotive hubs, for example, may find it easier to hire the talent they need.

Setting the strategy

Figure 1: Global Footprint Strategy

Source: Berylls Strategy Advisors

Looking in detail now at a typical supplier’s footprint decision process (see chart above), the first step has not changed despite the complex new challenges described above. Footprint decisions need to be aligned with the company’s strategic objectives, and whether the current network meets them. How is demand expected to develop in different markets and can production sites adapt?

The next step is 360-degree site assessments of performance, cost structure and capacity, to give transparency over each production site’s future potential and improvement opportunities.

Suppliers can then shape the ideal future footprint, defining the plant archetypes and logistics networks they will need. These become the guiding concepts for scenario analysis, that will cover each of the major areas that would be impacted by a change in footprint: cost; the potential effect of subsidies and other government initiatives; the supply chain and logistics network; regulatory compliance; environmental impact; technology and innovation; human resources, and risk assessment.

The evaluated scenarios are narrowed down to a shortlist for evaluation by a wider group of stakeholders, and the final stage is a business case calulation on the short-listed network options, before moving into implementation planning and final decision-making.

Footprint success factors

Footprint decisions are among the most crucial that any auto supplier will make. The right production network is a critical part of the long-term financial and non-financial success of the company: new production facilities are very expensive, but so is keeping under-used or inefficient sites open. The impact of the investment decision, good or bad, will be felt by the company for years.

Cost efficiency is still a top priority for any footprint decision, but after a period of time in which the auto industry has been hit with one crisis after another, resilience is now ranked just as highly. Important production network considerations to reduce complexity and increase flexibility can include building factories close to customers to reduce the chance of supply chain disruption, and ensuring sites are located in places where there are enough skilled staff, or that are attractive to new hires.

Sustainability throughout the supply chain is also a key consideration for OEMs, and suppliers must be able to ensure their production locations meet customer and regulatory ESG requirements.

And as described above, the auto industry has become a key part of many governments’ industrial policy as they seek to meet commitments to transform their economies. Striking the balance between the short-term benefits of subsidies and the long-term results of choosing a particular location is now an important part of the footprint decision-making process. Some uncertainty is inevitable, as for example in the US where the outcome of the presidential election in November may change the position on EV subsidies.

However, what suppliers can do is make a thorough assessment of their product portfolio and expected future market demands, and consider the results alongside subsidy benefits, to see whether government support makes entering a new market worthwhile. They should also consider how reliant their product portfolio is on subsidies, and how that impacts their production network flexibility. 

All these factors – cost, resilience, sustainability and subsidies – deserve thorough consideration in footprint decision-making, to reduce the risk inherent to such large and long-lasting decisions.

 

At Berylls, we have worked with clients on production network strategy and supply chain design for years, building up deep expertise in defining the right criteria and evaluations for your company’s footprint decisions. We would be delighted to discuss this or any other aspect of manufacturing footprint with you.

Authors
Christian Grimmelt

Partner

Timotheus Wittek

Felix Scheb

Martina Seip

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

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Task forces in the automotive industry: Why they are the solution to every problem – and why not

Munich, March 2024

Task forces in the automotive industry

Munich, March 2024

S

ometimes, the automotive industry tends to use military terminology. Understandably, this is typically the case when the stakes are high and time is running out. Task forces are a prime example of this phenomenon.

Usually, they are formed when there is a risk of a production shutdown with high follow-up costs or when development and industrialization projects fail to reach their milestones. Mechanisms are then set in motion that are common practice and pathbreaking to achieve the desired results. How do these mechanisms work? Where in the company can they still be deployed with success and what are their restrictions? And why are they unavoidable, despite every effort?

A task force is formed when a specific problem needs to be resolved within a very short time and a great deal of money is at stake. On the one hand, there are requirements and performance indicators regarding deadlines, costs, and quality to be considered and, on the other hand, a team of experts that has been put together on a temporary basis. The attentive reader might possibly recognize that this description comes very close to the definition of a “project.”

HOWEVER, THERE ARE SEVERAL SIGNIFICANT DIFFERENCES TO A NORMAL PROJECT:

Basically, it’s already too late for the solution
A lot of time and money has already been squandered. Preventive measures have failed, and the effort is mainly about damage limitation. The goal seems unattainable – and yet it must be pursued by all means

Every day costs money
When it comes to delivery bottlenecks, for example, every minute of lost time can be measured directly in lost profitability per component and ultimately per vehicle. The pressure on the people involved can become unbearable.

The problem is incredibly complex
Open heart surgery is required. Every change to the strained system can cause effects that need to be considered in advance and no single process can simply be changed separately. Every measure needs to be scrutinized in terms of success, failure, and unintended side effects. Often a few simple, clearly communicated, aligned (de-escalation) targets are needed to help resolve the situation.

A task force has a prior history of escalation
The nerves of those involved are frayed, several attempts have already been made to solve the problem, personal careers are at stake, and trust has been undermined. On the one hand, a speedy and structured problem-solving is often hampered by the personal and political tactics employed by those involved, while on the other hand, the process tends to be fraught with nervousness and hectic activities. Calm, fact-based communication and effective leadership are often simply disregarded.

The markets are unforgiving
A delayed product launch goes hand in hand with the scheduling of new model series and always involves a considerable loss of profit and reputational damage. As a result, sales, controlling, and marketing teams understandably have limited patience for those in development, production, and the supply chain who are constantly striving to catch up on milestones and performance indicators. The pressure, therefore, is sizzling, demanding tangible signs of progress each day. These factors alone are a clear indication that a task force needs to operate with a variety of specific project management tools.

Task forces are like agile project management on steroids
The timing is very tight. The daily schedule starts in the early morning for the team with the daily check-in and ends with the daily check-out. In between, the agreed measures need to be rigorously implemented – independently and without lengthy committee meetings. Success, therefore, greatly depends on nominating the right team members. The right experts need to be integrated and the team spirit must be sound, regardless of the organization and job title, whether OEM, supplier, or consultant. In the end, the integrated efforts of those involved make all the difference.

Discipline and a keen focus on suction are basic requirements
It sounds so simple but is unfortunately not always given that scheduled agreements are adhered to. Unforeseen obstacles must be communicated and resolved immediately as they arise and not only when someone fails to provide the agreed result.

The structure of a task force covers the entire range of solutions and usually consists of several work packages. When setting up the work packages, it is important not only to address the obvious topics (e.g. “OEE increase”), but also to work on the underlying causes (e.g. “strategic resource management”). When forming the team, it should be borne in mind that everyone involved must actively collaborate and be aligned with the overarching goal as defined and guided by the higher management. It is key to manage interdependencies between work packages within the Task Force Team on a regular basis and with mutual support. This combination is the only way to solve acute problems and at the same time create a robust system.

Each measure must have verifiable objectives
In addition to precisely documenting each defined measure, it goes without saying that feedback on completion is provided at the agreed due date. Another decisive factor for ensuring success is the prior linking of the measures with the expected impact on a targeted key performance indicator. This requires some effort and practice but leads to two elementary effects: a) A measure without a defined outcome will simply not be implemented, as it would be wasteful. b) A measure with a defined outcome is then not only reviewed regarding implementation, but also for the fulfillment of the expected outcome.

Task forces align with and follow higher management
There is no time for committee meetings and long decision-making processes. In a task force, serious decisions sometimes need to be made several times a day. Depending on the size of the company, the uppermost hierarchical levels need to be either directly involved on a daily basis or at least accessible. If they are not directly involved, decisions must be prepared precisely with the necessary information and clearly communicated. The required effort should not be underestimated and must be prepared in parallel to the technical work. However, the power of facts is there to override political controversies.

Empathy and emotional intelligence are critical success factors
This point may sound surprising, given that task force situations are connected to a military style of communication. Ultimately, the personalities involved need to be understood and positively motivated. This requires an excellent understanding of the respective situation and motives for action by the task force leadership and the consultants involved.

However, a sustainable improvement of the situation can only be achieved if people act intrinsically different afterwards, a fact that also highlights the limitations of task forces in general, as they only work effectively within a clearly defined timeline and organizational framework. The preceding paragraphs clearly illustrate the significant pressure on the people involved, leading to long-term sustainability concerns. The usual organizational and operational structures are also temporarily insignificant. Sooner or later, the situation must be transitioned back to a robust and efficient disciplinary line management system.

For this reason, every good task force needs to prepare its own end from scratch
Criteria for de-escalation must be clearly and transparently defined. Embedded in an overarching schedule, they must be regularly communicated and not subject to change. Once the targets have been achieved, the task force is no longer required. The criteria therefore need to be defined so that a return to normal working mode within robust processes is subsequently possible. The combination of deliberately defined work packages and criteria for their de-escalation therefore determines the subsequent sustainability of the success right from the start.

What happens next?

We at Berylls have spent decades honing our expertise in mastering task forces within the operations environment. The focus in terms of content has increasingly shifted towards e-mobility components but is not limited to this field alone. The task force life cycle we have developed as a result is a unique approach that incorporates all the success factors mentioned above:

Figure 1: The Berylls task force life cycle

Authors
Heiko Weber

Partner

Fritz Metzger

Partner

Christina Granitz

Project Manager

Source: Berylls

Pronounced for us was the successful transfer of experience from more than 100 successful de-escalated task force projects to enable early escalation preventive programs in future development and production planning. This is where our tried and tested Safe Launch System Certificate comes into play, which certifies that suppliers and OEMs have their development, industrialization and launch management processes under control.

But we wouldn’t be “but dyfferent” if we didn’t go one step further with our clients. When it comes to monitoring and controlling a task force, we offer our tool called “elyvate”. Our colleague Christian Kaiser has already described the additional use of IT tools and artificial intelligence for efficient support here.

In our following articles, we will also look at how task forces can lead to success, even in a well-oiled marketing machine or a dynamic sales environment. The instruments simply need to be adapted to the respective circumstances. Nevertheless, based on our experience, we strongly advise our clients to have a standardized task force approach as well as management mechanism for early problem identification at hand so that it can be swiftly utilized as and when needed.

Fritz Metzger

Fritz Metzger (1986) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, in February 2021. He is an expert on automotive operations.

Since 2011, his focus has been on strategic alignment and operational efficiency improvement of automotive manufacturers and suppliers. He also advises top management in critical situations, including R&D and industrialization task forces and relocation and restructuring initiatives of plants and complete suppliers. The challenges of e-mobility are always in focus.

Before joining Berylls, he was a director at international strategy consultants PwC Strategy&, as well as a sales and project manager at a medium-sized supplier and mechanical engineering company.

Fritz Metzger is a trained industrial engineer with a degree from ESB Business School Reutlingen. He also holds an MBA from the University of Salzburg.

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Heiko Weber

Heiko Weber (1972), Partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), is an automotive expert in operations.

He started his career at the former DaimlerChrysler AG, where he worked for seven years and was most recently responsible for quality assurance and production of an engine line. Since moving to Management Engineers in 2006, he has been contributing his experience and expertise to projects for automotive manufacturers as well as suppliers in development, purchasing, production and supply chain. Heiko Weber has extensive experience in the development of functional strategies in these areas and also possesses the operational management expertise to promptly catch critical situations in the supply chain through task force operations or to prevent them from occurring in the first place.

As a partner of Management Engineers, he accompanied the firm’s integration first into Booz & Co. and later into PwC Strategy&, where he was most recently responsible for the European automotive business until 2020.

Weber holds a degree in industrial engineering from the Technical University of Berlin and completed semesters abroad at Dublin City University in Marketing and Languages.

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