Why This One Decision Will Make Or Break Automakers In 2016

Fritz Onnasch

Overall, the automotive industry is experiencing an uneven recovery from the economic crisis worldwide. According to estimates from PricewaterhouseCoopers, annualized sales in North America are expected to reach 16 million cars in 2015 – up from 13 million in 2008. Europe is working its way through a six-year sales slump, while sales are falling in Russia (-25%) and South America (-15%), and the Indian market continues to be mixed. Even China, the world’s largest vehicle market, is experiencing slow growth.

What’s more striking is how the industry is reinventing the value its vehicles bring to consumers’ driving experiences. Connected cars and autonomous functions have been introduced to provide features such as collision prevention, built-in navigation systems, and automatic sensing and reaction to changing environmental and driving conditions. Considering that 78% of consumers had kept their cars for 10 years or more in 2012, the industry is hoping that tomorrow’s consumers will reconsider waiting so long before buying a new one.

While this is clearly the byproduct of embracing digital technology, there are greater impacts that go beyond enticing consumers to buy. McKinsey recently reported that 90% of automotive executives believe that connectivity and autonomous driving will change or broaden business models. Simultaneously, 80% expect new competitors to emerge and challenge the industry – due in large part to digitalization and in-vehicle connectivity.

Digital first: The automaker’s mandate in 2016 and beyond

It’s quite obvious that significant changes are happening these days. There is more sharing of platforms and modular systems. Regulatory pressures are tightening, and prices continue to be flat. Plus, consumers are demanding more connectivity, improved safety and ease of use, and digital access to information needed to make purchase decisions.

Shorter product cycles, greater production flexibility, and just-in-time delivery from the production line to dealership floor: These capabilities will help automakers win in 2016 and beyond. However, none of them are manageable without a digital-first mentality. Through the use of technology such as predictive analytics, Internet of Things sensors, mobile and cloud solutions, and in-memory computing, they can better adapt to ever-changing regional and segment patterns of supply and demand and adjust production, the supply-chain footprint, and product portfolios accordingly.

In an industry longing for the pre-2007 heyday of booming sales, executives are typically skeptical of the investment required to adopt a digital-first mindset and transform operations to serve a very fickle and budget-conscious consumer base. Yet, it is a vital move to not only grow the business, but also revive an entire industry.

Automotive consulting solutions: Your guide to digital transformation

Just like you wouldn’t go on a road trip without a map or navigation system, your business shouldn’t go about your digital journey alone. Digital innovations can optimize business processes and efficiently overcome these five perplexing market challenges.

  1. Lean manufacturing: Give your customers what they want, when they want it, and in the right order. By incorporating handling-unit management throughout the supply chain, customer-specific needs are introduced into the production process from the beginning of the production process.
  1. Production planning: Understand performance and risk early and accurately. Not only does this ability enable an optimal flow of materials to production, but it also positions the business for responsive, streamlined, and agile operations.
  1. Quality issue management: Build collaboration and sustained quality control into your quality management processes – from engineering and manufacturing to continuous improvement. With this approach, you can extend quality management beyond the confines of traditional inspection tasks to defect prevention.
  1. Sales and distribution: Know how consumers use your products and services – no matter how preferences evolve. By tapping into real-time insights, you can drive innovation and build consumer loyalty.
  1. Warranty management: Minimize errors and redundant effort with automated warranty claim submission and reimbursement.

Is your automotive business ready for a digital transformation? Find out how SAP Automotive Consulting Solutions can help by visiting www.sap.com/acs.


About Fritz Onnasch

Fritz Onnasch is the Service Portfolio Manager at SAP.