Infosys Insights: The state of the global automotive industry
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The global automotive industry is divided, with the EU experiencing a decline while the US, Japan, and China show growth due to differing economic strategies. Changing consumer preferences are shifting the focus from car ownership to car usage, prompting OEMs to innovate beyond traditional vehicle offerings. As autonomous driving and advanced technologies develop, the industry must adapt and explore new business models to enhance customer value and create additional revenue streams.
Infosys Insights: The state of the global automotive industry
- 1. - Dr. Martin Lockstrom The State of the Global Automotive Industry: A Tale of Two Gears Insights
- 2. The Macro View If the average car has five gears, the global automotive industry has two. Of the major global markets, the European Union (EU) posted a disappointing drop of -8.2% for 2012, whereas the United States (US), Japan and China showed growth of 9%, 26% and 4.3%, respectively. Why this stark contrast between the EU and the rest of the world? For starters, a comparison of the EU and the US shows that the two have embarked on distinctively different macro economic paths. The US, fearing a repeat of the mistakes from the Great Depression in the 1930s, has used its unlimited money- printing ability to launch massive fiscal stimulus measures by injecting trillions of dollars into the economy. The EU, on the other hand, kneecapped by a“one-size-fits-all”monetary approach and limited by external lenders, has been forced to adopt severe austerity measures that stymie any tendency to growth. China is growing at a more moderate pace in the wake of the astronomic growth right after the financial crisis in 2008-2009. Japan, finally, is seeing a healthy rebound in the wake of the Fukushima disaster and the launch of a massive fiscal stimulus program. In sum, we see a two-gear global automotive market – the EU in reverse, and the remaining key markets in top gear, if not quite overdrive. The Consumer View From a consumer perspective, geographic markets are less defined by country borders and more by the developed- developing dichotomy. In most developed markets, there is a trend of change in the traditional paradigm of“car ownership”– which is now moving towards“car usage”. Meanwhile, in many emerging markets, the car represents one of the key symbols of socioeconomic status. Furthermore, in many urban areas, especially in developing countries, congestion and pollution are becoming increasingly serious, calling for new solutions for consumer convenience and safety. So, global Original Equipment Manufacturers (OEMs) have to delicately balance frugality, luxury and sustainability. New Business Opportunities Beyond the Car This means that new business models have to be developed in order to accommodate changing consumer demand. For instance, car customer value in the future will not be so much about driving from point A to point B, but rather about providing the best travel experience, regardless of whether it takes place entirely within the
- 3. car or in a multi-modal fashion involving for instance, trains, aircraft etc. This means that automotive OEMs have to think beyond the driving seat about the additional services they can deliver in a single product in the shape of a car. For instance, there is a whole lot to do in terms of car entertainment; who said that it shouldn’t be possible to provide an app ecosystem for cars? As the share of electronic content is continuously increasing in cars, this is more imperative than visionary idea. In addition, with support from social media, a whole range of potential new services can be created; for instance, based on the demographic background of the driver (or passengers), intelligent context-sensitive information about gas stations or restaurants can be provided to the car even before the need is felt. Moreover, who says that the cars of the future will need drivers? While driving a car is usually a pleasurable experience, navigating through rush hour traffic on the daily commute, is not. Autonomous driving is already a reality; for instance, Google Car has logged thousands of miles of autonomous driving. For safety and regulatory reasons, this idea has yet to become mainstream though. Also, who said that cars have to behave like chaotic individuals? With autonomous cars, the ideal case would be one where cars not only care about themselves, but also make every decision, such as turning or accelerating, by considering the behavior of all other cars within a certain radius – as part of a finely synchronized swarm.
- 4. © 2013 Infosys Limited, Bangalore, India. All Rights Reserved. Infosys believes the information in this document is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of other companies to the trademarks, product names and such other intellectual property rights mentioned in this document. Except as expressly permitted, neither this documentation nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, printing, photocopying, recording or otherwise, without the prior permission of Infosys Limited and/ or any named intellectual property rights holders under this document. About Infosys Infosys is a global leader in business consulting and technology solutions. As a proven partner focused on building tomorrow’s enterprise, Infosys enables clients in more than 30 countries to outperform the competition and stay ahead of the innovation curve. Ranked in the top tier of Forbes’ 100 most innovative companies, Infosys – with $7.4B in annual revenues and 150,000+ employees – provides enterprises with strategic insights on what lies ahead. We help enterprises transform and thrive in a changing world through strategic consulting, operational leadership and the co-creation of breakthrough solutions, including those in mobility, sustainability, big data and cloud computing. Visit www.infosys.com to see how Infosys (NYSE: INFY) is Building Tomorrow’s Enterprise® today. For more information, contact [email protected] www.infosys.com Author Profile Dr. Martin Lockstrom Principal Consultant, Building Tomorrow’s Enterprise, Infosys Labs Martin is a specialist in Supply Chain and Operations Strategy, Outsourcing/Offshoring and International Management. During a six-year stint in China, he established the research and education activities at the SCM, Sustainability and Automotive academic centers at China Europe International Business School, Shanghai. He established the first endowed chair for Purchasing and SCM in China at Tongji University, Shanghai, and was also responsible for setting up Supply Chain Management Institute China, an international network of SCM research and education hubs. Martin co-founded Procuris Solutions, an IT company specializing in SCM-related solutions, offering consulting services to companies like Accenture, Ariba, BMW, Clariant, Dell, Dow, Ernst & Young and Intel, among others. He has a Ph.D. in Supply Chain Management from European Business School, Germany, a bachelor’s and master’s degree in Industrial Engineering and Management, from Chalmers University of Technology, Sweden. He speaks Swedish, English, German and Chinese, has published over 50 articles and papers and presented at more than 60 conferences. Summary and Conclusion Geely Chairman Li Shufu once said that“a car is just a couch on four wheels.”While a tad oversimplified, this comment nevertheless highlights the fact that the car as such is becoming increasingly commoditized and its value and importance are on the decline in some markets. Hence, OEMs have to ask themselves what customer value in the industry is all about. Only by doing so, will the mind be free to identify and explore new revenue streams that the industry so desperately needs.