Structural changes in the automotive industry

17 Jul 2019

Published in: Blog

The recent attempt by Fiat Chrysler to merge with Renault and the rumoured bid for JLR by PSA signals a structural change in the automotive industry that manufacturers in the supply chain and governments need to seriously think through.

It’s so hard to envisage that just 60 years ago, to have access to a car was a rare privilege, the growth of the automotive trade has mirrored the ‘car boom’, motor manufacturers and their supply chain have by and large thrived as a result.

Environmental concerns about petrol drove manufacturers to develop more advanced diesel power plants but these have now been identified as damaging to health.

A move to electric or other renewable power is seen as inevitable. Global climate agreements demand it and the motor industry face a massive challenge with advancements needed quickly, in battery technology, energy harvesting, range, charging availability and speeds all desperately needed as the anecdotal evidence of early adopters gain the ‘oxygen’ of magnified publicity.

Motor manufacturers know that to meet these and other challenges associated with completely changing their manufacturing, engineering and assembly processes whilst continuing to generate profits for their shareholders and cash flow to keep their banks happy is too big a challenge to face alone.

Hence collaboration, merger and rumours of merger abound, it’s highly likely that there will be further collaboration with tech giants to deliver mass produced automotive platforms for the likes of Google, Microsoft, Apple and others.

It’s logical; a classic example of ‘doing what your best at’. Motor oem’s have developed processes that assemble in the most efficient way and the tech industry have developed techniques that advance processing powers and innovations that bely the imagination of so many in a way that continues to miniaturise and efficiently use power.

Tesla have been a pioneer but lack the expertise and scale to assemble cars, so far, at least, in a manner that makes their products affordable to the masses and reliable.

They also lack an established brand which therefore presents a ‘whiff’ of potential unreliability which cannot be covered by a warranty when only backed by a financial structure that has yet to see a profit.

Imagine the combination of an iconic premium motor brand with a similar tech brand... say an Apple Porsche?

So what does all this mean for manufacturers and governments? Manufacturers will likely have to get used to supplying more generic components which will be common to platform systems that cross many more brands than now. They will need to be able to supply these components globally and in quantities which meet the needs of the oem’s whilst having imposed on them even tougher ‘cost downs’ than ever before. This will require investment, innovation and continuous improvement. It will also remove once and for all, the option for businesses to avoid trading internationally. It will no longer be an option. It will become essential to know how to trade effectively across borders with manufacturing groups that are multinational. The real issues here will not be European bloc based, they will be Global and manufacturers will need to become experts in addressing them.

There is of course a huge opportunity to develop the technologies that the industry and its associated industries will need, for example, materials that are lighter than ever before. Power technology will need to be advanced as will the infrastructure to support it. At present our national grid just isn’t able to support the electric cars currently on the road, let alone the expected boom as consumers progressively move away from internal combustion power.
Innovation to harvest power from motion, braking and elsewhere will all have key roles to play and of course, necessity is the mother of invention.

The smart governments will inspire support and invest in their manufacturers, scientists and populations to be at the forefront of this technology.

It all seems daunting but it’s so easy to forget that we live in the history of a planet which has existed for millions of years. Just over 100 years ago there was no such thing as the motor industry and if you wanted to travel you either boarded a very rickety and slow train, jumped on a horse or walked.

100 years has seen so much progress, the next 30 years will see much much more. Manufacturers need to seriously plan whether they want to thrive over that time or become a casualty consigned to history.

Submitted by Elodie from Crowe U.K. LLP
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