What does the future hold for the traditional automotive industry? From the potential failure of Nissan to the controversial closure of factories by VW, long-established, familiar brands are struggling to compete with the new market dynamics. The issue is not just the swathe of cheaper, government-subsidised vehicles from China. Or even the radically changing driver expectations and fast-diminishing customer loyalty. The industry has not failed to recognise the demands created by the new software-led, function-oriented car design and build model. These challenges are accepted. The problem is that the industry remains mired in an endemic inability to truly change.
Car manufacturers may have seen the writing on the wall for a decade. They have looked to streamline processes and embrace technology innovation. Yet when Chinese cars have a 20-month time to market and their European competitors take nearly three times as long, something is still very wrong.
Go deeper with GlobalData
Technology is a vital enabler in change but the industry urgently needs to let go of traditional processes, culture and mindset. And that means moving away from cherry-picking areas of change and the implementation of tactical digital solutions that address just one issue. Automotive companies must urgently overhaul the entire business, from process to mindset, insists Bodo Philipp, CEO, MHP Consulting UK, a Porsche-owned global management and IT consulting firm.
Last Chance
How long can the automotive industry in the UK and Europe rely on brand value? It is no longer valid to argue that the new Chinese entrants are immature. Or that they lack customer appeal. For a digitally native generation, a car that greets the passengers, offers to take their picture and then posts it on Instagram is far more relatable than a brand relying on decade-old movie tie-ins.
The enormous gulf in time to market between old and new manufacturers is not just accelerating the innovation offered by new entrants. It is also allowing these companies to attract the instant gratification cohort that sees no reason a new car should not arrive as frequently as a new phone. In contrast, the time to market for legacy automotive companies continues to extend.
New market entrants, especially those from China, are able to introduce products based on an entirely different design, build and deliver model. In contrast to traditional automotive companies struggling to retrofit new thinking onto a completely outdated operational model, they have been able to embed function-centric vehicle creation from day one. And while new entrants may have sacrificed some build quality and reliability in the push for 20-month time to market and lacked the robust after-market infrastructure, these competitors are maturing fast.
Perhaps more significant is the fact that new automotive companies have a completely different notion of ‘compelling’ when it comes to cars and driving. While Lexus is emphasising its smooth luxury driving experience with a rerelease of its iconic Champagne Glass advert, in stark contrast BYD is promoting its self-driving hyper car with its ability to “jump” over road spikes and water. There is an enormous gulf between the gaming/ social media style of the new generation and the calm, comfortable focus of the traditional automotive landscape. Just how much longer will old brand values, even traditional vehicle concepts, sustain a legacy automotive industry that is struggling for money, sales and customer loyalty?
Digital opportunity
The shift towards function-oriented development has required new processes. It has pushed traditional vendors to invest heavily in dedicated software expertise and adapt tried and trusted supply chains to include sensors, radar, cameras and ECUs. Automotive vendors are also in the vanguard of technology exploration, leveraging innovations in Artificial Intelligence (AI) and Virtual Reality to quickly reproduce sophisticated design models, tweaking and innovating in real time.
Designers and engineers can collaborate from different countries, using Meta Quest and Apple Vision Pro to experience together the materials, haptics, even reflections of the concept car. Viewing insights in real-time and effectively conceptualising changes allows the collaborative team to understand the impact and make decisions quickly. AI is enabling companies to run multiple design concepts simultaneously, combining financial evaluations, regulations and design ideas through rapid iterations in real-time, shaving weeks, even months off the process. The overall result is more confidence in decision making, leading to faster, more efficient outcomes. Digitisation is without any doubt fundamental to transforming the time to market for automotive manufacturers. And yet, time to market is getting longer, not shorter due to the complexity and challenges associated with delivering function-oriented design within traditional automotive manufacturing processes.
Systemic and systematic change
Digitisation is a foundation but technology alone will not be the solution. The issue is automotive companies’ inability, to date, to change internal behaviour, culture and processes. The thinking is there but they have failed to activate and operationalise the new measures essential to achieving a new automotive paradigm.
This is where an independent third party can be a powerful enabler of change – not only by analysing what is required but actively overseeing and implementing new processes and embedding new culture and mindset. End-to-end support leveraging Process, Methodology, Tools, Organisation and Data (PMTOD) can transform the speed and success of change programmes. An organisation with expertise in automotive and a background in software development can both help organisations define their direction and, critically, also work together to implement and execute the shifts required to achieve that goal by ensuring all employees are part of the process and have the support needed for long term success. The new automotive model, culture and thinking must be radically different.
Companies will have to step away from the traditional overspecification of every aspect of the process, from design through testing and accept a less rigorous, but still safe, 100% to achieve a faster time to market. They will have to achieve a new matrix that breaks down the familiar silos. They must do more than encourage collaboration between diverse teams by actively demanding that cooperation. In the process, they will have to negotiate employee and union grievances and safeguard funding – all whilst accelerating innovation, hitting new targets for Electric Vehicle sales and meeting customer expectations. It is incredibly challenging but without this level of change, the current industry players will fail.
Keeping up with the pace of change
The automotive market is experiencing the most extraordinary pace of product innovation and technology, new market dynamics, business models, and, as a result, customer expectations. Legacy manufacturers are squeezed from all directions and, with finances failing and customer loyalty dropping, fundamental, systemic change is urgent. Chinese challengers cannot be countered by a tweak at the edges to encourage better collaboration through the design and development process. Piecemeal plans to build software expertise in one area or build in further efficiencies to the supply chain are not enough. The industry requires a radical, end-to-end overhaul of mindset, culture and process.
Automotive manufacturers need to change now. It currently takes four to five years to bring a new car to market – and if that new vehicle does not match up to cheaper, more innovative alternatives, the writing will be on the wall. Companies know this. They know they need to change. It is now urgent that automotive companies make a wholesale commitment to take actions today that truly embrace end-to-end transformation.
