12/2/2013 | 2 MINUTE READ

Eight Megatrends Shaping the Global Light Vehicle Industry

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Fast-changing events across the automotive ecosystem are impacting the operating environment, customer preferences, competition and supply chain.

Share

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Fast-changing events across the automotive ecosystem are impacting the operating environment, customer preferences, competition and supply chain.

EY's Global Automotive Center has identified eight megatrends that will affect the industry globally for years to come. In this executive summary, the firm summaries shifts that will significantly impact the revenues, costs and profitability of the industry during this decade of tremendous change. From the social media phenomenon to structured government initiatives, these trends influence vehicle manufacturers, suppliers and dealers on multiple fronts:

Governments push for safer, cleaner transportation

Governments are focusing on safety, resource conservation and environmental quality. In response, carmakers are shifting to a cleaner, safer and more diverse range of personal vehicles. With these new vehicles comes a new array of penalties and incentives that will shape consumer decisions about ownership and use.

Manufacturers develop new value propositions to meet shifting mobility needs

Consumers in the developed markets have different mobility needs than those in emerging markets. Continued urbanization is likely to lead consumers in mature markets to see alternatives to traditional car ownership such as car-sharing and integrated mobility services even as it leads people in the developing world to buy more cars.

New players take the lead in the mobility market

New players will enter the market because of advances in technology and unmet consumer needs. Non-automotive companies are providing services, such as car-sharing, mobility integration, usage-based "black-box" insurance that sets premiums based on real-time monitoring of driving performance, electric vehicle integration and advanced car entertainment systems.

Social media redefines automotive marketing

The traditional means of marketing a vehicle has shifted dramatically. The social media phenomenon has brought access to Internet-based information and uncensored feedback, including the opinions and perceptions of other consumers. These are sources that automotive companies cannot control or restrict. At the same time, the new social media platforms make it possible for producers to create much closer bonds with customers.

Collaboration among industry stakeholders

Technology innovations driving closer collaboration, not just between carmakers and their suppliers but with technology companies and telecoms that were not a part of the traditional auto industry. This greater level of coordination is being driven in part by a need to reduce R&D costs, decrease risk and speed time to market.

Portfolio rationalization

Most vehicle manufacturers in developed countries are focused on sustainable, profitable growth and not just volume. But in emerging markets, the same producers are striving for scale as fast as they can.

New risks from globalization

Carmakers are being challenged to devise radical operational strategies to tackle the new risks emerging from globalization. Supply misalignment, volatile raw material prices, changing regulatory policies and a shortage of qualified workers in developed markets present unprecedented hurdles for today's auto industry. The need for a flexible supply chain has never been greater.

Sub-tier suppliers are being pushed toward new strategies

Cost controls by vehicle assemblers and their top-tier suppliers during the global recession exposed the vulnerability of sub-tier suppliers, especially their relatively weak financial health and the absence of product, market and customer diversity.

Those who have survived will need to become increasingly strategic. The winners are likely to jettison non-core businesses for greater profitability and diversify their risks by broadening their customer base and developing products that extend beyond the automotive ecosystem.