Automotive: current challenges amplify an already critical situation

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The automotive industry has seen a massive decline in all markets, with a short-term reduction of up to 80% in March. This comes at a time characterized by the most significant transformation the industry has seen so far: OEMs must rethink automobile, from being a manufacturer to providing individual mobility. Suppliers balance two strategic directions: global cost competition and being an innovation leader in new mobility. While this transformation offers many opportunities, it comes with a financial burden that is now amplified by the crisis, leading to significant liquidity concerns.

Industry trends offer reason for optimism

Despite the current crisis, we see five distinct developments that offer reason for optimism in the industry: 

  1. Individual mobility remains a strong and growing market with automotive being very well-positioned
  2. Bold decisions regarding product portfolio and investments support competitiveness
  3. Huge momentum to finally go for the “Digital Enterprise”
  4. Global regionalization will redesign automotive supply chains
  5. New entrepreneurial spirit will create a new dynamic of transformation

Which actions should be taken?

After successfully stabilizing the business, industry players need to rearrange strategic directions towards the new potentials and challenges that lie ahead. We see three key elements for resetting the course in the longer term: 

  1. Employ a greenfield attitude for digitization in all areas
  2. Focus on execution and fast decision-making
  3. Develop a bold M&A strategy