TRANSFORMATIONAL THEMES IN THE AUTOMOTIVE INDUSTRY – THE IMPACT OF COVID-19

The COVID-19 crisis arrived at a time when the Automotive industry was already experiencing a perfect storm of disruption and transformation.

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Elevenci’s Managing Consultant Mike Walters was recently invited to present as a Headline speaker at a major international automotive conference on ‘Transformational Themes in the Automotive industry and how COVID-19 may serve to shape and impact these themes in the immediate and longer term’.

The full video of this presentation is embedded below.

International Assistance Group

Key Elevenci insights and messaging within Mike’s commentary include:

Key Automotive Themes Pre-COVID-19

‘Reinvent to Survive’

The beginning of 2020 was truly a period of unprecedented change in the Automotive industry.

Multiple diverse transformational themes and wider industry challenges were crystallising together at the same time to put significant pressure and stress on the entire Automotive ecosystem.

This change and transformation agenda extended across all the key organisations in the sector, impacting OEMs, Finance Companies, Leasing/Mobility Providers and wider Value Chain Suppliers/Partners in equal measure.

The stark reality was that we were at a point in early 2020 where many industry organisations where having to substantially
reinvent themselves to simply survive.

The transformation of Automotive was truly multi-dimensional with a key element being the rise of emerging technologies, tools and innovation from beyond the pure automotive world – key examples included Cloud Computing, Machine Learning, AI and Blockchain.

The key trends that were shaping this ‘perfect storm’ of disruption include:

  • Electric and Alternative Drivetrains
  • Autonomy and Connectivity
  • Environmental Agenda
  • Mobility and MaaS
  • Consolidation and Convergence
  • Automation, Robotics and AI
  • New Entrants and Disruptors
  • Chinese Vehicle Sales
  • Changes in Retailing and Networks – ‘Rise of Digital’
  • European Union Emissions Legislation

The Automotive industry also faced significant structural and operational challenges characterised by old, siloed, legacy models poorly suited to the demands of a transforming, converging ecosystem and rapidly evolving customer demands (e.g. subscription, usership and MaaS). Many OEMs, leasing and automotive finance companies continued to suffer from significant overlap and duplication across operating models, IT platforms and innovation initiatives. Formerly agile organisations had become increasingly complex and cumbersome.

Our honest opinion

The presentation details a number of key Elevenci views and insights around COVID -19 and its initial impacts on the Automotive Industry:

This is something totally new

  • Public health is the trigger, not financial
  • There has been unprecedented support and intervention by governments
  • Not a liquidity crisis and global financial markets were relatively well positioned

We are still at an early stage

  • Summer 2020 is probably only the ‘end of the beginning’
  • Speed and ultimate timescales for recovery are impossible to define
  • Unemployment and personal debt impacts will extend well into the future
  • The ‘New Normal’ is still a long distance away

A Checkpoint and Gateway

  • COVID-19 has delivered an unexpected transformational ‘stop and check’ opportunity
  • Organisations now need to review their strategies, roadmaps and change portfolios – an immediate impact assessment
  • Massive financial impacts means that every cent/penny of investment spend counts even more – the prioritisation, business case and ROI expectations for every initiative need to be revisited

Significant Impact on Existing Transformational Themes and Trends

  • Acceleration, Retardation or Modification – a variable model
  • New trends and long-lasting impacts already emerging

The presentation also looks further forward – into the medium and longer-term future.

It provides an outlook and views as to how Elevenci believes COVID-19 will impact three of the key industry themes – Auto Retailing, Mobility and Digital.

Auto Retailing and Networks

  • OEMs continue to reduce and restructure their networks
  • Increased dealer group consolidation
  • Decrease in physical sites and staffing levels
  • Continued profitability challenges – e.g. EV impact
  • Increased focus on aftersales and used car retailing
  • Increased acceleration of digital over traditional bricks and mortar – both new players and OEM direct digital offerings
  • Probable POS Finance declines in showroom
  • Continued adoption of new retail formats and technology – e.g. Virtual Reality
  • Changes in OEM:Dealer relationships? – e.g. Agency and direct models (e.g. Lynk & Co)

Mobility and MaaS

  • Demand for Mobility and MaaS will return – the long-term strategy and direction is robust
  • Health and safety will increasingly be a key measure – legacy of COVID-19
  • Continued innovation – e.g. wider multi-modal demands
  • Increased standardization and aggregation of technology and components
  • Continued investment by OEMs and move to Mobility – e.g. Toyota Kinto
  • Mobility to continue to drive industry convergence – help to remove OEM:Retail:Fleet silos

Digital

  • Increased incorporation of automation, AI and robotics within digital offerings – efficiency, behavioural and analytical benefits
  • A drive to digital simplification and aggregation
  • Continued industry disruption through new entrants
  • Sophisticated omnichannel service and customer experience opportunities increasingly realized
  • Increased sophistication in retail and fleet digital Apps and portals – e.g. integrated Virtual Reality, Video facilities etc.
  • Contactless an enduring outcome from COVID-19

Final thoughts and Takeaway:

COVID-19 has hit an industry already reeling from a perfect storm of disruption and change. The transformational agenda will continue but the epidemic will have diverse, long lasting impacts.

Concluding thoughts and views include:

  • Inefficiencies Exposed
    COVID-19 has further exposed and spotlighted structural and operational deficiencies in the industry – e.g. silos, retail model and digital maturity
  • A New Normal
    The future ‘New Normal’ cannot yet be defined but existing key themes will survive and prosper in the longer term (e.g. Mobility and Digital) – COVID-19 will be a catalyst for further innovation and accelerated change
  • Opportunities for Automation
    COVID-19 will further encourage organisations to accelerate the adoption of automation, robotics and AI technologies and solutions
  • Challenges for Autonomy
    OEMs to defer or decelerate plans due to high cost of investment and long timeline – Possible 5+ years delay and increased focus on level 3 autonomy not level 4/5?
  • Electrification Powers Forward
    ICE replacement will accelerate with Electric, and longer-term, Hydrogen fuel cell vehicles proliferating and significantly increasing market share
  • Agility and Resilience to the Fore
    ‘C suite’ retrospectives post COVID-19 – how did we perform? Did our platforms and processes stand up to the test? Accelerate ‘clear out’ of restrictive legacy platforms and outdated business models

Fancy an informal chat over coffee about how Elevenci can help you navigate the new opportunities and demands that
COVID-19 is presenting?

Elevenci has developed powerful new thinking about the post COVID-19 landscape: translating this into tangible services and
capability to help our clients maximise the potential of the recovery curve and gain competitive advantage. We would love to
discuss this with you. No fee, no obligation, no fuss.