Until the start of the COVID-19 crisis, the global automotive industry was in the process of major transformation, partially driven by the disruption of hybrid & electric technology. There will be a significant short-term blip in sales, but we believe the crisis, despite the reduction in oil prices, will result in an acceleration toward electric vehicles.
In developed markets, the emphasis is on product design and innovation in fuel and electric technology. More importantly, cost also remains a critical issue. First stage transformation in this area has been moving sub-assembly/assembly manufacturing from the OEM to component manufacturers and leveraging as many of the platforms/components across models.
The second phase has been focused towards developing a global international component/assembly sourcing network across Asia, where labor cost and design capabilities can be leveraged globally.
There is also the obvious opportunity to sell products across the developing markets where automotive growth rates are running double digits. These markets not only provide opportunity to sell automobiles as indicated above, but also to source components cost effectively. The advent of electric will require a new group of Tier 1, 2 and 3 suppliers as many old components may no longer be needed.
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- OEMs: Cedar has worked with OEMs in the past in assessing global opportunities, and as result of the new global crisis, the markets will need to be re-mapped and re-prioritized. In some cases, exits may be needed, and acquirers or local partners may need to be found. The market penetration of electric needs to be better understood, and will vary by country, so appropriated plans will need to be developed. Lastly, the global supply chain from China may need to be de-risked by increasing sourcing from India and other markets.
- Component suppliers: Component suppliers will also need to reassess global markets & supply-chains along with, and separately from, their OEM arrangements, After-market may need to be given more weightage due to slower new vehicle sales. Additionally, operating costs will need to be reduced.
- Dealer networks: Dealer networks will need to be realigned and re-configured. Customer segments, product and pricing needs will change, and digital will need to be incorporated into the model, both from a sales and service perspective.