The final wake-up call for Aftersales – Spotlight on Germany

Munich, May 2024

The final wake-up call for Aftersales

Munich, May 2024

F

or as long as we can remember, the aftersales business has been the cash cow within the automotive industry. 

Both OEMs and dealers willingly accepted lower vehicle sales margins, knowing that aftersales services contribute significantly to annual profits.

Increasingly, dealers are forging partnerships with emerging players, particularly from China, as they find themselves grappling with dwindling profits from established OEMs. The pivotal factor?

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Berylls Insight
The final wake-up call for after sales - spotlight on Germany
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Authors
Paul Kummer

Partner

Florian Tauschek

Associate Partner

Tobias Detzler

Project Manager

Paul Kummer

Paul Kummer (1983) joined Berylls Strategy Advisors, an international strategy consultancy specializing in the automotive industry, as a partner in October 2021. He is an automotive downstream expert.
He has been advising automotive manufacturers in a global context since 2010. He has in-depth expert knowledge in the areas of sales and aftersales. His other areas of expertise include growth strategy development, business model development, portfolio optimization and digital transformation.
Prior to joining Berylls Strategy Advisors, he worked for Monitor Deloitte and Accenture.
Paul received his MBA from WHU Otto Beisheim School of Management and his Industrial Engineering degree from DHWB Mosbach.

Driving Success: Strategic Management of Automotive Software Projects

Munich, May 2024

Driving Success: Strategic Management of Automotive Software Projects

Munich, May 2024

T

The software supply chain is becoming increasingly critical to automotive success – yet OEMs and suppliers often struggle to manage it effectively. 

Now is the time to identify known and emerging problems in software supplier management, and re-think supply processes end-to-end.

As software-defined vehicles revolutionize the automotive landscape, effective management of the software supply chain becomes paramount. Discover the challenges OEMs and suppliers face and seize the opportunity to redefine end-to-end supply processes.

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Berylls Insight
Driving Success: Strategic Management of Automotive Software Projects
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Authors
Christian Grimmelt

Partner

Sebastian Böswald

Associate Partner

Fabian Dinescu

Senior Consultant

Julius Gaupp

Consultant

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls Strategy Advisors team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

Semi-annual Index Rebalancing

Munich, April 2024

Semi-annual Index Rebalancing

Munich, April 2024

T

he year 2023 was characterized by changes in the automotive industry. 

While numerous new suppliers and OEMs are trying to gain a foothold, the established OEMs are fighting for their position and strug- gling with their strategic realignment.

A high interest rate environment and low consumer spending due to the high inflation period suggest that 2024 will be another subdued year. Geopolitical tensions and disruptions in supply chains continue to prevent a sigh of relief.

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Berylls Insight
Semi-annual Index Rebalancing WTCAR 2024
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Authors
Dr. Jan Burgard

CEO

Malte Broxtermann

Partner

Björn Simon

Senior Consultant

Moritz Nold

Consultant

Dr. Jan Burgard

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer. In October 2011, he became a founding partner of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

Malte Broxtermann

Malte Broxtermann (1986) joined the Berylls team in 2014. After extensive experience as emergency medical technician, he has been working in consulting since 2012. He helps customer to leverage digital strategies & products across the entire automotive value chain. He is an expert in deploying machine learning-powered applications. As Partner at Berylls’ own unit for digital solutions, Berylls Digital Ventures, he focuses on scaling start-ups as part of our venturing practice.
Studied economics and international business at Maastricht University (Netherlands) and Queen’s University (Canada).

Navigating the labyrinth toward a regional sales & marketing organization

Munich, April 2024

Navigating the labyrinth toward a regional sales & marketing organization
Munich, April 2024

T

he automotive industry is in the midst of immense transformation, affecting all departments and established industry mechanisms. 

As part of that, sales and marketing functions are undergoing a huge shift toward a direct retail sales model. 

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Berylls Insight
Navigating the labyrinth toward a regional sales & marketing organization.
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Authors
Jonas Wagner

Partner & Managing Director

Theresa Stütz

Associate Partner

Philipp Enderle

Associate Partner

Paul-Alexander Bures

Senior Consultant

Jonas Wagner
Jonas Wagner (1978) is a Partner at Berylls Strategy Advisors and Managing Director of Berylls Mad Media. He has been a consultant in the automotive industry for more than 18 years. Wagner supports the strategy and organizational development of leading automotive manufacturers in the transformation of their sales and marketing. This includes the digitalization of the customer interface, the introduction of new sales models and the development of a data-driven sales and marketing organization. The focus is on optimizing the customer journey across all divisional boundaries – whether sales, after sales or financial services.
Before joining Berylls, he worked for the strategy consulting firm Oliver Wyman for automotive manufacturers in Germany and abroad.
He studied business administration at the Aarhus School of Business and at the University of Mannheim, focus on international management, marketing and controlling.
Theresa Stütz

Theresa Stütz (1991) joined Berylls Strategy Advisors in December 2017. Meanwhile she is associate partner and automotive downstream expert.

She has been advising automotive manufacturers in a global context both in the luxury and premium segment. She has in-depth expert knowledge in the areas of sales and marketing, particularly in the context of customer experience strategies. Other areas of expertise include strategy development processes, Go-to-market strategies and transformation management.

Theresa received both Bachelor and Master of Science in Management and Technology (Mechanical Engineering) at Technical University of Munich.

Philipp Enderle

Philipp Enderle (1988) joined the Berylls Group in March 2019 to support the ‘Future Sales’ division. With his experience in Automotive Captive Finance & Corporate Leasing projects, he has been actively shaping the Vehicle-as-a-Service offering within Berylls. Besides his focus on consulting for strategic and organizational challenges in Sales & Marketing, he follows his passion and supports his clients and the Berylls Group on their way to a sustainable future.

Philipp Enderle is a graduate engineer and has studied mechanical engineering at the KIT in Karlsruhe, Technical University of Munich & the University of California, Berkeley with focus on renewable energy.

The Battery Electric Vehicle „Dilemma“

Munich, March 2024

The Battery Electric Vehicle "Dilemma"?

Munich, March 2024

H

ow OEMs successfully navigate an insecure environment with volatile incentives and reluctant customers as well as retailers.

In 2024, the automotive industry is supposed to be at the tipping point of the transformation to the battery electric vehicle (BEV). This paradigm shift is exemplified by the imminent launch of over 50 new battery electric vehicle models in Germany alone, coupled with more than 15 Chinese brands operating in the fiercely competitive European market.

But will the shift happen, or will it be dismissed? The dramatic drop of BEV sales in December 2023 (compared with 2022), shows clear signals of a weakening commitment and volatile demand. So how do you navigate through this difficult time without wasting effort and budget?

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Berylls Insight
Berylls Mad Media Insight: The BEV "Dilemma"
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Authors
Jonas Wagner

Partner & Managing Director

Sascha Kurth

Partner

Nikolas Schoenenwald

Senior Associate

Henri Laux

Associate

Jonas Wagner
Jonas Wagner (1978) is a Partner at Berylls Strategy Advisors and Managing Director of Berylls Mad Media. He has been a consultant in the automotive industry for more than 18 years. Wagner supports the strategy and organizational development of leading automotive manufacturers in the transformation of their sales and marketing. This includes the digitalization of the customer interface, the introduction of new sales models and the development of a data-driven sales and marketing organization. The focus is on optimizing the customer journey across all divisional boundaries – whether sales, after sales or financial services.
Before joining Berylls, he worked for the strategy consulting firm Oliver Wyman for automotive manufacturers in Germany and abroad.
He studied business administration at the Aarhus School of Business and at the University of Mannheim, focus on international management, marketing and controlling.
Sascha Kurth

Sascha Kurth (1987) is a Partner at Berylls Mad Media, the Sales & Marketing Transformation unit of Berylls Group, a company specializing in the automotive industry. He is an expert in building, transforming, and restructuring sales and marketing organizations and has experience from more than 30 projects in this context. From his perspective, it is particularly important for sales and marketing organizations to have clear and measurable goals and a clear and comprehensible strategy for achieving them. Subsequently, the focus is on creating an effective, efficient, and self-optimizing organization from the right people, processes, partners, and necessary governance. Technology and data are crucial enablers for leveraging the efficiency and effectiveness of the resources used multiple times. This is essential to be competitive, remain competitive, and develop competitive advantages for the future. However, they are not an end in themselves but always enablers to achieve the goals (better). Sascha Kurth is convinced that building effective and efficient sales and marketing organizations is a crucial long-term competitive advantage for the entire company and that paid advertising (especially increasing the budget) should be one of the last initiatives to achieve strategic goals.

Sascha Kurth has been supporting automotive manufacturers in a global context since 2013. He has extensive expertise in goal-oriented sales and marketing planning, Paid, Earned, Owned- funnel management, data management platforms & customer data platforms, e-commerce platforms, programmatic advertising, customer relation management, smart KPIs, and management dashboards.

Prior to joining Berylls Mad Media, he supported leading OEMs, e-mobility start-ups, telecommunications companies, and fast-moving consumer goods manufacturers in their sales & marketing transformation at various consulting firms.

Decision time: Making the right production footprint choices in a volatile market

Munich, April 2024

Decision time: Making the right Production footprint choices in a volatile market

 

Munich, April 2024

U

ncertain demand in a weak economy, a mix of powertrains, skills shortages and the influence of subsidies are making network design more important - and more complex

Automotive suppliers and OEMS are being forced to make hard decisions about their production networks, as they focus on efficiencies and protecting margins in an uncertain economy. Existing footprints are also being challenged by the electric vehicle (EV) transition, sustainability requirements, new skills needs and more political influence in the form of national subsidy programs.

Supplier ZF Friedrichshafen, for example, announced plans in January to close two plants in Germany with the intention of moving production to lower-cost locations in eastern Europe or India, and the future of Audi’s plant in Brussels is in doubt, according to multiple news reports. At the same time, Chinese EV maker BYD is building its first European factory in Hungary, which has a growing car battery industry.

Footprint decisions for suppliers are always complex because of the high costs involved – particularly after the rise in interest rates from years of historic lows – and the social and political impact of closures and job losses. But the range of current considerations, including the impact of generous new EV subsidies in the US under the Inflation Reduction Act, are making the process even more challenging.

Here we look at how suppliers can asses their overall network capacity in light of current and future market demands, to align with their strategic objectives.

Decision-making in uncertain times

Suppliers currently face complex additional footprint considerations, the first of which is undoubtedly politics. Governments are exerting more influence over where OEMs and suppliers locate production than they have done for a number of years, as national subsidy programs linked to the EV transition significantly affect the business case for factory locations.

The biggest is the US Inflation Reduction Act (IRA), signed into law by President Joe Biden in 2022. The IRA promises $433 billion of investments in the US economy, of which $369 billion are for energy security and climate change. The measures that directly affect the auto industry include tax incentives for consumers to buy EVs and grants to retrofit factories for low-emissions vehicle production. However, the subsidies only apply to EVs that are made with a proportion of materials that are sourced in the US or countries with US free trade agreements, such as Japan. The proportion was 30% in 2023, rising to 80% by 2027.

The earlier Bipartisan Infratsructure Law, signed in 2021, also awarded $6 billion of grants for companies investing in battery manufacturing and components.

The intention of the legislation is to build up the US’s domestic battery and EV production and reduce reliance on Chinese components, and the result is that OEMs and suppliers will have to move production to the US in order to sell EVs and components there.

We believe the effect on the automototive labor market will go beyond job losses in Europe and Asia if new factories are located or older ones re-located to the US. Tech talent is also likely to move to the US, because subsidies are focused on future clean technologies, and innovation will go with them. This will cause Europe to lose further ground against the US.

This is not to say Europe is stepping back from the race to build up its EV and battery production capacity. EU member states made €6.1bn available to support battery innovation and production through two Important Projects of Common European Interest (IPCEI) agreed in 2019 and 2021. There are no restrictions on the origin of the raw materials for batteries, in order to build up production of EVs and battery cells in the region.

From 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) means companies will have to pay for certificates to cover the cost of emissions created during the production of goods they import, making low-carbon local production sites more financially attractive.

There are also EU subsidies available to build up manufacturing in less wealthy parts of the bloc such as eastern Europe. Building new plants with the latest automation and digital production tools will increase efficiency and likely will cost less than modernizing an existing production site. The cost advantage will be a strong factor in suppliers’ footprint decisions.

A transformed workforce

Beyond politics, new types of workforce considerations are also now affecting footprint decisions. The first issue is the availability of people with the right skills: new, highly digitalized and automated factories need workers with a broad range of technology skills, including engineering, computer science, robotics and experience with artificial intelligence (AI). Creative problem-solving by humans will become increasingly important as routine production tasks are taken over by machines, and we see a growing need for hybrid experts, who combine technical skills with creativity.

We expect a significant impact on traditional factory job profiles as a result of increased digitization and automation, especially at the operational level in factories making lower-cost, mass-produced models (we define these as volume or variant champions here). We see the number of shopfloor logistics roles declining by 63% in volume champion sites and 56% at variant champions’ plants by 2035 while the number of factory operator roles will shrink by 53% and 40% respectively, and the number of line managers by 24% in both types of factories.

In their place, we see high demand for new job profiles as the use of smart machines increases, and databases and data flow become more important. The number of data engineer roles is expected to increase by 78% in volume champion factories and 98% in variant champions’ sites, for example.

For employers, recruiting people to fill these roles will be highly competitive because their skills are in short supply across all manufacturing sectors. Suppliers will need to adjust wages accordingly and offer additional benefits to attract skilled staff to their production sites. The location of plants will become increasingly important – factories close to existing tech or automotive hubs, for example, may find it easier to hire the talent they need.

Setting the strategy

Figure 1: Global Footprint Strategy

Source: Berylls Strategy Advisors

Looking in detail now at a typical supplier’s footprint decision process (see chart above), the first step has not changed despite the complex new challenges described above. Footprint decisions need to be aligned with the company’s strategic objectives, and whether the current network meets them. How is demand expected to develop in different markets and can production sites adapt?

The next step is 360-degree site assessments of performance, cost structure and capacity, to give transparency over each production site’s future potential and improvement opportunities.

Suppliers can then shape the ideal future footprint, defining the plant archetypes and logistics networks they will need. These become the guiding concepts for scenario analysis, that will cover each of the major areas that would be impacted by a change in footprint: cost; the potential effect of subsidies and other government initiatives; the supply chain and logistics network; regulatory compliance; environmental impact; technology and innovation; human resources, and risk assessment.

The evaluated scenarios are narrowed down to a shortlist for evaluation by a wider group of stakeholders, and the final stage is a business case calulation on the short-listed network options, before moving into implementation planning and final decision-making.

Footprint success factors

Footprint decisions are among the most crucial that any auto supplier will make. The right production network is a critical part of the long-term financial and non-financial success of the company: new production facilities are very expensive, but so is keeping under-used or inefficient sites open. The impact of the investment decision, good or bad, will be felt by the company for years.

Cost efficiency is still a top priority for any footprint decision, but after a period of time in which the auto industry has been hit with one crisis after another, resilience is now ranked just as highly. Important production network considerations to reduce complexity and increase flexibility can include building factories close to customers to reduce the chance of supply chain disruption, and ensuring sites are located in places where there are enough skilled staff, or that are attractive to new hires.

Sustainability throughout the supply chain is also a key consideration for OEMs, and suppliers must be able to ensure their production locations meet customer and regulatory ESG requirements.

And as described above, the auto industry has become a key part of many governments’ industrial policy as they seek to meet commitments to transform their economies. Striking the balance between the short-term benefits of subsidies and the long-term results of choosing a particular location is now an important part of the footprint decision-making process. Some uncertainty is inevitable, as for example in the US where the outcome of the presidential election in November may change the position on EV subsidies.

However, what suppliers can do is make a thorough assessment of their product portfolio and expected future market demands, and consider the results alongside subsidy benefits, to see whether government support makes entering a new market worthwhile. They should also consider how reliant their product portfolio is on subsidies, and how that impacts their production network flexibility. 

All these factors – cost, resilience, sustainability and subsidies – deserve thorough consideration in footprint decision-making, to reduce the risk inherent to such large and long-lasting decisions.

 

At Berylls, we have worked with clients on production network strategy and supply chain design for years, building up deep expertise in defining the right criteria and evaluations for your company’s footprint decisions. We would be delighted to discuss this or any other aspect of manufacturing footprint with you.

Authors
Christian Grimmelt

Partner

Timotheus Wittek

Felix Scheb

Martina Seip

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls Strategy Advisors team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

Task forces in the automotive industry: Why they are the solution to every problem – and why not

Munich, March 2024

Task forces in the automotive industry

Munich, March 2024

S

ometimes, the automotive industry tends to use military terminology. Understandably, this is typically the case when the stakes are high and time is running out. Task forces are a prime example of this phenomenon.

Usually, they are formed when there is a risk of a production shutdown with high follow-up costs or when development and industrialization projects fail to reach their milestones. Mechanisms are then set in motion that are common practice and pathbreaking to achieve the desired results. How do these mechanisms work? Where in the company can they still be deployed with success and what are their restrictions? And why are they unavoidable, despite every effort?

A task force is formed when a specific problem needs to be resolved within a very short time and a great deal of money is at stake. On the one hand, there are requirements and performance indicators regarding deadlines, costs, and quality to be considered and, on the other hand, a team of experts that has been put together on a temporary basis. The attentive reader might possibly recognize that this description comes very close to the definition of a “project.”

HOWEVER, THERE ARE SEVERAL SIGNIFICANT DIFFERENCES TO A NORMAL PROJECT:

Basically, it’s already too late for the solution
A lot of time and money has already been squandered. Preventive measures have failed, and the effort is mainly about damage limitation. The goal seems unattainable – and yet it must be pursued by all means

Every day costs money
When it comes to delivery bottlenecks, for example, every minute of lost time can be measured directly in lost profitability per component and ultimately per vehicle. The pressure on the people involved can become unbearable.

The problem is incredibly complex
Open heart surgery is required. Every change to the strained system can cause effects that need to be considered in advance and no single process can simply be changed separately. Every measure needs to be scrutinized in terms of success, failure, and unintended side effects. Often a few simple, clearly communicated, aligned (de-escalation) targets are needed to help resolve the situation.

A task force has a prior history of escalation
The nerves of those involved are frayed, several attempts have already been made to solve the problem, personal careers are at stake, and trust has been undermined. On the one hand, a speedy and structured problem-solving is often hampered by the personal and political tactics employed by those involved, while on the other hand, the process tends to be fraught with nervousness and hectic activities. Calm, fact-based communication and effective leadership are often simply disregarded.

The markets are unforgiving
A delayed product launch goes hand in hand with the scheduling of new model series and always involves a considerable loss of profit and reputational damage. As a result, sales, controlling, and marketing teams understandably have limited patience for those in development, production, and the supply chain who are constantly striving to catch up on milestones and performance indicators. The pressure, therefore, is sizzling, demanding tangible signs of progress each day. These factors alone are a clear indication that a task force needs to operate with a variety of specific project management tools.

Task forces are like agile project management on steroids
The timing is very tight. The daily schedule starts in the early morning for the team with the daily check-in and ends with the daily check-out. In between, the agreed measures need to be rigorously implemented – independently and without lengthy committee meetings. Success, therefore, greatly depends on nominating the right team members. The right experts need to be integrated and the team spirit must be sound, regardless of the organization and job title, whether OEM, supplier, or consultant. In the end, the integrated efforts of those involved make all the difference.

Discipline and a keen focus on suction are basic requirements
It sounds so simple but is unfortunately not always given that scheduled agreements are adhered to. Unforeseen obstacles must be communicated and resolved immediately as they arise and not only when someone fails to provide the agreed result.

The structure of a task force covers the entire range of solutions and usually consists of several work packages. When setting up the work packages, it is important not only to address the obvious topics (e.g. “OEE increase”), but also to work on the underlying causes (e.g. “strategic resource management”). When forming the team, it should be borne in mind that everyone involved must actively collaborate and be aligned with the overarching goal as defined and guided by the higher management. It is key to manage interdependencies between work packages within the Task Force Team on a regular basis and with mutual support. This combination is the only way to solve acute problems and at the same time create a robust system.

Each measure must have verifiable objectives
In addition to precisely documenting each defined measure, it goes without saying that feedback on completion is provided at the agreed due date. Another decisive factor for ensuring success is the prior linking of the measures with the expected impact on a targeted key performance indicator. This requires some effort and practice but leads to two elementary effects: a) A measure without a defined outcome will simply not be implemented, as it would be wasteful. b) A measure with a defined outcome is then not only reviewed regarding implementation, but also for the fulfillment of the expected outcome.

Task forces align with and follow higher management
There is no time for committee meetings and long decision-making processes. In a task force, serious decisions sometimes need to be made several times a day. Depending on the size of the company, the uppermost hierarchical levels need to be either directly involved on a daily basis or at least accessible. If they are not directly involved, decisions must be prepared precisely with the necessary information and clearly communicated. The required effort should not be underestimated and must be prepared in parallel to the technical work. However, the power of facts is there to override political controversies.

Empathy and emotional intelligence are critical success factors
This point may sound surprising, given that task force situations are connected to a military style of communication. Ultimately, the personalities involved need to be understood and positively motivated. This requires an excellent understanding of the respective situation and motives for action by the task force leadership and the consultants involved.

However, a sustainable improvement of the situation can only be achieved if people act intrinsically different afterwards, a fact that also highlights the limitations of task forces in general, as they only work effectively within a clearly defined timeline and organizational framework. The preceding paragraphs clearly illustrate the significant pressure on the people involved, leading to long-term sustainability concerns. The usual organizational and operational structures are also temporarily insignificant. Sooner or later, the situation must be transitioned back to a robust and efficient disciplinary line management system.

For this reason, every good task force needs to prepare its own end from scratch
Criteria for de-escalation must be clearly and transparently defined. Embedded in an overarching schedule, they must be regularly communicated and not subject to change. Once the targets have been achieved, the task force is no longer required. The criteria therefore need to be defined so that a return to normal working mode within robust processes is subsequently possible. The combination of deliberately defined work packages and criteria for their de-escalation therefore determines the subsequent sustainability of the success right from the start.

What happens next?

We at Berylls have spent decades honing our expertise in mastering task forces within the operations environment. The focus in terms of content has increasingly shifted towards e-mobility components but is not limited to this field alone. The task force life cycle we have developed as a result is a unique approach that incorporates all the success factors mentioned above:

Figure 1: The Berylls task force life cycle

Authors
Heiko Weber

Partner

Fritz Metzger

Partner

Christina Granitz

Project Manager

Source: Berylls

Pronounced for us was the successful transfer of experience from more than 100 successful de-escalated task force projects to enable early escalation preventive programs in future development and production planning. This is where our tried and tested Safe Launch System Certificate comes into play, which certifies that suppliers and OEMs have their development, industrialization and launch management processes under control.

But we wouldn’t be “but dyfferent” if we didn’t go one step further with our clients. When it comes to monitoring and controlling a task force, we offer our tool called “elyvate”. Our colleague Christian Kaiser has already described the additional use of IT tools and artificial intelligence for efficient support here.

In our following articles, we will also look at how task forces can lead to success, even in a well-oiled marketing machine or a dynamic sales environment. The instruments simply need to be adapted to the respective circumstances. Nevertheless, based on our experience, we strongly advise our clients to have a standardized task force approach as well as management mechanism for early problem identification at hand so that it can be swiftly utilized as and when needed.

Fritz Metzger

Fritz Metzger (1986) joined Berylls Strategy Advisors, an international strategy consultancy specializing in the automotive industry, in February 2021. He is an expert on automotive operations.

Since 2011, his focus has been on strategic alignment and operational efficiency improvement of automotive manufacturers and suppliers. He also advises top management in critical situations, including R&D and industrialization task forces and relocation and restructuring initiatives of plants and complete suppliers. The challenges of e-mobility are always in focus.

Before joining Berylls, he was a director at international strategy consultants PwC Strategy&, as well as a sales and project manager at a medium-sized supplier and mechanical engineering company.

Fritz Metzger is a trained industrial engineer with a degree from ESB Business School Reutlingen. He also holds an MBA from the University of Salzburg.

Heiko Weber

Heiko Weber (1972), Partner at Berylls Strategy Advisors, is an automotive expert in operations.

He started his career at the former DaimlerChrysler AG, where he worked for seven years and was most recently responsible for quality assurance and production of an engine line. Since moving to Management Engineers in 2006, he has been contributing his experience and expertise to projects for automotive manufacturers as well as suppliers in development, purchasing, production and supply chain. Heiko Weber has extensive experience in the development of functional strategies in these areas and also possesses the operational management expertise to promptly catch critical situations in the supply chain through task force operations or to prevent them from occurring in the first place.

As a partner of Management Engineers, he accompanied the firm’s integration first into Booz & Co. and later into PwC Strategy&, where he was most recently responsible for the European automotive business until 2020.

Weber holds a degree in industrial engineering from the Technical University of Berlin and completed semesters abroad at Dublin City University in Marketing and Languages.

How carnage in the Used Car market is impacting BEV adoption in Europe

Munich, March 2024

How carnage in the Used Car market is impacting BEV adoption in Europe

Munich, March 2024

E

UROPEAN POLICYMAKERS DEFINE ELECTRIC MOBILITY AS THE FUTURE.

Governments in Europe unanimously share the vision that electrifying the vehicle fleet is the best way to achieve a more sustainable future. With its new regulation, which states that from 2035 all new cars and vans registered will have to be zero-emission versions, the European Union is a global front-runner in the adoption of electric vehicles.

However, this places OEMs under a lot of pressure to update their vehicle portfolio within a relatively short time span. In order to maintain a profitable business case, nearly all OEMs initially focused on producing rather pricy high-end SUVs. Cost parity between comparable new BEV and ICE vehicles has still not been achieved in most cases and, in particular, affordable vehicles in the smaller segments are yet to be launched. For instance, FIAT is offering the electrified version of its 500 with a premium of 78% and even Jaguar’s high-end SUV F-Pace is one third cheaper than its electrified brother (according to UK list prices). This pricing policy limits the overall size of the potential buyer group and prevents the BEV market from moving from early adopters to the mass market.

Average advertised prices of new electric vehicles in the UK

Source: AutoTrader as of 17.01.2024

BEV SALES GROWTH IN EUROPE IS DECLINING

After some initial strong growth – also fueled by high government tax incentive schemes – the relative market share growth of battery electric vehicles (BEVs) is gradually slowing down across Europe.

TOTAL PASSENGER CAR REGISTRATION VOLUME EU5

Increasing relative share of BEV in EU5 registration volume (2017-2023), (registered cars in thousands) 

Source: Berylls Strategy Advisors, ACEA

Whilst the share of BEV registrations across all drivetrain types is steadily increasing for the top 5 EU markets (14% in 2023), the momentum of growth is slowing down (+23% in 2023 vs. +103% in 2021 for the top 5 EU markets). BEV customer subsidies are being increasingly reduced in many EU markets (e.g., subsidies for corporate and private cars in Germany were terminated at the end of 2023).

BEV PASSENGER CAR REGISTRATION VOLUME PER EU5 MARKET

Increasing size of registered BEVs in EU5 (2017-2023), (registered cars in thousands)

Source: Berylls Strategy Advisors, ACEA

However, differences in BEV adoption exist across EU5 countries, with every fifth newly registered car being a BEV in Germany in 2023 whereas only every 20th to 25th new car was a BEV in Spain or Italy.

BEV PASSENGER CAR REGISTRATION SHARE PER EU5 MARKET

Increasing relative share of BEVs per EU5 market registration volume (2017-2023), (all figures in %)

Source: Berylls Strategy Advisors, ACEA

RESIDUAL VALUES OF USED BEVs ARE DEPRECIATING MORE QUICKLY THAN ICEs

We identify the BEV used car market as one of the key reasons for this slowdown, combined with affordability issues due to challenging economic conditions with high interest rates.

Used BEVs are performing significantly worse than ICEs throughout top European markets with regard to their residual values. On average across Europe, more than 50% of the initial value is lost after an average of three years and 60,000 kilometers.

RESIDUAL VALUE PER DRIVE TRAIN

Comparison of residual values along drive trains (BEV, Diesel, petrol), (all figures in %)

Source: Berylls Strategy Advisors, Autovista24, part of the Autovista Group

The situation is leading to a significant excess value loss for BEVs compared to ICEs, especially when factoring in the higher initial new car prices of BEVs.

In Germany, on average BEVs had an excess residual value loss of 13% compared to petrol vehicles in December 2023. The rest of Europe’s top 5 markets displayed similar tendencies with excess residual value losses ranging from 13% (Spain) to 21% (Italy) when comparing BEVs to petrol vehicles. Apart from Spain and France, used cars in all top 5 European markets have lost drastically in residual value. In the UK, the residual value of BEVs plummeted dramatically from 63% to 40% in the course of 2023.

Based on an average new BEV list price of EUR 43,529 as stated by Autovista Group for Germany in December 2023, the absolute amount of excess loss of an average BEV compared to an average petrol vehicle is 13%, which equals EUR 5,659 compared to the initial list price. Looking at a 36-month lease contract with a total of 60,000 km, this would make a BEV EUR 157 more expensive per month compared to a petrol car, just to cover the excess loss and excluding interest effects, in addition to the higher lease installments due to the higher list price.

Likewise, lower residual values also affect new car lease contracts, as providers will try to pass on higher depreciation to their customers. An analysis conducted by Transport & Environment in 2023 reveals that across major European markets, leasing companies charged consumers 57% more to lease an EV compared to an equivalent petrol model.

RESIDUAL VALUE PER DRIVE TRAIN AND EXCESS LOSS IN COMPARISON TO PETROL

Comparison of residual values per car of BEV vs. Petrol and Diesel in DE, (rounded figures, December 2023)

Source: Berylls Strategy Advisors, Autovista24, part of the Autovista Group

BEVs ARE BURNING TAX INCENTIVES AND THE POCKETS OF VEHICLE OWNERS

The calculation is even more alarming when the initial incentives funded by taxpayers’ money are also taken into account. The current market & technology immaturity is turning out to be a gigantic value burn.

Just assuming the gap between the residual value developments of BEVs and petrol vehicles remains constant in the future, the additional value loss of all the 524,000 BEVs registered in Germany in 2023 in three years’ time compared to petrol vehicles will equal EUR 2.99 billion. The figure surpasses the total of German BEV tax incentives (BAFA environmental bonus) of EUR 2.4 billion for all eligible BEVs in 2023.

COMPARISON OF LOSS IN RESIDUAL VALUE FOR BEVS AND SUBSIDIES IN GERMANY

Excess in loss in residual value of BEVs outpaces environmental bonus in DE in 2023

Note: Excess in residual value loss as aggregation of excess loss of residual value per BEV to petrol (13%) of 524.000 registered BEVs at avg. list price of 43.529 EUR in 2023 in Germany

Source: Berylls Strategy Advisors, Autovista24, part of the Autovista Group

The value losses become even more apparent when comparing the residual values of similar BEV and ICE models:

Upfront price difference based on stock advertised on AutoTrader.co.uk

Source: autotrader.co.uk

WHO CARRIES THE RESIDUAL VALUE RISK OF BEVs?

In Germany, less than one third of new vehicles are bought by private customers. On the other hand, more than two thirds of all new cars are registered to corporate customers. The greatest share is the ‘true fleet’ segment, which comprises fleets of company cars, either for particular purposes or as an employee incentive. The second biggest segment comprises vehicles registered for tactical reasons by OEMs or their dealer networks, which are typically brought to the market later with discounts. Rental fleets also make up a relevant part of the total fleet.

Sales Split per channel in Germany in 2023 Total vs. BEV only

Source: Berylls Strategy Advisors, KBA

According to information from Dataforce, there was a setback in electrification following the final ending of the environmental bonus (BAFA) in 2023. During the last few months, the bonus was only eligible for private customers, which explains the decrease in the corporate segment. In the private market, the BEV-related share of new registrations fell from 35% in December 2022 to just 11% in December 2023. The share of BEVs in fleet registrations also remains at a low level.

BEV trend in vehicle registrations over the last 24 months in Germany (in thousand)

Source: Dataforce

A large number of these vehicles are sold via lease contracts that are typically returned to the leasing company at the end of the contract. Based on information from Dataforce, in 2023, 29% of private BEV customers opted for a leasing offer while the overall share of private customers taking the leasing option was only 7.2%. In the fleet segment, the majority of vehicles are bought via lease contracts.

In total, that leaves a majority of the residual value risk accumulating with the financial services companies of OEMs (Captives) or independent (Non-Captive) leasing companies.

VICIOUS CIRCLE: HOW DECLINING VALUES OF USED BEVs WILL HARM NEW BEV MARKET

Automotive dealers and OEMs are therefore currently seeing a drastic decline in demand for used BEVs, which is placing further pressure on resale values. As long as residual values continue to decline, it is hard to make a positive business case for buying a new or almost new electric vehicle due to this value loss. Even the cheaper cost of operation – drastically depending on actual cost for electricity – cannot compensate for this loss.

In an interconnected model, these factors also have an impact on demand and the sales prices of new BEVs.

Looking at the current price discounts for new BEVs in Germany, it becomes apparent that OEMs and dealers will need to continue discounting BEVs in order to stimulate at least a certain level of demand. A recent analysis presented by the German newspaper Auto Motor und Sport based on price data from leading automotive platforms (carwow.de, meinauto.de, neuwagen24.de) shows that in January 2024 the average discount was 18% compared with an average discount of 21% in 2023. This point is especially interesting as environmental subsidies (BAFA) were terminated at the end of 2023. Therefore, OEMs and dealers within the German market are giving discounts at their own expense to offset the lack of a government bonus.

Discount comparison for selected BEV models in the German market

Source: carwow.de, meinauto.de, neuwagen24.de; all figures are rounded; last update: January 2024

From our perspective, there are several trends that reinforce one another, limiting the attractiveness of owning a BEV and potentially leading to a carnage in the BEV market in the coming months:

  • After years of disrupted supply chains, vehicle availability is back to a fast supply, which is generating an overstock of new BEVs. The situation is resulting in price pressure and reduced production shifts

  • In 2023, Tesla leveraged its healthy unit economics and initiated several rounds of price discounts that negatively impacted the residual values of the total existing BEV fleet

  • High stock levels at OEMs and dealerships are further aggravating the situation with BEVs continuously coming in from the first user cycle of early adopters of BEVs

  • New BEV market entrants from China are still behind with their sales targets and thus likely to use price reductions as a tool to win market share
  • Customers still have very little experience with BEV technology and wonder how long used batteries will last, what ranges are realistic, and at what mileage the carbon-intense battery production amortizes its footprint during use compared to an ICE. As technology is progressing, customers will expect more mileage in the future due to improved technology and rather postpone their transition towards BEVs

  • The state of battery health in used BEVs is still a big question mark for many potential buyers, as the charging behavior has a strong influence on the battery lifetime and limited information and standards on battery history are reducing customer trust
  • As described earlier, the lack of medium- to low-priced electric vehicles is still excluding large potential buyer segments from the BEV market. Although used car prices are strongly declining, overall price levels are still higher than what many customers can afford
  • OEMs are increasingly leveraging their financial services arms (Captives) to offer highly incentivized leasing rates to increase the ‘take’ rates of BEVs. In an environment of relatively high interest rates, competitive leasing rates can only be offered by anticipating relatively high residual values. As we illustrated before, this is not very likely and the pressure might increase once these leased vehicles return to the used car market in a few years, i.e., today’s sales volumes will be bought at the expense of future residual value losses
  • According to data from mobile.de, search queries for BEVs decreased from 5.8 million in 2022 to 5.4 million in 2023. However, the number of BEVs offered on the platform significantly increased from 17,000 in 2021 to 74,000 in 2023. On average, list prices were EUR 42,718 for a BEV on mobile.de. However, the price customers are willing to pay stands at EUR 23,946. Therefore, the price gap between offering and demand is more than twice that of ICEs
  • The majority of BEVs were sold to fleet customers, especially rental fleets. Most of them are reducing the share of BEVs in their fleets, stating challenging residual values, low customer demand and high operating costs as the key reasons
  • Customers are concerned about an insufficient charging infrastructure withsstill a rather low ratio of registered BEVS to charging stations in most EU markets. We expect a rise from a ratio of currently 17 BEVs per public charging point in 2023 to 24 BEVs per public charging point in 2030 within the EU

HOW TO WEATHER THE STORM AND STAY SUCCESSFUL

Overall, the outlook for OEMs, their Captives, leasing companies, and auto dealers can appear rather daunting in the next few years with regard to electrification. In order to stay profitable in the BEV market going forward, we at Berylls see several levers that need to be utilized in order to be successful. In our upcoming series, we will further deep-dive into these fields.

  • Customer Experience & Sales Funnel Management: review your BEV Customer Journey and install intelligent BEV Funnel planning, steering and optimized media spend to accelerate omni-channel touchpoint conversions & drive conversions
  • Pricing: apply effective and consistent pricing strategies across the complete new and used BEV portfolio to secure and optimize profitability Learn more
  • Remarketing: centralize & optimize remarketing activities as well as establish digital direct-to-consumer remarketing channels to increase customer loyalty
  • Multi-cycle sales models: manage vehicles on one’s own balance sheet over multiple years via non-ownership Vehicle-as-a-Service models (VaaS) to control the residual value curve and maximize the vehicle lifetime value (VLV) Learn more
  • 4R (recycling, remanufacturing, reuse, refurbishment) & circularity: leverage upcoming stricter regulations regarding the recycling of batteries and vehicle components and apply different life cycles for the vehicle and the battery up to the recycling stage Learn more
Authors
Christopher Ley

Partner

Michael Dümig

Project Manager

Philipp Neubauer

Senior Consultant

Felix Riebel

Consultant

Christopher Ley

Christopher Ley (1984) joined Berylls Group in October 2021 as Principal. He has over twelve years of top management consulting experience with focus on new business models and market expansions within the automotive & mobility industry. He is an expert around Vehicle-as-a-Service, comprising vehicle finance & leasing, fleet management and mobility services. Christopher Ley is advising OEMs, Captives, Financial Services Companies & Investors, Leasing & Rental Companies, Fleet Managers and Mobility Startups around the transformation from one-time sales towards use-based multi-cycle business models on a global level.

Prior to joining Berylls, Christopher Ley has been working for other international management consulting firms, amongst others Monitor Deloitte and Alvarez & Marsal. He holds a diploma degree in business administration from Johannes Gutenberg-Universität in Mainz and an MBA from Colorado State University.

Enablement via Generative AI: Bridging the Talent Gap in the Emobility Transition

Munich, March 2024

Enablement via Generative AI: Bridging the talent gap in the Emobility transition
Munich, March 2024

T

here is a lack of employees for the transformation towards e-mobility. Generative AI has the potential to close this gap and reduce costs at the same time.

  • E-mobility requires talented specialists with new skills from OEMs and suppliers, but the labor market is largely empty. Berylls has investigated how AI can help to offset the consequences of this shortage.

  • The Berylls analysis shows that the use of AI can speed up work processes. The experts believe it is possible to reduce working hours by up to 25 percent.

  • As production efficiency increases, the need for personnel decreases and the shortage of skilled workers in the relevant sectors loses its terror.

  • Berylls calculations show that the global top 10 OEMs can significantly reduce the need to hire new specialists through the use of AI and thus leverage a personnel cost savings potential of almost 550 million euros.
Download the full study now.
Berylls Insight
Enablement via Generative AI: Bridging the Talent Gap in the Emobility Transition
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Author
Dr. Alexander Timmer

Partner

Lisa Theresa Schmidt

Consultant

Yalun Li

Consultant

Valentin Froh

Project Manager

Dr. Alexander Timmer

Dr. Alexander Timmer (1981) joined the Berylls Group, an international strategy consultancy specializing in the automotive industry, as a partner in May 2021. He is an expert in innovation and market entry strategies and can look back on many years of experience in the operations environment.
Dr. Alexander Timmer has been advising automotive manufacturers and suppliers in a global context since 2012. He has in-depth expert knowledge in the areas of portfolio planning, development and production. His other areas of expertise include digitalization and the complex of topics surrounding electromobility.
Prior to joining Berylls Strategy Advisors, he worked for Booz & Company and PwC Strategy&, among others, as a member of the management team in North America, Asia and Europe.
After studying mechanical engineering at RWTH Aachen University and Chalmers University in Gothenburg, he earned his doctorate in manufacturing technologies at the Machine Tool Laboratory of RWTH Aachen University.