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he importance of software partnerships in Automotive
The automotive industry has long been known for pushing the boundaries of engineering and design. However, the car as we have known it is now being reimagined. As a consequence, OEMs are undergoing a profound transformation, where innovation is not defined solely by engine performance and efficiencies, but becomes focused on the complex software systems that will control the cars of tomorrow.
Vehicles are now defined by their software and digital capabilities, and OEMs must prepare for the new era of the SDV, in which seamless vehicle integration with other digital devices and ecosystems becomes the norm.
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he shift from conventional engines to battery electric vehicles (BEVs) is revolutionizing the auto industry. However, until battery performance and cost improve, BEVs will continue to struggle to take over from gasoline-powered vehicles as the mainstream choice for drivers.
Widespread adoption of BEVs is essential to meet emissions reduction targets and for OEMs and suppliers to see a return on their huge investments in the engine technology. Achieving it hinges, in part, on critical advancements in battery technology.
Undoubtedly, the BEVs available now offer a number of benefits, including lower emissions and less engine noise. However, limitations on range, long charging times, high cost and safety concerns are dampening consumer enthusiasm for the electric vehicle transition. Improvements in battery technology hold the key to solving these critical issues, particularly advancements in energy density, charging speed and safety. In this article, we assess the changes in battery technology that could unlock the full potential of BEVs, focusing on solid-state batteries, long held out as the solution to longer battery life.
The success BEVs have had to date only became possible through advancements in lithium-ion (Li-ion) battery technology. Li-ion batteries offer medium-to-high energy density, storing a significant amount of energy per unit weight compared to other battery technologies, giving them a longer driving range. Li-ion batteries also have a comparatively long life cycle, meaning they can be recharged and used hundreds to thousands of times before capacity and performance starts to diminish. This translates into a longer lifespan for the battery pack in BEVs, reducing replacement costs, decreasing maintenance needs, and minimizing the environmental impact of battery production and disposal.
Compared to newer technologies still under development, Li-ion battery production is also well-understood and efficient. An established manufacturing process has resulted in greater cost-effectiveness, driving down the overall cost of BEVs and making them more accessible to a wider range of consumers.
However, charging a Li-ion battery still takes significantly longer than refilling a car’s gas tank, even using a fast charger. The average refueling time for a vehicle with an internal combustion engine is less than 5 minutes, while charging time for a BEV with a 65 kWh battery using an ultra-fast 150 kW charger is around 20 minutes. This can be inconvenient for drivers, especially on long trips, and doesn’t suit driving habits that have come to rely on making quick stops to refuel. Faster charging is crucial for improving the overall driver experience with BEVs.
Another key downside is in the supply chain. Production of Li-ion batteries relies heavily on the key components of lithium, nickel and cobalt, which are only produced in large quantities in a limited number of places around the world, creating supply chain vulnerabilities and raising ethical concerns regarding sourcing practices in certain regions. Finding alternative materials or more sustainable sourcing methods is essential for the long-term viability of BEV technology.
Several new battery technologies aim to solve the shortcomings of Li-ion. Sodium-ion-graphite batteries, for example, have been in development over the past few years but have not yet progressed to commercialization due to their current high cost and lower energy density. Lithium-sulfur batteries are in the early stages of research and development so less is known about their potential, but they cost roughly the same as Li-ion batteries and have a higher energy density. Lithium-sulfur batteries have relatively low performance in charging speed, safety, and battery lifetime, but will likely progress with further development.
Source: Berylls by AlixPartners, FFB Münster
One of the main focuses in current battery R&D is solid-state batteries (SSBs). Unlike traditional lithium-ion batteries that rely on liquid electrolytes, SSBs use solid electrolytes. These come in different forms, including oxide, sulfide and polymer. One of the most exciting aspects of SSBs is their potential for significantly higher energy density compared to the Li-ion batteries being made today. This means longer driving ranges and faster charging times for BEVs, which could eliminate range anxiety, one of the major barriers to widespread BEV adoption.
SSBs also have a significant safety advantage over lithium-ion batteries. The absence of flammable liquids or gases in the solid electrolyte minimizes the risk of explosion or fire compared with traditional lithium-ion batteries, which could be a major selling point for consumers hesitant about BEVs due to safety concerns
There has been significant global interest in SSB technology from OEMs (including Stellantis, BYD, Toyota and GM), incumbent battery suppliers (CATL, Samsung and LG, among others) and startups (including QuantumScape, Solid Power and Factorial Energy). The major SSB players are primarily in the US, East Asia, and to a smaller degree Europe. OEMs are engaging in partnerships with SSB startups – Volkswagen’s joint venture with QuantumScape for example – to capitalize on the technology’s potential when it becomes available on a commercial scale. New collaboration models like China’s CASIP (China All-Solid-State Battery Collaborative Innovation Platform), a consortium of battery incumbents, startups and OEMs, highlight the technology’s significance and the resource commitment being made by many stakeholders.
As the chart below shows, other cooperation models already underway include silent investment, for example by Toyota and Nissan, and technology “openness”, as seen in Factorial’s technology development partnership with Mercedes-Benz.
Note: CASIP: newly established R&D network named China All-Solid-State Battery Collaborative Innovation Platform
Source: PEM Motion, Berylls by AlixPartners
For all these reasons, SSBs have considerable promise for the auto industry. However, there are two fundamental challenges hindering their widespread adoption at scale: production difficulties and technical hurdles.
Production difficulties: Transitioning from established Li-ion battery production to SSBs requires transformational changes in manufacturing. Producing solid electrolytes involves complex processes that are quite different from the well-established methods used for lithium-ion battery components. Developing and scaling up this technically difficult production process will take significant investment in new manufacturing infrastructure. High costs and quality control issues, particularly for oxide and sulfide-based electrolytes, also pose major challenges to mass production and further contribute to the higher cost of SSB production.
Technical hurdles: Materials are one of the key challenges for solid-state battery technology because the solid electrolyte (separator that allows ions to pass) needs to be both ionically conductive and mechanically robust. This ensures efficient operation and prevents leaks or degradation within the battery. Additionally, interface compatibility between the electrodes (the positive and negative battery terminals) and the electrolyte is crucial. Dendrite formation (needle-like lithium structures) and lithium loss can occur at the interface, leading to a reduced cycle life (the number of times the battery can be charged and discharged) for the SSB.
There is an appetite for SSB investment – and startups are benefitting
Overcoming these production and technical challenges is vital in order to manufacture SSB batteries on the scale needed for the auto industry. Fortunately, there is significant investment going into R&D and production capability, and the global market for solid-state batteries is forecast to grow substantially. Optimistic estimates¹ suggest production capacities could reach 420 GWh by 2035, reflecting a potential compound annual growth rate (CAGR) of 21%. Polymer electrolyte-based SSBs are expected to have the highest market share by 2035 (224 GWh, or 53%) followed by sulfide (117 GWh, 28%) and oxide (78 GWh, 19%).
SSB startups have benefitted from the interest in the technology with more than $4bn invested to date. That compares with investment (or planned investment) of >$10bn across the industry including OEMs and incumbent battery manufacturers. Larger startups have seen the bulk of this funding, however, with the top seven receiving around 85% of the investment, leaving 37 companies to compete for the remaining 15%. This is likely to lead to consolidation, so that only the largest players survive the race to develop SSBs at scale. The charts below show where funding has gone to date, and the key investors:
Note: Selected companies based on relevance
Source: Crunchbase, Leap435, PEM Motion, Berylls by AlixPartners
While there is great theoretical potential in SSBs, we believe the industry is still five to 10 years from a commercially viable product. For OEMs considering how, or indeed whether, to invest in the battery technology, Berylls’ solution is to take a three-pronged approach, made up of a 360-degree partnership assessment, tech and competitor benchmarking, and strategy development.
Berylls’ partnership assessment takes a 360-degree view of selected dimensions, including value creation and risk management to quantify performance levels, thus revealing strengths, weaknesses and potential for optimization. The key goal is to identify and make transparent the gaps in partnership and collaboration approach to build the foundation of a sustainable improvement program.
Technology and competitor benchmarking uses Berylls’ comprehensive quantitative and qualitative datasets as the basis for customized and expanded assessments of how peers are performing in specific SSB use cases.Our proprietary database continuously tracks more than 3,000 startups and scaleups across the mobility value chain, including around 250 battery-related companies and around 50 automotive SSB startups and scaleups.These are technology-based profiles, including KPIs for battery energy density and charging cycle efficiency, as well as our proprietary research insights into industry claims.
Our standardized strategy development process then uses the results of the partnership assessment and benchmarking, combined with comprehensive internal and external analysis, to define and implement a data-backed strategy. It takes in future customers, competencies, and strategic direction to set automakers on the best path forward.
To discuss your solid-state battery ambitions with our team, please contact Dr. Alexander Timmer.
¹ Joint study conducted by Berylls by AlixPartners and PEM Motion
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erylls by AlixPartners schließt sich mit dem KI-Unternehmen FULLY AI zusammen, um einen virtuellen, KI-basierten Assistenten zu entwickeln.
München, 30. September 2024 – Die Berylls by AlixPartners Marketing und Sales-Experten rund um Jonas Wagner, geben eine Partnerschaft mit FULLY AI bekannt. Das Unternehmen, mit engen Beziehungen zur Tech-Szene des Silicon Valley, entwickelt zukunftsweisende KI-Lösungen nach höchsten Standards in Bezug auf Datenqualität und -sicherheit. Gemeinsam wollen die Partner die Automobilbranche grundlegend verändern und setzen in ihrer Zusammenarbeit bei der Customer Journey an.
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Jonas Wagner, Jahrgang 1978, ist Partner und Geschäftsführer von Berylls by AlixPartners (ehemals Berylls Mad Media). Mit etwa 20 Jahren Beratungserfahrung in der Automobilindustrie ist Jonas ein vertrauenswürdiger Berater für das Top-Management, der sich auf Strategie, Organisationsentwicklung und große Transformationsprojekte für führende, globale Automobilhersteller spezialisiert hat.
Jonas ist ein Experte darin, Automobilunternehmen durch die Transformation ihrer Vertriebs- und Marketingfunktionen zu führen. Er hat eine nachweisliche Erfolgsbilanz in der Digitalisierung von Customer Journeys zur Verbesserung der Kundenerlebnisses, des Vertriebserfolges und der Kundenbindung. Seine Expertise umfasst die Einführung und Umsetzung neuer Vertriebs- und Geschäftsmodelle, sowie den Aufbau datengetriebener Vertriebs- und Marketingorganisationen zur Performance- und Effizienzsteigerung. Sein Expertise umfasst sämtliche On- und Offline Touchpoints, sowie alle Geschäftsbereiche, einschließlich Vertrieb, After-Sales, Finanzdienstleistungen sowie neue Geschäftsmodelle.
Vor seinem Einstieg bei Berylls war Jonas Berater der Automobil-Practise von Oliver Wyman, wo er mit globalen Automobilherstellern zusammenarbeitete und deren strategische Initiativen und Operations optimierte.
Jonas hat einen Abschluss in Betriebswirtschaftslehre von der Aarhus School of Business und der Universität Mannheim, mit einem Schwerpunkt auf Internationalem Management, Marketing und Controlling. Durch die Kombination von tiefem Branchenwissen und strategischem Scharfsinn ist Jonas Wagner ein wertvoller Partner für Manager im Automobilsektor, die komplexe Transformationen meistern.
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ie jüngsten Meldungen von Volkswagen haben Deutschland überrascht und die Diskussionen über einen Industriestrompreis neu entfacht. In Kombination mit Ankündigungen, dass bei einem Wahlsieg der Republikaner in den USA bedeutend mehr Öl und Gas gefördert werden soll, erfordert dies einen kritischen Blick auf die Auswirkungen der aktuellen Energiekosten auf die deutsche und europäische Automobilindustrie.
Aktuelle Situation und Ausblick: Sind die Energiekosten in Deutschland und Europa derzeit ein entscheidender Nachteil für die Automobilindustrie? Drei zentrale Botschaften lassen sich aus den aktuellen Daten ableiten:
Seit den historischen Preisspitzen in Europa im Sommer 2022 sind nun bereits zwei Jahre vergangen. Grafik 1 vergleicht die Börsenpreise für Strom und Gas in wesentlichen Standorten der Automobilindustrie seit diesen Spitzen. Es zeigt sich, dass seit den Verwerfungen im Jahr 2022 wieder eine gewisse Normalität eingetreten ist. Dennoch bestehen weiterhin signifikante Preisunterschiede zwischen Deutschland bzw. Kontinentaleuropa und den USA. Der aktuelle Jahresdurchschnitt der vergleichbaren Börsenpreise für Strom liegt in Deutschland 136 % höher als in den USA. Ein vergleichbarer Börsenpreis für Gas liegt in Europa sogar 303 % höher als in den USA. Nur die von Kontinentaleuropa weitgehend entkoppelten Strommärkte in Skandinavien weisen geringere Unterschiede auf.
Grafik 2 zeigt die Entwicklung und den Vergleich zwischen Europa, USA, Japan und China im längeren Kontext. Bereits vor den Verwerfungen im Jahr 2022 waren die Preise in den USA strukturell niedriger als in Europa. Besonders seit dem Jahr 2017 lässt sich ein struktureller Unterschied feststellen. Waren bis 2017 die Unterschiede im Börsenpreis für Strom sowohl absolut als auch relativ gering, hat sich der Unterschied mittlerweile manifestiert. Im Jahresdurchschnitt 2024 liegt dieser Unterschied bei 87 € bzw. 329 %. Diese Unterschiede werden zumindest mittelfristig fortbestehen.
Auswirkungen auf die Automobilindustrie: Ein Großteil des Energieaufwands für die Fahrzeugproduktion liegt in der Zulieferkette, nur ca. 10-20 % fällt in der Endmontage bei den OEMs an. Bei einem Gesamtenergieeinsatz von ~20 MWh* für die Produktion eines durchschnittlichen Fahrzeugs zeigt sich, dass der Energieaufwand für den OEM in den eigenen Werken limitiert ist und nur einen geringeren Teil entlang der gesamten Wertschöpfungskette ausmacht. Die Mehrkosten für die Herstellung eines Fahrzeugs in Deutschland im Vergleich zu den USA liegen daher, bei den aktuellen Energiepreisen, im niedrigen dreistelligen Euro-Bereich. Ein Industriestrompreis hätte auf einen OEM daher nur einen geringen Effekt. Direkte Produktionsverlagerungen oder Standortentscheidungen werden dadurch nicht primär beeinflusst.
Ein anderes Bild ergibt sich bei den energieintensiven Unternehmen in der Zulieferkette. Hier kann der Energieaufwand im Vergleich zu der Fertigung bei den OEMs schnell einen signifikanten Anteil ausmachen. Eine Batterie mit einer Speicherkapazität von 50 kWh erfordert in der Herstellung einen Energieaufwand von bis zu 10 MWh (~100 bis 200 kWh Energieaufwand pro 1 kWh Speicherkapazität) und damit deutlich mehr als die Endmontage des Fahrzeugs durch den OEM. Es stellt sich jedoch die Frage, ob Zulieferer bei einem Industriestrompreis aufgrund ihrer geringeren Größe überhaupt davon profitieren könnten bzw. ob dieser für energieintensive Zulieferer ausreichende langfristige Planungssicherheit bietet. Ein Industriestrompreis wird aufgrund der hohen Kosten für den Staatshaushalt strukturelle Unterschiede nicht langfristig ausgleichen können.
Fazit: Zusammenfassend lässt sich feststellen, dass insbesondere der Standort Deutschland weiterhin von hohen Energiekosten belastet wird. Diese haben auch Auswirkungen auf die Automobilindustrie. Betrachtet man jedoch ausschließlich die Fertigung bei den OEMs, ist der Effekt der Energiekosten nur von sekundärer Bedeutung. Ein Industriestrompreis würde daher nur einen geringen Effekt haben und vor allem zu geringfügigen Mitnahmeeffekten führen. Darüber hinaus lenkt er von den Maßnahmen ab, die wesentlich für einen wettbewerbsfähigen Standort sind. Diese umfassen insbesondere Planungssicherheit, Bürokratieabbau und effektive Antworten auf Subventionsprogramme anderer Staaten.
*Exemplarischer Wert: Die exakte Höhe des Energieaufwandes ist insb. von dem Antriebkonzept sowie der Integration entlang der Wertschöpfungskette anhängig und kann hiervon abweichen. Der Energiemix zwischen den wesentlichen Energieträgern Strom und Gas kann ebenfalls variieren, wenngleich die Bedeutung von Strom immer weiter zunimmt.
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any OEMs are struggling with accelerating BEV (battery electric vehicle) sales. The key to overcoming this challenge is differentiation by listening to what customers need.
As a result, we have asked BEV customers and considerers in Germany, The USA, China and Korea about what they care for during various steps of the BEV purchase journey. There are notable differences in how respondents in the four surveyed countries perceive BEVs.
Here are some of our key insights:
German BEV consideres are more sceptical than consumers from the US or China
While many German respondents regard electric vehicles as neutral or not good value for money, their Chinese and US American counterparts demonstrate a much more positive attitude towards BEVs.
Test drives play a crucial role to convince BEV prospects in all markets
The initial driving experience with a BEV is a key factor in shaping a positive consumer perception towards e-mobility. It is therefore crucial that OEMs and dealers join forces to put customers behind the steering wheel of their electric cars.
Many consumers don’t know right from the start whether they want to buy a BEV
Our survey shows that only a quarter of BEV customers and considerers knew right from the start that they want to purchase a BEV. Almost equal shares of respondents were convinced while interacting with the brand, discussing with their peers, or during the test drive.
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In our latest Webinar in cooperation with Civey, our experts show what is important to automotive customers along the entire process of buying an electric vehicle – from Germany to the USA to China and Korea. Enjoy watching!
Jonas Wagner, born in 1978, is a Partner and Managing Director of Berylls by AlixPartners (formerly Berylls Mad Media). With around 20 years of consulting experience in the automotive industry, Jonas is a trusted advisor for top management, specializing in strategy, organizational development and large transformation programs for leading, global automotive manufacturers.
Jonas excels in guiding automotive companies through the transformation of their sales and marketing functions. He has a proven track record in digitalizing customer interfaces to enhance customer experience, sales conversion and loyalty. His expertise includes introducing and implementing new sales and business models tailored to the evolving market landscape and developing data-driven sales and marketing organizations to optimize performance and efficiency. His expertise includes all on- and offline touchpoints as well as business segments, ranging from sales, after-sales, financial services to new business models.
Before joining Berylls, Jonas was a leading consultant within the Automotive Practise of Oliver Wyman, where he worked with global automotive manufacturers, enhancing their strategic initiatives and operations.
Jonas holds a degree in Business Administration from the Aarhus School of Business and the University of Mannheim, with a focus on International Management, Marketing, and Controlling. Combining deep industry knowledge with strategic acumen, Jonas Wagner is a valuable partner for automotive leaders navigating complex transformations.
Jonas Wagner, Jahrgang 1978, ist Partner und Geschäftsführer von Berylls by AlixPartners (ehemals Berylls Mad Media). Mit etwa 20 Jahren Beratungserfahrung in der Automobilindustrie ist Jonas ein vertrauenswürdiger Berater für das Top-Management, der sich auf Strategie, Organisationsentwicklung und große Transformationsprojekte für führende, globale Automobilhersteller spezialisiert hat.
Jonas ist ein Experte darin, Automobilunternehmen durch die Transformation ihrer Vertriebs- und Marketingfunktionen zu führen. Er hat eine nachweisliche Erfolgsbilanz in der Digitalisierung von Customer Journeys zur Verbesserung der Kundenerlebnisses, des Vertriebserfolges und der Kundenbindung. Seine Expertise umfasst die Einführung und Umsetzung neuer Vertriebs- und Geschäftsmodelle, sowie den Aufbau datengetriebener Vertriebs- und Marketingorganisationen zur Performance- und Effizienzsteigerung. Sein Expertise umfasst sämtliche On- und Offline Touchpoints, sowie alle Geschäftsbereiche, einschließlich Vertrieb, After-Sales, Finanzdienstleistungen sowie neue Geschäftsmodelle.
Vor seinem Einstieg bei Berylls war Jonas Berater der Automobil-Practise von Oliver Wyman, wo er mit globalen Automobilherstellern zusammenarbeitete und deren strategische Initiativen und Operations optimierte.
Jonas hat einen Abschluss in Betriebswirtschaftslehre von der Aarhus School of Business und der Universität Mannheim, mit einem Schwerpunkt auf Internationalem Management, Marketing und Controlling. Durch die Kombination von tiefem Branchenwissen und strategischem Scharfsinn ist Jonas Wagner ein wertvoller Partner für Manager im Automobilsektor, die komplexe Transformationen meistern.
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ISILLUSIONMENT SETS IN WHEN LOOKING AT E-MOBILITY
In our yearly study, we interviewed executives of 77 European automotive suppliers from various sectors (e.g., powertrain, E/E, interior, exterior, body, software) and of different sizes (including several TOP 100 suppliers), most of which are dependent on the internal combustion engine (ICE) for a significant proportion of their revenue. The main goal was to gauge the impact of e-mobility on their respective businesses and assess how prepared they are for this major transformation.
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Dr. Alexander Timmer (1981) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, as a partner in May 2021. He is an expert in market entry and growth strategies, M&A 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.
Dr. Juergen Simon (1986) is Associate Partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry. He is an expert in sales and corporate strategies as well as M&A and can look back on many years of consulting experience.
Dr. Juergen Simon has been advising automotive manufacturers and suppliers since 2011 and has in-depth expert knowledge in the areas of holistic strategy development, business models and commercial due diligence. He also focuses on market entry strategies and topics related to the „Software Defined Vehicle“.
Prior to joining Berylls Strategy Advisors, he worked as senior consultant at the Droege Group, a consulting and investment firm.
As a graduate economist from the University of Hohenheim, he completed his doctorate at the Institute of Management at the Karlsruhe Institute of Technology (KIT) before joining Berylls.
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argin pressures for OEMs and suppliers are here to stay and increasingly make the competitive difference - our self-assessment tool identifies the areas for action that will boost performance across the production network.
Since ever, the OEMs have been the driver for their suppliers to both diversify and grow their installed manufacturing capacities. And this was part of the “old rule” as suppliers had also been slightly outperforming OEMs on EBTIDA profitability level. However, since 2021 the usual pattern has been disrupted and the profitability has flipped the first time since more than a decade. OEMs now outperformed their suppliers by 3.5% points on profitability level – until today. The profitability of both automakers and suppliers has suffered in recent years, as the industry has navigated a series of major external crises while also managing its own transformation for an electric future. And there is no soft landing in sight – auto industry margins will remain under pressure from multiple economic challenges.
These include new forms of protectionism that are likely to hurt the car industry’s global supply chain – for example, the estimated $500bn-a-year cost of planned import taxes in the US if Donald Trump wins the presidential election in November, including a 60% tax on all goods from China. At the time of publication, the European Union was also planning to introduce tariffs of up to 38.1% on Chinese EVs amid an anti-subsidy investigation. Workforce issues are also disrupting production – the lack of skilled workers in Germany will cost the country’s economy around $52bn this year, estimates show, and a six-week strike by United Auto Workers union members in the US last year cost OEMs an estimated $10.4bn.
There is also the overarching challenge of climate change, both the changes required by regulators to reduce vehicle and factory emissions, and the impact of more frequent extreme weather events on production and supply chains.
So how to get back on profitability track given the installed production network?
As a result, every department of an automotive company should be asking itself what it can do to stop the slippages of margins. In this piece we look specifically at operations, and what major levers are available to chief operating officers (COOs) to protect and increase profitability in the production network. Especially, how and what levers you can trigger with a competitive payback period within 2-3 years? You can also take our benchmark assessment at the end of the article, and we will share our insights directly with you.
In short, we believe the major opportunity for COOs is to rethink their approach to steering plants – to shift their focus from optimizing individual factories to the performance of the production network as a whole. Five key differentiators will enable this change:
1. Network design
2. Sourcing excellence
3. Industrialization excellence
4. People and talent
5. Sustainability
In recent years, disruption to production has had a major negative impact on profitability as carmakers and suppliers have faced high volatility in order levels, and multiple issues in global supply chains ranging from pandemic shutdowns to attacks on shipping in the Red Sea.
In a period of so much geopolitical and economic uncertainty, OEMs and suppliers know they need to increase the flexibility and resilience of their supply chains. Operating factories as part of a network, where another plant can take over the work of one that has been impacted by shutdowns or disruption to its supply chain, requires companies to define a clear steering concept for the network, made up of governance, allocation and incentivization.
Governance: A certain degree of standardization is required to enable overall management and leverage potential across the entire network. This can be achieved by harmonizing definition and calculation of KPIs, transparency around production performance or current challenges, consistent use of network-wide MES and maintenance software and standardized supplier management processes and standards in product design and material usage.
Allocation: To hedge against order volatility and absorb high demand at peak times, COOs should be looking at ways to balance capacity between plants, and increasing the flexibility of production lines, to make it possible to quickly rethink product allocation when needed.
Incentivization: To increase network profitability, automotive companies and suppliers need to secure buy-in from all their plants, down to the level of individual employees. To incentivize teams to support the network concept, plant managers will have goals that are, at least in part, based on achieving network profitability rather than only their single plant’s profitability. This of course includes any intercompany complexities.
1. Network design
Is network design a continuous task? Yes – it should be a continued optimization once set up. The way the production network is designed and set up is crucial to making it highly profitable. At some point in time, it is also right to question the status quo and initiate a more structural footprint transition including re-allocations, downsizing or consolidation. Payback ratio here should not exceed 3 years. However, those costly restructuring efforts can be avoided by risk prevention actions.
For instance, OEMs and suppliers should have the maximum level of standardization across all plants, along with the ability to be both highly flexible when needed and to give enough power to individual plant managers to be able to delegate complex issues locally, decentralizing decisions where possible.
Of course, achieving this is very challenging. Planning robustness is key. The major risks to profitability are volatility in orders and customer requirements, which make it difficult for OEMs and suppliers to plan for the right production volumes; shortages of resources, both components and staff, which lead to constant changes in production schedules and potentially shutdowns; and external risks to production locations. We should note here that handling overcapacity by identifying the best and most efficient production footprint is something that only a few automotive suppliers have successfully achieved. More information and guidance on this topic can be found in this Berylls publication (link)
To build in the right level of standardization and flexibility in production, COOs need to take the following steps:
Making these changes will allow automotive companies to radically improve their existing asset structures and increase cost competitiveness, which in turns allows for higher flexibility. For more on the topic of future-proofing supply chains, download our report here.
2. Sourcing excellence
Sourcing and supply chains are fields where the automotive industry has been very efficient for decades. However, the multiple crises of recent years, including Brexit, the US/China trade war, COVID-19, the wars in Ukraine and Gaza, and escalating tension between China and Taiwan, have made clear that the industry’s global supply chains are far from shock-resistant. Volatile commodity prices, particularly for parts destined for EVs, also require new competencies in modern purchasing organizations.
Building a robust supply chain now means striking a balance between cost, resilience and flexibility. OEMs and suppliers need to actively manage supply chain risk, assessing where the next problem is likely to arise, as well as actively managing suppliers. Potential solutions and approaches include:
3. Industrialization excellence
Despite working as hard as they can to keep production timelines on schedule and within budget, we estimate car manufacturers lose more than €4bn a year due to poorly managed launches. The biggest challenges in the auto industry today arise from industrializing new technologies, as software increasingly becomes the key differentiator between vehicles. Suppliers and OEMs are mastering new production technologies, and shorter product lifecycles with increasing development complexity. Integrating customer requirements throughout the industrialization phase is another challenge.
Against this backdrop, the key success factors when industrializing new programs are:
4. People and talent
Digital twins are now commonly used in production and the first production-relevant AI use cases are coming through, but the automotive industry still relies heavily on the skills of the people working in it. However, the skills that are needed are changing as greater automation and digitization in factories replaces or changes roles. OEMs and suppliers also find themselves competing with other industries for the best-qualified employees. There is an urgent need for companies to both ensure their current workforce is trained with the right skills and hire new people to supplement existing resources as technology advances and the way cars are made changes.
To help overcome workforce hurdles, COOs should:
5. Sustainability
Environmental, social and governance (ESG) performance is increasingly important for key stakeholders, as well as a regulatory requirement. Carbon emissions are now a leading consideration when it comes to supplier selection, drivers increasingly want products that can be reused or recycled which means the automotive industry has to deliver these, and strong environmental performance is one of the elements of corporate culture that really matters to current and prospective employees. Make ESG an economic KPI to be measured and to gain benefits on the P&L and cash flow statements.
COOs must guide the production organization to play its part by:
COOs and production organizations that actively address the challenges described above by managing their operations as a network can really make a positive difference to profitability.
Berylls and AlixPartners have extensive global project experience in managing production networks and has gathered data that has been invaluable to our work with clients in recent years. If you are interested in finding out more, complete our self-assessment (see below) on the key differentiators in order to:
As soon as you provide your data we will assess the input and provide you with insights into your network profitability benchmark and ambition levels within two weeks.
Fritz Metzger (1986) joined Berylls by AlixPartners (formerly 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.
Featured Insights
ar dealers are almost as old as the car itself. And ‘peak car dealer’ was reached before ‘peak car’.
While the end of the car dealer has been forecasted for many years they are well alive and kicking. Customers, disruptors and OEMs alike have put pressure on the trade to adapt and improve. It seems the necessity to maintain returns for investors in a capital-intensive business has done its part, too.
Several brands have experimented with agency systems – with mixed results at best. And some innovators who launched direct-to-consumer networks had to learn which crucial role retailers play in a brand’s success and are now recruiting retail partners. Auto dealers are here to stay.
Nevertheless, the potential for further improvement always exists, also within a brand’s network, where a wide span of performance is still too common. Unfortunately, several brands seem to have neglected driving retail excellence – while pursuing innovative sales models, or due to cost pressures.
We at Berylls by AlixPartners believe that it is a success-critical task of a brand to (re-)strengthen their leadership and support of retail excellence in their networks. So, how can your brand help its network to continue improving? And how can Berylls help you to do that? Our Berylls Retail Excellence Toolbox focuses on the performance drivers with the biggest impact, it aligns operational improvements with your strategy and boosts innovation. And finally makes performance gains more sustainable. All this in a structured approach utilising the well-proven Building Blocks of our Toolbox.
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Arthur Kipferler (1963) started his career in 1989 at the Boston Consulting Group, where he consulted for 13 years in the automotive industry. After consulting, Arthur Kipferler held senior management positions at Toyota in Europe and the U.S. From 2013 to 2014, he was global head of the BMW Group’s Future Retail program. Subsequently, he had leading roles in strategy, corporate planning and transformation management at Jaguar Land Rover in Coventry, UK. Arthur Kipferler complements the expertise of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.
Mechanical engineering, production engineering, at the Technical University of Munich (TUM); MBA in Strategy, Marketing and Organizational Behavior at INSEAD Business School, France.
Featured Insights
he automotive sector is one of the most relevant contributors to the wealth of European citizens.
In the past, a highly competitive aftermarket granted affordable and individual mobility to a large part of the population, but this might change with the ongoing shift of technology. CLEPA, FIGIEFA, Automechanika, and Berylls conducted a study to analyze the most important influencing factors that have the potential to change the aftermarket landscape and possibly drive a shift in the existing market balance between the channels of the independent aftermarket (IAM) and the original equipment services (OES). To substantiate and draw conclusions, we identified five key influencing factors likely to drive the most significant changes and defined seven key markets in Europe to provide a thorough overview and subsequently build a market model to forecast the expected market development. We conducted interviews with highly esteemed experts across the entire aftermarket value chain to gather qualitative feedback, sustain our observations, and illustrate changes in the balance of power, price, and access to data, forming highly probable market scenarios.
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Florian Tauschek has 8 years of experience in strategy consulting. He focuses on business & sales model strategies for flexible Vehicle-as-a-Service (VaaS) offers.
He is an expert in topics such as customer & vehicle lifetime value optimization, the transformation of the underlying automotive sales model from one-time asset sales towards multicycle models generating recurring revenues as well as market entry strategies for various VaaS products such as operating lease or subscriptions. Furthermore he is the author of several market leading studies around VaaS.
He holds a Master of Science degree in management from HHL – Leipzig Graduate School of Management.
Paul Kummer (1983) joined Berylls by AlixPartners (formerly 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.