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Zero-Emission Zones

Munich, December 2022
B

y 2030 170 Mio. people could live within proximity of a zero-emission zone (ZEZ) – affecting 80 Mio. Passenger cars on the road.

At least 36 cities pledged to establish a significant area of their city as a zero-emission zone by 2030. This will have a massive impact on new cars sold in and around these cities as well as the replacement of their current vehicle fleet.

Authors

Dr. Alexander Timmer

Partner

Lars Behr

Consultant

Map of cities planning to introduce a zero-emission zone by 2030

Decarbonization of the vehicle fleet in line with the Paris Agreement is essential to fight climate change. To spur the decarbonization of the vehicle fleet, governments all over the world take measures for the conversion of fleets from internal combustion engines (ICE) vehicles to zero-emission vehicles at the tailpipe.

To phase out ICE vehicles many countries plan to ban the registration and sale of new ICE vehicles. The member states of the EU agreed to enforce this ban by 2035. Another measure taken by cities and local governments is the introduction of zero emission zones (ZEZ). This helps to spur the decarbonization of the vehicle fleet, improves local air quality and limits congestion. While there is no strict definition of ZEZs, generally only buses, trucks, and cars with zero tailpipe emissions as well as pedestrians and cyclists are allowed access. The restrictions for freight are not consistent between the different governments, however it is likely that the majority of ZEZs will also apply to freight, perhaps even more so. For example: at least 29 cities in the Netherlands announces to implement ZEZs for freight by 2025!

In addition to national or isolated initiatives to establish ZEZs, 36 cities around the world that are part of the C40 alliance have joined forces. The members of the C40 alliance have set themselves the goal of combating the climate crisis. 36 of these members have committed to creating ZEZs to reduce emissions in city centers. Among them are cities like London, Berlin, Mexico City and Tokyo (see map). In their “Green and Healthy Streets Declaration”, they pledge to establish a significant area of their city as a zero-emission zone by 2030. This means that by 2030 170 million people could live within proximity (within 25km) of ZEZ and thereby affect their future purchasing decisions. Currently, these 170 million people represent a vehicle fleet of about 80 million passenger cars; ZEZs will require accelerated replacement of this fleet. For comparison, IHS currently predicts that around 230 million electric vehicles will be produced between 2022 and 2030.

Besides commitment from European cities, it is remarkable that many cities in developing countries committed to ZEZ. Their ambitious targets signify the high relevance of the climate crisis and pollution of inner cities for these regions of the world. It is likely that some of these cities will delay or soften the implementation of a ZEZ, if more pressing political issues arise.

Furthermore, looking at the map, there is one apparent gap. China, responsible for around one third of worldwide vehicle sales, does not have any cities committing to ZEZs. However, multiple cities like Shenzhen and Luoyang in China, have or a planning to introduce ZEZs for freight vehicles. A change in policy in Chinese metropolitan areas could have a significant impact on the impact of ZEZs on global auto demand. If the current Chinese C40 cities were also committed to creating ZEZs, that would be over 90 million people.

However, the steering effect of cities committing to implementing ZEZs is significant even without Chinese involvement.  However, only a few cities so far have made the commitment official, have set a start date, indicated the exact vehicle types affected, and have binding requirements for access based on things like emission performance standards. Examples that fulfill these four conditions currently exist primarily in Europe, which is a role model for ZEZs. It is likely that other nations will follow the European example. What is certain is that the final implementation and impact of ZEZs on car owners will depend on the adaptation of national and local laws.

Dr. Alexander Timmer

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.

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Six transformation secrets for auto industry leaders

Munich, December 2022
L

eaders must not be afraid of the transformation and the far-reaching measures that will be required in order to succeed

The car industry is going through a period of enormous change. Increasing demands from customers and regulators for more sustainable cars and a series of global crises have combined to create huge complexities for companies. These require radical re-thinking of decades-old business models and consistent, decisive action by leaders.

We believe carmakers need to announce a “general state of transformation”. Transformation involves questioning the familiar at the same time as learning new competencies and skills. It means processing and managing multiple new states of being at once. Automakers must break away from their traditional organizational structures and ways of working, supported by temporary structures focused on ensuring the transformation succeeds.

Managing this process exponentially increases the demands placed on management teams. It is the responsibility of leaders to steer the company quickly from its old organizational and operational structure to the new, transformed state (see Exhibit 1).

Authors

Peter Eltze

Partner

Laura Kronen

Partner

Theresa Stütz

Project Manager

Exhibit 1

Source: Malik, Berylls

Managers need to identify the future state they are aiming for and not be afraid of the transformation and far-reaching measures that will be required in order to get there.  The future success of the company should be based on the understanding that change fixes the past, transformation creates the future.

In our experience working with some of the world’s biggest automotive OEMs, six secrets help management teams to lead their organization successfully through the state of transformation:

Secret 1: Take on board the transformation’s purpose and pursue it consistently

Secret 2: Show humility and respect toward the company’s history and values

Secret 3: Convergence of strategy and organizational development are essential

Secret 4: Set and follow your transformation plan consistently and purposefully

Secret 5: Create the transformation team from a balanced mix of experienced and younger managers

Secret 6: Make sure that every staff member recognizes their contribution to the transformation

Secret 1
Secret 2
Secret 3
Secret 4
Secret 5
Secret 6
Secret 1

Take on board the transformation’s purpose and pursue it consistently

Transformational power should always come from an organization’s top management. They have to be prepared to consistently make transformation their top priority – and to make the required changes in their own ways of working too. Leaders must exude a genuine enthusiasm for transformation. The whole system can only be successfully implemented when a strong will and desire for transformational change is displayed at top management level – and when the management team acts as if the path to be followed has already become reality.

Successful transformation is often initiated by “top down” messages that put the whole system under pressure. These messages act as amplifiers that propel the company into action: it can no longer break away from the path it must follow.

The transformation’s purpose should be defined and shaped by a small group, otherwise there is a danger that it could remain under discussion for too long. However, leaders should also create a big enough coalition of supporters in advance of the transformation work starting, to help them convey the purpose in detail. Individuals whose support for the purpose seems to be wavering should be closely observed and reassigned if there is any doubt.

Secret 2

Show humility and respect toward the company’s history and values

Successful transformations actively engage with the past and uncover how the company’s ability to change has shaped it to date. The lead questions to be kept in mind are: where have we come from? Why is it like that? Which patterns can be broken and which ones not? Leaders should keep in mind that there are almost always good reasons why company structures are as they are and why people behave like they do.

By recognizing current structures and cultural patterns, and treating them with respect, leaders can evaluate where there is a need for action and where radical changes cannot be initiated overnight.

Secret 3

Convergence of strategy and organizational development are essential

Integrated strategy and organizational development involves combining the conceptual perspective of strategic thinking and acting with the organizational perspective and continuously harmonizing them. This is where we talk about ensuring convergence: the elements of strategy, structure and culture have to be continually examined for consistency and coherence, and the effects of change have to be monitored so that the whole system is optimized rather than only individual elements of it.

When it comes to transformation, the translation of strategy into organizational development such as organizational structure, monitoring systems, IT infrastructure and Human Resources should be examined and adapted just as leadership and culture should. This should be carried out very quickly after the finalization of the strategic target picture, so that a transformation concept for changing the relevant elements can be directly developed and implemented.

All too often, organizations are adapted after too much time has elapsed, and momentum for supporting the transformation cannot be used. Even if the idea of convergence is not new, in practice it is very challenging to implement because it requires a lot of cooperation and alignment between the relevant functions in the organization. There are usually no identifiable organizational tick boxes for elements such as culture and leadership. Setting organizational requirements such as re-interpreting the role of organizational development and investing strategic and organizational functions with creative and joint responsibility has proven to be helpful. This central function oversees convergence during the transformation and works closely with individual functions.

Secret 4

Set and follow your transformation plan consistently and purposefully

The planning component of a transformation is designed to deliver consistent implementation. From the outset, it is essential to convey the transformation plan in a clear and structured way and to set up a firm performance framework which is closely monitored by strict milestone tracking and impact assessment.

Of course, even with the best planning in the world, there is no protection against unfavourable and unforeseen outside conditions, as the events of the past three years have made clear. Leaders must therefore remain extremely alert to changes in the environment. Jim Collins even speaks of a “planning paranoia”, which can be converted into productive action.

The secret is to stick to planned objectives, not underperforming but at the same time not striving for even further-reaching results that go beyond the scope of the current transformation. This is because even if it seems tempting to overdo the speed, scope, and other elements, organizations cannot usually keep this up over the long run and the positive momentum behind the transformation is lost. For the same reason, it is important during the planning phase to scrutinize transformation plans closely and examine their feasibility for the organization.

Secret 5

Create the transformation team from a balanced mix of experienced and younger managers

The core transformation team plays a key role in the success of the overall initiative, and it is essential for top management to choose the members very carefully. In our experience, the ideal team is a mix of experienced managers and younger managers who are keen for change. Experienced managers are usually adept at assessing feasibility, practicability and potential risks. At the same time, there is also a need for adventurous and courageous input from those who see the situation with fresh eyes.

Whereas experienced people in the final stages of their career have little to lose and are in a good position to hand over the new course of action to the next generation, the most dangerous group for the success of the transformation is those who have achieved a degree of seniority and stand to lose it through the changes.

The importance of communicating in an empathic way therefore cannot be underestimated. Conceptual skills are in themselves not sufficient for a successful implementation of a transformation; rather managers are needed who lead staff with empathy and who radiate stability and security in uncertainty.

Secret 6

Make sure that every staff member recognizes their contribution to the transformation

Management needs to not only fully understand and steer the transformation with all its interdependencies; they also have to ensure that all members of staff can make a contribution. Leaders should ensure from the start that people can understand what the transformation purpose means for their role, discover how they can contribute to the purpose, and take ownership of it. Staff should understand why the transformation is the right thing to do, what contribution they are making, and what every individual needs to do to help the transformation take place successfully. If these elements are in place, the chances of a successful transformation will be considerably greater.

Conclusion

The automotive industry is confronting changes that exponentially increase the demands placed on management teams. This unique challenge requires leaders who have the vision and the stamina to transform their organisations’ core, organisation and value chain all at the same time.

They must lead top-down and build a coalition of the willing around a shared purpose at the same time as acknowledging and honouring their organisations’ past successes. They must ensure that strategy and organisational development are in full lockstep by ensuring that transformation-critical functions remain closely aligned without straying from the transformation roadmap they have committed themselves and their organisations to.

 

The most successful transformation managers rely on mixed teams that represent the best of the old and the new while ensuring that employees understand how their roles are impacted by the transformation and how they themselves can contribute to its success.

Too many transformation initiatives flounder because leaders fail to fully integrate the demands of the transformation in their every action. In so doing they risk arresting their organisations in permanent firefighting and thereby compromise their organisations’ ability to adapt and its members’ trust in the transformation effort itself.

Examples:

Example Mercedes-Benz: A consistent premium strategy
  • Mercedes-Benz has set itself the goal of pursuing a consistent premium strategy and defining sustainable and modern luxury of tomorrow.
  • The strategic direction was clearly communicated and the purpose was specified top down: profitable growth instead of volume focus, no mainstream expansion but dedicated focus on the growing and attractive luxury segment, at the same time reduction of complexity in other segments. With this, Mercedes-Benz sends clear message to develop to a premium/luxury manufacturer and to take away the focus from the volume segment.
  • This is accompanied by tremendous changes for the organization and the people who work on the affected products. To exit a complete segment means to free oneself along the entire value chain - from development to production to marketing.
  • The clear and confident announcement of this major change led to the organization being moved to action, with a clear focus on implementing the vision rather than questioning taking up space and time. The organization is thus left with the strength and positive momentum to concentrate on intensive transformation support, which must be carefully considered in order to be successful.
Example Porsche: Porsche’s early electrification strategy
  • In terms of new vehicles, Porsche has set itself the goal of already achieving 50% of sales with fully electric vehicles by 2025 and increasing this rate to 80% by 2030. To this end, the entire portfolio will be fully electrified, with the exception of the iconic 911.
  • This means that - despite a target group with a historical high affinity to combustion engines - the transformation from an absolute position of strength with high market success in the combustion performance segment was initiated early on and pursued consistently.
  • The example of the Taycan clearly illustrates this: the strategic product decision was made almost 10 years ago. The Taycan is the full concentration on its own platform & architecture, including its own 800 volt system. Making this decision at that time shows how clearly Porsche strategically initiated the transformation at an early stage and believed in it. Moreover, Porsche has made investments in an own production of high-performance battery cells, consistently expanded services such as premium charging parks or wall boxes.
Example ZF: Transformation ZF E-Mobility: Electrified Powertrain Technology
  • ZF Friedrichshafen’s Electrified Powertrain Technology division, in which ZF bundles all its technologies related to electric vehicle drives since January 1st, 2021, has successfully launched the largest “Capability Building” initiative in the company's history. More than 12,700 managers and employees worldwide are learning, networking, and developing themselves, and their teams to master the transformation from combustion engine to e-mobility.
  • Within months, participants build-up comprehensive knowledge and skills in all aspects of e-mobility. This gives them the opportunity to upskill or even reskill professionally, to onboard successfully to the new division or to recommend themselves for new job profiles.
  • The ZF E-Cademy is intended to establish a new, strong learning culture that focuses on collective and individual learning experiences via a modular, platform-based blended learning offer. It impacts all areas of business, from strategy, innovation, employee engagement, employee retention, and many other elements of the organization. This is a major step towards creating a strongly positive transformation momentum and ensuring that employees recognize their personal contribution to transformation.

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.

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Peter Eltze

Peter Eltze (1964) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) as a Partner in November 2015. He began his career in the medical technology division of an integrated technology corporation, and became a project manager at Malik Management Zentrum St. Gallen in 1996 before being appointed Partner in 2001. From 2003, in his role as member of the executive board, he was in charge of Management Education & Development. Since the end of the 1990s, Peter Eltze has advised companies in the automotive and mechanical engineering industries. At Berylls, his consulting activities focus on integrated organizational development (strategy, structure, culture), transformation management, and executive development.
Education in wholesale and international trade; administrative sciences at the University of Constance, Germany.

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Laura Kronen

Laura Kronen (1980) is a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors) with a focus on transformation. She is passionate about moving people and organizations forward. With over 18 years of industry and consulting experience, her focus is on transformative challenges in the operations context – from executives to individual employees, at manufacturers and suppliers. She helps her clients align strategy, structure, and culture in their respective market environments to build resilience.

Prior to joining Berylls, Laura Kronen worked at PwC Strategy&, Volkswagen AG and Audi. She holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT).

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What do they have that we don’t?

Munich, December 2022
E

stablished and new automotive players can learn from each other in the battle for future customers, as the transformation of the industry accelerates

Consider the following number: in August, 42% of the AUTO100 Index’s global market capitalization was held by companies which did not even exist in 2000 (Figure 1)¹. That gives you some sense of the scale of disruption experienced by the industry in the past two decades, powered by the rise of electric mobility and the growing importance of connected, shared and autonomous vehicle technology. For an industry with more than 130 years of history, the question arises, what can traditional players learn from the new breed of automotive companies – and vice-versa. Both sides stand to benefit by asking: what do they have that we don’t?

¹ To protect against the bias inherent in under- or overvalued stocks, the index share of any one stock in the AUTO100 is capped at 2.5 percent.

Berylls Insight

What do they have that we don't?
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Authors

Laura Kronen

Partner

Peter Eltze

Partner

Figure 1

The 12% of Auto100 Companies founded AFTER 2000  holding 42% of total mkt. Cap

AUTO100 listed companies per automobilty group, market capitalization in USD as of Aug 9th 2022

Notes:
1. Definition and selection criteria of the AUTO100 index: Prerequisites: publicly listed with > EUR 1bn Market cap, share of revenue from automobility >50%, Selection through >20   individual scores that assess both, strategic and fundamental performance
2. Definition traditional / new players: traditional players have long automotive history; new players were founded in 2000 and after

Source: Berylls AUTO100 Index, Berylls Strategy Advisors

The six key success factors that link strategic and operational leadership

Leading companies succeed because they closely link strategic and operational leadership. What sounds like a simple maxim is hard work in practice. It requires a clear understanding of the main strategic and operational control variables, and how they interrelate. For this, Berylls’ transformation team relies on Aloys Gälweiler’s framework, which focuses on six key success factors. Four are key for mid- to long-term success and these are: market position, innovation performance, productivity, and attractiveness to good people. In the short term, liquidity and cash flow, as well as profitability, matter most. (Figure 2)

Figure 2: Six key factors define short-term and long-term success

Source: Berylls Strategy Advisors based on Aloys Gälweiler

Market Position
Innovation Performance
Productivity
Attractiveness to good people
Liquidity and cash flow
Profitability
Market Position

Successful automotive companies understand exactly what their customers value and are willing to pay for. They also have a clear understanding of how they are viewed in relation to competitors.

As companies race to keep up with the EV transition, future growth expectations trump past sales records. New players have the ability to adapt, improve and expand their business models at a rapid pace, which leads to high growth expectations. But they still need to build trust and a loyal customer base.

On the other side, traditional players are adept at leveraging their established brand profile and reputation to win and retain customer trust and loyalty. However, their sheer size and market power blurs their customer focus and slows down decision-making.

Innovation Performance

Innovation performance hinges on a company’s ability to transition from old to new business models.

New players have the freedom to fully focus on disruptive products for the future mobility ecosystem (green curve), within a culture that supports fast ideation and execution. The challenge for them is to rapidly respond to customer feedback and improve their product’s performance to make it relevant at scale.

Traditional companies, by contrast, have built their success on past disruptive innovations, which they now need to sustain to run their existing business (red curve) while also transforming to meet future customer needs. As a result, they face multiple challenges, including competing projects and resource requirements, developing future skills and building collaborative partnerships.

Productivity

High market share allows companies to realize lowest costs per unit. However, as the competitive mobility landscape is changing with new products, services and technologies, automotive players need to understand their own cost position relative to their competitors’.

Traditional automobile manufacturers are paragons of productivity in several ways: they have deep engineering and industrial know-how and unrivalled ability to scale up to large production volumes. However, with the increasing need for new capabilities and partnerships along the value chain, they need to find ways to collaborate more closely with suppliers and close existing capability gaps.

In contrast, new players often have a lack of system and process know-how related to the automotive value chain, leading to great challenges to get products ready for series production. However, with greenfield operations set-ups and the flexibility to informally reshuffle resources, they have the opportunity to set up their operations for future productivity leadership.

Attractiveness to good people

The right people are at the heart of every successful company. But, with the increasingly high number of employees in the industry looking for new jobs, leaders must be very clear about their value proposition not just to their customers, but to existing and prospective employees alike.

The most competitive new players are already talent magnets. They have a compelling company purpose and culture, are fully focused on core priorities, and have flat team hierarchies. Rewards are high for star performers, who are paid according to their talent and skills, rather than length of service and seniority.

Traditional players have well-known brands and very good reputations as employers, as well as offering stable jobs. The bad news is that traditional companies typically suffer from convoluted corporate structures with multiple management levels, while internal politics often prevents a sharp focus on customer value. At its worst, this leads to directionless and demotivated teams.

Liquidity and cash flow

Liquidity and cash flow represent a key success factor in operational management, in particular when it comes to the short-term success of the company.

In the past, traditional manufacturers were cash machines during strong periods of growth, able to generate their own liquidity from the business. To some extent this is still true, but they are operating in a market where their expensive infrastructure and high vehicle turnover increase the risk of costly bottlenecks, at a time when the pandemic and the war in Ukraine have severely disrupted supply chains and triggered spiraling inflation.

New players have a different challenge in the current volatile market conditions. They still need to prove that their value proposition will establish a viable business model in the long term. This will be an ever-greater challenge in the face of the looming recession, with more difficult access to capital.

Profitability

In addition to liquidity, annual profit is an important factor for measuring short-term success. The effects of high market share and economies of scale are particularly evident here.

New players must invest heavily in R&D to build up their operational capacities and supplier networks. At the same time, they have limited turnover and production volumes and no opportunity to realize economies of scale. As a result, their profitability is generally low or they are loss making.

By contrast, traditional players leverage their deep industry experience to develop efficient operations. Their leading market positions and high vehicle volumes strengthen their negotiating power with suppliers and increase their ability to realize economies of scale. At the top end of the market, luxury models generate higher margins and profitability.

How OEMs can use the lessons to transform

Just as traditional players must take cues from new ones, for example in how to transition to more agile working methods, so new entrants need to look at incumbents to achieve the kind of operational excellence that will ensure their long-term survival. In our experience, the top priorities for new players should be improving their market position, productivity, and profitability, while traditional OEMs should focus on innovation, attracting talent and boosting liquidity.

Yet while the challenges that confront new and traditional players are as different as their respective starting positions, the same factors will help both groups manage this intense period of transformation and successfully position their businesses in the future mobility ecosystem. In our experience, this requires holistic systems thinking, in the following ways:

Defining a clear vision for the future

A shared “north star” vision provides orientation for transformation and enables all staff to fully understand their contributing role. Management teams must act as role models to make their vision tangible.

Being able to operationalize strategy

Companies need to link their strategic and operational leadership closely to ensure long- to mid-term success. This means that building the foundation for their strategic approach to market position, innovation performance, productivity and attractiveness to good people becomes a central task in the here and now.

Having a holistic view of strategy, structure, culture and leadership - and their interdependencies

Fully understanding the interrelationships between strategy, structure, culture, and leadership is vital to realizing sustainable changes. A good example is time to market: If a company wants to become faster, it needs to make decisions more rapidly. This requires a culture that tolerates mistakes and a governance model that enables decision-makers to circumvent existing processes in cases when speed is of the essence.

Adapting organizational structures into viable units with a high degree of autonomy and rapid decision-making

In the rapidly changing automotive ecosystem, speed and adaptability are key. Adapting organizational structures into viable units steered with a high degree of autonomy, while aligned with the overall strategy, allows organizations to act fast and effectively.

Reinforcing the leadership qualities of foresight, making decisions amid uncertainty, taking responsibility, and providing orientation

Company leaders must model the change they want to see in their employees. They must lead by example, be decisive and provide employees with an inspiring picture of what the future will be like in their daily interactions, to create the kind of atmosphere required to carry out sustainable change.

Developing the skills and capabilities required to succeed in the future

Closing performance and opportunity gaps not only means hiring new people in future competency areas such as software, but also making clear the need for change to people already in the organization and enabling them to contribute to what will make them successful in the future.

Both new and traditional players need to boost their resilience to weather the accelerated industry transformation successfully. Traditional players face the additional challenge of walking the difficult path from what has made them successful in the past to what will make them successful in the future. Or as Aloys Gälweiler puts it, “Strategic thinking, decision-making and acting is always the sacrifice of immediate advantages in favor of higher future advantages.”

What’s next in this series?

New and traditional players need to learn fast from each other or risk falling behind swifter competitors. In the coming weeks, we’ll publish our perspective on how to apply the following key lessons rapidly and effectively:

Successful transformations – six secrets

Digital capability building – solving the key bottleneck for transformation

The viable system model – organizational steering in a VUCA world

Laura Kronen

Laura Kronen (1980) is a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors) with a focus on transformation. She is passionate about moving people and organizations forward. With over 18 years of industry and consulting experience, her focus is on transformative challenges in the operations context – from executives to individual employees, at manufacturers and suppliers. She helps her clients align strategy, structure, and culture in their respective market environments to build resilience.

Prior to joining Berylls, Laura Kronen worked at PwC Strategy&, Volkswagen AG and Audi. She holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT).

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Peter Eltze

Peter Eltze (1964) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) as a Partner in November 2015. He began his career in the medical technology division of an integrated technology corporation, and became a project manager at Malik Management Zentrum St. Gallen in 1996 before being appointed Partner in 2001. From 2003, in his role as member of the executive board, he was in charge of Management Education & Development. Since the end of the 1990s, Peter Eltze has advised companies in the automotive and mechanical engineering industries. At Berylls, his consulting activities focus on integrated organizational development (strategy, structure, culture), transformation management, and executive development.
Education in wholesale and international trade; administrative sciences at the University of Constance, Germany.

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US Automobility: Unilateralism in a network of networks?

Munich/Detroit, September 2020

Kicking up a lot of dust, COVID-19 has made the form and shape of the future of automobility even more opaque. The objective of this insight is to function as a compass for players in the US automobility industry for the near-term future by providing a different perspective on what has and has not changed amidst the pandemic. The insight is structured into three sections: (1) A critical reflection of what American customers want, (2) a discussion of the impact on the automobility value chain, and (3) a synthesis of the strategic implications for automobility players operating across this value chain.

(1) WHAT CUSTOMERS WANT

The private vehicle will remain the cash cow of the automobility industry over the near-term future. Within this dominant segment, customers are demanding an omnichannel blend of physical and digital (retail) offerings. While connected services are on customers’ radar, their full unfolding is yet to come. Depending on the development of macroeconomic stimuli, electric passenger vehicles will remain a niche phenomenon in North America over the near-term future, just as automated driving.

(2) HOW AUTOMOBILITY PLAYERS REACT

Automobility supply has been shaken by COVID-19 with vehicle production having been kept at a standstill from mid-March through early May. The market capitalization and stellar performance of Tesla amidst the pandemic showcases the importance of greater digitalization of the customer experience. Beyond the immediate Corona manifestations, changes in the automobility value chain will rewrite the rules of the game. While incumbents’ DIY approach to the future of automobility gave room to new kids on the block, the required core competencies to champion this future will be too complex for a single player to handle alone.

(3) WHAT NOW

Future competition in the automobility industry will be between networks, not individual players. OEMs are recommended to internalize their home-turf core competencies at the customer interface and regarding the provision of the vehicle framework. CASE technologies should only be internalized if players can realistically achieve a sustainable competitive advantage in them. The underlying legal, financial, and technological risks of all other fields are best hedged in a network of complementary downstream and upstream partners.

Coping with the digital ramifications of the pandemic is only the qualifier for the longer-term game. Future success will be determined by performance within networks, not individual greatness. Formulate a clear vision and enhance prioritized core competencies, which will form your network value proposition. Now.

Berylls Insight

US Automobility: Unilateralism in a network of networks?
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Authors

Andreas Radics

Executive Partner

Martin French

Managing Director USA

Henning Ludes

Associate Partner

Andreas Radics

Andreas Radics (1973) has been advising the automotive industry as a consultant since 2001. In addition, he can look back on over four years of professional and management experience in industry. Before co-founding and building up Berylls Strategy Advisors in 2011 as one of its Managing Partners, he worked at Gemini Consulting and Oliver Wyman, two international strategy consulting firms.
Besides being one of the leading subject-matter experts in Mergers & Acquisitions as well as in the development and implementation of corporate strategies in the automotive industry, he is an expert in e-mobility and a proven expert on the US market.
Business administration degree at Catholic University of Eichstätt-Ingolstadt, Business Administration Faculty, Ingolstadt, Germany.

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Martin French

Martin French has over 25 years of experience in automotive OEM, Tier 1 suppliers & mobility startups with various high-profile international leadership, product development, operational, program management, strategic & business development roles. In 2012, after holding various senior management positions, he was appointed Global Vice President Customer Group at Webasto where he led the global business transformation for their US based customers with over $1bn in revenue.
Martin joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) as Managing Director in 2019 and leads the Berylls office in Metro Detroit, USA. His consulting focus is Automotive Suppliers & OEMs, Corporate Strategy & Business models, M&A, Restructuring & New Business Development & Go to Market.
Martin studied Production & Mechanical Engineering at Oxford Brookes University. He has lived in Michigan, USA, since 2012.

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Henning Ludes

Henning joined Berylls in 2018, is an Associate Partner at the Berylls Group and is currently completing a regional assignment in Detroit to further expand our local footprint. Henning particularly focuses on topics at the interface of new business development, go-to-market strategies, sales as well as organizational transformation. He has advised automotive manufacturers, suppliers and investors on a global scale.

As an MSc. Management graduate, Henning has completed his education at WHU – Otto Beisheim School of Management (Germany), Kellogg School of Management, Northwestern University (United States) and Warwick Business School (United Kingdom).

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Pressemitteilung

Pressemitteilung: Chinesische Marken mit guten Chancen bei deutschen Premium-Autofahrern

München, November 2022
I

nnerhalb der 30 – 39-jährigen Kunden ist die Akzeptanz für Hersteller wie Aiways, BYD, Nio und Polestar hoch.

München, 17.11.2022 Die China Experten von Berylls Strategy Advisors um Soleiman Mansouri, haben gemeinsam mit dem Meinungsforschungsinstitut Civey eine Umfrage zur Akzeptanz chinesischer Premium-OEMs und ihrer BEV-Modelle bei deutschen Kunden durchgeführt. Die repräsentative Befragung fand unter den loyalsten deutschen Autokäufern, den Fahrern von Audi-, BMW- und Mercedes-Modellen statt.

Die Analyse zeigt, dass Aiways, BYD, Nio, Polestar und Co. durchaus Erfolgschancen haben. Denn unter den Premium-Kunden ziehen beim Autokauf etwa 25 Prozent chinesische Marken in Betracht. Das ist bemerkenswert, schließlich haben die meisten chinesischen Hersteller noch nicht mit ihren Marketing-/Kommunikationsaktivitäten begonnen. Die Bekanntheit der Marken und ihrer Modelle bewegt sich daher noch auf einem eher niedrigen Niveau. Eine Ausnahme stellt Polestar dar. Der Volvo-Ableger ist bereits seit 2018 stark mit Werbung und Medienauftritten im deutschen Markt vertreten.

Kunden die bereits Erfahrung mit einem chinesischen Fahrzeug haben, zeigen sich wesentlich aufgeschlossener für den erneuten Kauf. Offensichtlich sind sie von ihrem bisherigen Modell aus China, dem zurückliegenden Kaufprozess und dem Service rund um ihr Auto nicht enttäuscht worden und wollen den Newcomern vielfach eine zweite Chance geben. Vor diesem Hintergrund kommt dem zwischen BYD und SIXT angekündigten Geschäft, das einer großen Anzahl von Kunden die Möglichkeit bieten wird, chinesische Produkte aus erster Hand zu erleben, eine enorme Bedeutung zu. Insgesamt wird sich der Markt für Elektroautos mit den chinesischen Marktteilnehmern, auch dank solcher Kooperationen, stark verdichten.

Soleiman Mansouri, Associate Partner bei Berylls Strategy Advisors: „Der Kampf um die Aufmerksamkeit von Erstkäufern ist real. Vor allem deutsche Premiumhersteller wissen, wie wichtig es ist, die Altersgruppe der 30- bis 39-Jährigen, die so genannte Generation Y, als Erstkunden zu gewinnen.“ Denn üblicherweise entscheiden sich deutsche Käufer ab etwa 40 Jahren erstmals für den Kauf eines Premium-Modells. Und gerade bei dieser Alterskohorte sind die Vorbehalte gegenüber chinesischen Fahrzeugen besonders niedrig.

Allerdings können sich die eigenen Ansprüche der OEM aus China als grobe Stolperfalle entpuppen. Denn die mit Parwiz Torgull, dem Leiter des Customer Success Teams von Civey, gemeinsam durchgeführte Umfrage zeigt, wie wichtig den deutschen Kunden ein gutes Preis-/Leistungsverhältnis ist. So ist annähernd jedem zweiten Umfrage-Teilnehmer der Preis das Kaufkriterium Nummer eins. Erst weit abgeschlagen folgen technische Inhalte, wie große Reichweite oder Ladezeiten. Features, die in China ganz oben in der Käufergunst stehen wie digitale Funktionen, spielen bei der Mehrzahl der deutschen Käufer eine nur sehr untergeordnete Rolle.

Kunden, die bereits Erfahrung mit chinesischen Autos haben, geben abweichende Gründe für die Kaufentscheidung an. Bei Ihnen besitzt sehr wohl die Reichweite ein großes Gewicht, das Design spielt ebenfalls eine wichtige Rolle. Aber auch für sie ist der Preis an Platz zwei, ein ganz entscheidendes Kriterium für den erneuten Erwerb eines Autos aus China. Und genau in diesem Punkt sehen die deutschen Kunden die Chinesen bisher den deutschen OEM als überlegen an, während sie technische Unterschiede kaum wahrnehmen.

Die Studie legt damit nahe, dass sich jene Hersteller mit dem Erfolg auf dem deutschen Markt sehr schwertun werden, die ihre Produkte preislich auf Augenhöhe oder zu nah bei der deutschen Konkurrenz ansiedeln. Problematisch ist auch, dass sich die Modelle aus China zu wenig voneinander unterscheiden. Es existieren kaum Markendifferenzierungspunkte, weder technische und nicht einmal im Design. Den chinesischen Modellen fehlt das Besondere, das Kunden suchen, die bereit sind einen Premiumpreis zu bezahlen.

BYD-Chef Shu will dennoch bereits 2026 120.000 seiner Modelle in Deutschland absetzen, wie er am Rande einer Händlerkonferenz verlauten ließ. Andere Hersteller kommen mit ähnlich ambitionierten Zielen auf den deutschen Markt. Wie die Berylls Umfrage zeigt, treffen sie hier zwar auf Kunden, die ihnen eine Chance geben wollen. Dass es in kurzer Zeit aber derart viele sein werden ist unrealistisch, vor allem wenn das Angebot ausschließlich aus E-Autos besteht. Denn noch ist der deutsche BEV-Markt, 2021 wurden lediglich 365.000 E-Autos zugelassen, viel zu klein und wächst zu langsam, um den ambitionierten Zielen der chinesischen Anbieter gerecht zu werden. In der Folge müssen sich die Newcomer mit bescheideneren Stücken vom Kuchen zufriedengeben. Immerhin sind ihre Plätze am Kaffeetisch aber gedeckt.

Berylls Pressemitteilung

Pressemitteilung: Chinesische Marken mit guten Chancen bei deutschen Premium-Autofahrern
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Autor

Christian Bangemann

Head of PR & Media Relations

Soleiman Mansouri

Soleiman ist seit März 2022 bei der Berylls Group. Er hat seinen Fokus auf kundenzentrierte Lösungen gelegt und dabei Erfahrungen in der Produkt- und Unternehmensstrategie sowie in der Beratung mit dem Fokus auf das OEM-Geschäft gesammelt. Seine Automotive-Karriere begann mit der Digitalisierung des Aftersales eines US-OEM in Europa und führte ihn nach China zu einem führenden deutschen OEM-Konzern, wo er die Produkt- und Portfolioabteilung leitete. Er sammelte intensive Beratungserfahrungen bei einer der führenden Unternehmensberatungen und als freiberuflicher Berater. Bevor er zu Berylls kam, war er Director Go-to-Market bei einem der führenden chinesischen OEMs und unterstützte deren Eintritt in den EU-Markt. Soleiman hat einen M.A./MBA-Abschluss in International Business von der Universität Hamburg und der ECUST/Shanghai.

Soleiman ist seit März 2022 bei der Berylls Group und gehört zum Asien-Team, verantwortlich für die Unterstützung aller Market-Player bei einem erfolgreichen Markteintritt. Darüber hinaus bietet er unseren Klienten fundiertes Fachwissen über kundenorientiertes Produktmarketing und Portfoliostrategieansätze.

Soleiman ist Experte für kundenzentrierte Produkt-/Portfoliostrategie, Go-To-Market, Unternehmensstrategie und Entrepreneurship.

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Battery Recycling – Circular economy on the example of e-Mobility

Munich, November 2022

The mobility of the future will be electric – and the transition from conventional internal combustion engines (ICE) to battery-electric powertrains is progressing faster than expected. In 2020, battery-electric vehicles were forecast to account for 10% of global production volumes in 2025. Only two years later, this number has soared to 18%. Most vehicle manufacturers have once again tightened their exit strategies for the ICE. Individual OEMs are planning the complete electrification of their product portfolio as soon as 2025.

 

In light of increasing electrification, there remain numerous questions about the vehicle lifecycle, in particular the re-use of high-voltage batteries:

  • What are the different options in the context of circular economy for these batteries after they have reached their end of life?
  • What recycling capacities will be required to be able to meet the recycling targets?
  • What investments are required to build these required recycling capacities?
  • What proportion of raw materials for the production of new batteries will actually be covered by recycled material in the future?

 

To answer these and other questions, we have developed the Berylls Re-X model (Re-cycling, Re-manufacture, Re-use), which forecasts the recycling requirements, investment requirements, and material cost development for 19 different cell chemistries globally until 2040.

 

In our view, battery recycling will gain enormous importance by the end of the next decade. Therefore, successful bottleneck management of material supply, building regional capacities, and the introduction of technical standards are the key factors, as our key findings show:

 

  • Recycling volumes are growing rapidly. Between 2030 and 2040, a nearly 15-fold increase in recycling volume is expected worldwide
  • Investment needs are long-term. By 2040, >€35 billion will need to be invested in plants and machinery to meet recycling demand in Europe. By 2030, however, announced recycling capacities exceed the demand
  • Recycling bottlenecks are to be expected. While a global bottleneck is averted by building capacities, regional/local bottlenecks are expected due to technical diversity

Berylls Insight

Battery Recycling - Circular economy on the example of e-Mobility
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Authors

Dr. Alexander Timmer

Partner

Willy Wang

Managing Director China

Peter Trögel

Associate Partner

Valentin Froh

Project Manager

Sema Poyraz

Senior Consultant

Dr. Alexander Timmer

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.

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Willy Wang

Willy Lu Wang (1981) joined Berylls Strategy Advisors in 2017. He started his career participating in the graduate program of Audi focusing on production planning. After stations at another strategy consultancy as well as being the strategy director for a German Tier-1 supplier, he is now responsible for the China business at Berylls.

He has a broad consulting focus working for all clients in China, whether they are JVs, WOFEs or pure local players. He is also responsible for the development of AI and Big Data products dedicated towards the Chinese market further strengthening the Berylls End-to-End strategy and product development capabilities.

Wang studied Electronics & Information Technology with focus on Systems and Software Engineering and Control Theory at Karlsruhe Institute of Technology.

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Peter Trögel

Peter supports companies with complex strategic and operational challenges in the automotive industry. He is an expert in operations and can look back on many years of experience in the transformation environment. His areas of expertise include development, industrialization, and production. Peter is also responsible for Berylls Digital Ventures’ digital task force solution – elyvate.

Peter also heads the Sustainability service offering at Berylls by AlixPartners (formerly Berylls Strategy Advisors). He supports clients in developing and implementing sustainable business models in the automotive industry.
Prior to joining Berylls, Peter worked for Booz & Company and PwC Strategy&, among others, as a member of the management team. He holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT) and the University of Technology Sydney (UTS).

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German (premium) customer acceptance of Chinese OEMs

Munich, November 2022
I

n the last series of articles, the Berylls China team analyzed the Chinese OEMs’ bumpy market entry story into Europe.The focus of these analyses was a broader scope of understanding for successfully entering the European market and what currently hinders the Chinese OEMs.

From our perspective, all aspects of a successful Go-To-Market strategy require a customer-centric approach. And which customer is more challenging than the loyal German customer?

We conducted a detailed survey to understand the perception and expectations of German customers towards Chinese OEMs.

For this endeavor, Berylls and Civey have teamed up to provide a precise understanding of the German automotive-buying persona.

 

For the analyses, we have conducted two studies, each with one thousand participants and a side study with 60 Chinese OEMs’ experienced customers.

First study: asking the general German customer
Second study: on customers who own a premium car

Both groups are willing to purchase a foreign brand/model. While the first study is still ongoing, the latter had a field time of June 10 and September 15, 2022.

Further, we understand that the premium market consists of brands such as BMW, Audi, Mercedes Benz, and JLR. Although Mercedes Benz announced that it would focus on becoming a luxury brand, we do not think this has had a strong effect on the customer mindset in the brief time span since the announcement.

First, the results are astoundingly surprising! Heads-up, owners of premium cars (MB, BMW, Audi, JLR, Porsche) are more positive than general customers.

1. One Group German/EU OEMs:

1.1 Chinese are arriving, and the German customers are willing to give them a chance

Among the premium customers, roughly 25% consider Chinese brands when purchasing a car. This is a significant threat to German/EU OEMs, given the fact that most Chinese brands have not yet started their marketing/communication activities. Surprisingly, the general German customer shows notably less willingness (16%) even though “value-for-money” is the key driver for respective purchase decisions (46% general vs. 57% premium). Overall, the EV market will be severely more clustered with the Chinese entrants. Here the existing market player will have to fight to sustain market shares, while the Chinese need to be aware that conversion to a purchase will require investment into the right channels.

1.2. The German customer mindset is surprisingly heterogeneous and difficult to grasp – new generations are open to innovative solutions

As the market becomes fragmented, customer perception and openness to the latest brands are also changing. Almost 50% of the premium customers believe that Chinese OEMs will be successful in Europe, while the general customer is more conservative at only 35%.This high percentage illustrates a leap of faith by German customers toward Chinese OEMs that there is a certain level of trust or an expectation of technical leadership in developing EVs. In particular, the Western OEMs need to underline the strength of their upcoming EV portfolio and provide the WOW-effect of their product substance (clear product USPs). Their Asian competitors, on the other hand, will still have to prove that quality and service will not be causes to reject a purchase of Chinese models.

1.3. High rate of acceptance among the 30-39-year-old premium customers

The struggle to get the attention of first-time car buyers is real. Premium German OEMs particularly know how crucial it is to convince the age group 30-39 or Gen Y to become their first-time customers. German OEMs will face a dramatic challenge as 42% (vs. 16% of general German customers) of this group are willing to acquire a Chinese product. This group is very clear on the reasons to conduct such a purchase (only 10% stated “I don’t know”), while 60% of the general customers at this age state the technical specifications of the Chinese brands. The European first-time buyer in most countries will be a decisive group to convince towards the new entrants or to keep with the existing brands. As such, in particular, marketers should consider focusing significantly more on addressing this respective group with a surgical approach.

2. Chinese OEMs:

2.1 Brand building and brand experience are the most important aspects of a roll-out

A willingness to purchase a Chinese car, not knowing the brands and what they stand for, is obviously an obstacle for premium Chinese brands. Though brands such as Polestar, NIO, and BYD have the highest brand recognition among the Chinese OEMs entering the EU market, it is still a limiting factor not to have experienced the brands on hand. The recognition counts for both premium customers and the average customer. In fact, once customers have any touchpoint with Chinese brands, the purchase consideration jumps from 21% to up to 85%. Overall, this emphasizes the importance of brand and product awareness and the groundwork to be done by the Chinese. It also emphasizes the immense significance of deals such as the recent one between BYD and SIXT, providing a vast number of customers with the possibility of experiencing Chinese products firsthand.

2.2 Knowing Your Customer – who is your target group?

A critical challenge for Chinese OEMs will be gathering valid data to define their target group and clearly understanding the German/European customer in detail. Valid market data can and will help Chinese OEMs to understand their value proposition from the point of view of potential German customers and reframe their messaging. Our data indicate a strong difference among age groups (lowest: 18-29 with 11% and 65+ with 16%) and propose the marketing of the cars among potential premium customers around the attributes of affordability and EV technical features (range and charging times).

2.3 Politics are not as strongly influencing premium customers as expected

The omnipresent discussion of the notion that politics are an influential factor in the purchase decision of the German/European customer seems to be a valid point. Whether it is political topics or purely the mistrust in Chinese technology, such as the Huawei/ZTE case, the media perspective is always a polarized picture of opposing Chinese products. However, our study indicates that German customers are less influenced by these political arguments than expected. In fact, 50% of the customers (general and premium) state that it merely has an effect on their purchase decision. Thus, when confronted by political provocation, OEMs are recommended to emphasize the separation between the mere attempt to offer customer-oriented mobility solutions to political turmoil while keeping their ground on the fundamental values of the brand proposition.

So, after this short excursion, what are the detailed results?

Awareness

While most German customers cannot name any Chinese brands (more than 70% – see figure 1), this figure reduces strongly with premium customers (57% – see figure 2) and the ones experienced with CN OEMs to only 2% – see figure 3 (can name several brands). Polestar, Nio, and BYD are the best-known brands named by at least every fifth customer asked. Brands such as WEY (GWM) or Xpeng are barely known. From our point of view, this obviously has a lot to do with the heritage (Volvo-Polestar), strong marketing efforts, the presence of cars on the road, and also the stock market attention where many customers are hoping to invest in the next Tesla (Nio/BYD).

1. Brand Awareness among general German customers

2. Brand Awareness among premium German customers

3. Brand Awareness among premium German customers who have had experience with a Chinese OEM

Consideration

What is much more outstanding is the general openness toward purchasing a Chinese model. Only 17% of the general German customers showed strong or somewhat openness towards purchase willingness, while this figure increases to every 5th (22%) premium customer asked. Once a customer gains experience with Chinese OEMs, it appears that the Chinese are unstoppable within the purchase decision basket of the German customer (74% of the customers asked). This indicates that the key purchase barrier might still be the strong lack of brand/product awareness and brand/product experience. While the Chinese are champions at playing the game of customer-centricity on their home ground, this provides the impression of a fantastic opportunity for opening up to German customers.

4. Brand consideration among general German customers

5. Brand consideration among premium German customers

6. Brand consideration among premium German customers who have had experience with a Chinese OEM

Though asking premium customers about specific brands, the willingness decreases roughly 2/3, with Polestar being in the forefront (12%), followed by Nio (6%) and BYD (7%). This changes decisively with customers experienced with Chinese products, Polestar (83%), Nio (34%), and BYD (71%). From our point of view, this shows that legacy and history do make a difference when it comes to customer trust. Polestar is perceived as a Volvo company (and, as such, with European DNA), BYD has been around for more than 20 years in European discussions, while Nio is the new kid on the block and still to convince customers. Besides legacy and history, Polestar specifically has been marketing the brand heavily since 2018. The Swedish/Chinese brand has gained brand momentum throughout all media outlets with its high-street stores and social media presence. It seems that once German customers have taken comfort in a Chinese OEMs driver’s seat, they are willing to stay.

7. Openness towards Chinese OEMs among premium German customers

8. Openness towards Chinese OEMs among premium German customers who have had experience with a Chinese OEM

Purchase (reasons)

On the other hand, not-so-surprising key reasons for purchasing a Chinese car are mainly “value-for-money” (45% premium / 54% general) and key electric vehicle features such as range (19% premium / 41% general) and charging time (11% premium / 47% general). The most emotional purchase reason, “design,” is only stated by every 12th premium customer, while over a third of premium customers who have had experience with Chinese OEMs say that this would be a trigger. As such, more investment in sleek and distinctive European design is necessary for all new market entrants. In paradigm examples such as the Hyundai Ioniq 5, we can observe that such an adaption has a strong impact on direct acceptance by customers and sets the pace for a successful story of a model.

9. Purchase (reasons) for Chinese OEMs among premium German customers

10. Purchase (reasons) for Chinese OEMs among premium German customers who have had experience with a Chinese OEM

Asking the customer which Chinese attributes might be superior to German brands is not so astounding – the majority believe, analog to purchase reasons, in “value-for-money” (42% premium / 53% general) and “base equipment level” (19% premium / 48% general). What is shockingly low, though, is eRange, charging time, and design – all main decision factors for the latest brands. Here, Chinese OEMs need to prove their designs being able to convince buyers of any premium price. As such, the current price strategies of the Chinese OEMs (e.g., BYD, WEY, NIO) are on shaky ground if customers cannot observe clear competitiveness for these attributes.

11. Superior attributes of Chinese OEMs compared to German ones from the perspective of premium German customers

12. Superior attributes of Chinese OEMs compared to German ones from the perspective of premium German customers who have had experience with a Chinese OEM

(Purchase) Decision

Once all the factors are taken into consideration by premium customers, the page no longer looks so peachy for Chinese brands. Only 2% of premium customers state that it is highly likely that they will purchase a Chinese model, and 4% are somewhat likely to buy one. Considering the volume sold by the premium brands in Germany in 2022, this would mean a max potential volume of 25-40k units. Obviously, even most optimistically, it is a tiny market for the number of brands launching in this segment (Nio, Xpeng, HiPhi, RedFlag, Wey, etc.).

Again, this picture is significantly different with customers who have already gained experience with Chinese brands, with 14% highly likely to purchase a Chinese model and 21% somewhat likely. Though, still keeping in mind that these customers expect “value-for-money.”

13. Likelihood of premium German customers purchasing a Chinese OEM’s product

14. Likelihood of premium German customers who have had experience with a Chinese OEM purchasing a Chinese OEM’s product

So, do premium German customers believe that Chinese OEMs can sustainably position themselves in Germany? The question is a clear “YES”!

Almost 50% of premium customers believe so (19% highly likely, 28% somewhat likely), while those customers who have experienced Chinese products are absolutely convinced (74% highly likely, 11% somewhat likely), cementing the risk for the existing market players.

15. Will Chinese OEMs make it in Germany from a premium customer POV?

16. Will Chinese OEMs make it in Germany from a premium customer POV who has had experience with a Chinese OEM?

And how important is the omnipresent political discussion of the behavior of the Chinese government around this topic? Does it influence customers’ choices?

Here, the answer is not so clear but rather a 50/50 statement from a premium customer’s POV. The figure looks different from those who have had experience with a Chinese OEM – here, 60% respond that it has an impact on their decision. This indicates that although these potential buyers have a great willingness to purchase Chinese OEMs, they have a critical view of the political landscape.

17. Does politics have an influence on your buying decision? POV of a premium German customer who had experience with a Chinese OEM.

18. Does politics have an influence on your buying decision? POV of a premium German customer.

German premium customers show curiosity towards Chinese OEMs with clear USP expectations

Going forward, there is obviously much more potential to dig deeper into this topic and understand more profoundly the challenges of the customer needs in Germany and beyond – especially as we think all business aspects should start with understanding customers and their respective needs. We conducted further detailed analysis on customers who experienced Chinese brands, revealing many more insights about where the future will lead to. In this case, we would like to conclude that though there is somehow a visible potential for Chinese premium OEMs with clear USP expectations, the future touchpoints with customers will be the decisive factor. One size does not fit all, resulting in Chinese OEMs creating unique brand propositions or providing best-in-class customer experience touchpoints, as Polestar highlights. WOW moments will be of key need, positioning the brands in an effective approach. A brand that demonstrated this momentum was Tesla – creating first a WOW and harvesting the crops – now the most sold electric car in Germany is the Model Y.

At Berylls, we have profound experience and understanding of the challenges of the automotive markets, focusing on customer-centric approaches and trying to understand the customer needs in all levers while contributing our knowledge to successfully market products and Go-To-Market strategies.

Civey, as one of our partners, provides us with the core tool to understand the consumer and their respective needs in a thorough but swift approach, allowing us to grasp the smallest changes in customer attitudes and needs.

As such, we can provide you with a short-term analysis of certain customer groups while translating the results into clear actions toward a successful strategy.

Also, our diverse and international team has a significant understanding of cultural and market challenges, enabling us to passionately help our clients in surgical tasks or larger strategy developments.

Authors

Soleiman Mansouri

Associate Partner

Parwiz Torgull

Head of Customer Success Civey

Soleiman Mansouri

Soleiman joined the Berylls Group in March 2022. He has set his focus on customer-centrist solutions, gaining experience in Product- and Corporate Strategy, Consulting with the focus on the OEM business. His Automotive career started with digitalization of the Aftersales of an US OEM in Europe and took him to China to the leading German OEM group, heading the Product and Portfolio department. He gained intensive consulting experience with one of the top management consulting firms and as a freelance consultant. Before joining Berylls, he was the Director Go-to-Market of one of the top Chinese OEMs supporting their entrance into the EU market. Soleiman is a graduated M.A./MBA in International Business from the University of Hamburg and ECUST/Shanghai.

Soleiman joined the Berylls Group in March 2022 and is part of the Asia-team, responsible for supporting all players in a successful market entrance. Also, provides profound expertise of customer-centric Product Marketing and Portfolio Strategy approaches to our clients.

Soleiman is expert in customer-centric Product-/Portfolio Strategy, Go-To-Market, Corporate Strategy and Entrepreneurship.

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Parwiz Torgull

Parwiz has started his automotive journey in early years at Mercedes-Benz going through all levels of the automotive industry. Starting at Flagship Dealership, working at its HQ in Stuttgart and experiencing the Chinese markets has allowed him to gain deep knowledge of all industry challenges and opportunities. After Mercedes-Benz he continued his automotive journey with Volkswagen Group & Audi. His roles varied within Sales, Business Development & Marketing, while spending almost 4 years in China. Since 2018 he has shifted his career towards brand strategy, design and tech and now heads the Customer Success Team of Civey (Opinion Tech) in Berlin.

Parwiz holds a M.B.A & MSc. in International Business at the Steinbeis University Berlin and Universidade Católica de Brasília.

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Uncover your supply chain risks

Munich, November 2022
A

 pragmatic approach to identify and assess supplier risks

If the last few years have taught us anything, it is that automotive supply chain risk is real. Companies need a structured process of supplier risk identification and mitigation: This is the only way to embed end-to-end supply chain resilience for the future.

The automotive supply chain is extended, global, complex – and fragile. The list of recent and current supply chain shocks and disruptions is already long. The Covid-19 pandemic, logistics failures, political turmoil and warfare have stressed existing automotive supply arrangements to breaking point, while new technologies and new types of suppliers are concentrating risk and supply dependency. There is no reason to think this volatility and risk escalation will end any time soon. Companies need to mitigate supplier and supply chain risk, and to do so they must quantify it.

Understanding the new supplier landscape

Where industrial supply chains are longstanding and the supplier base is rich and competitive, supplier risk may be limited. But where supply needs are developing rapidly against a background of global uncertainty and technology change then risk will inevitably rise. And that is exactly the situation the automotive industry faces today.

The shift to electric drivetrains, connected software-defined vehicles and mobility services have combined to create the greatest period of change the automotive industry has faced. Nowhere is this more visible than in the supply chain arrangements that are critical to automotive success. Change takes the form of increasing process and product complexity, rising demand for new resources and materials that in turn creates strong global inter-dependencies, and an irreversible growth in environmental awareness and demands.

The risks to resilience created by such changes are already apparent. Shortages of both raw materials and finished goods have already caused production stoppages and lengthening delivery times. These event-driven vulnerabilities have been exacerbated by extended global logistics chains, where a break in one link of the supply chain can disrupt the entire production process.

Meanwhile both OEMs and suppliers are struggling to meet the demands of increased product and process complexity. The skills needed to adapt to a digitized sustainability-first industrial model are in short supply, leading to a near-monopoly by some technology suppliers and increasing levels of dependency where risk can no longer be mitigated by multi-supplier strategies. As a result, analysis and mitigation of risk has never been so important.

Making risk visible

Despite clear evidence that supply chain fragility is a rising risk factor, many companies have not taken action to address the threat to their competitive position. According to independent research, some 37% of automotive companies do not have formal supply chain risk monitoring procedures in place. This should be addressed as a matter of urgency.

The Berylls risk approach allows companies to create a holistic yet pragmatic assessment of total supply chain risk. The approach includes a component- and process-related risk assessment, together with an event-driven quantification of political and logistical risks, including the risk of natural disasters, or political crisis.

Figure 1: Where is the risk?

In a complex supply chain, identifying critical suppliers represents a heavy workload. For many companies, supplier or risk management functions simply do not have the resources to perform detailed or sophisticated analyses of the total supply chain. So instead of trying to ‘boil the ocean’ at a stroke, companies should adopt a targeted and pragmatic approach to risk identification and mitigation.

The approach starts with a six-step Q&A process. By answering this simple set of yes/no questions an initial set of critical suppliers is identified, which can then be analyzed in greater detail to generate supplier risk rankings and precise mitigation measures.

Step one: Filter for critical suppliers by component / process criteria. This filter determines criticality according to characteristics of components, the supplier market, and the supplier’s value creation process.

  • Ask: does the supplier provide a component that cannot be sourced through a different supplier on short notice of four weeks or less?
  • Ask: has the supplier only recently entered the automotive segment?
  • Ask: is the supplier’s value creation process dependent on volatile parameters that are beyond its control?

Step two: Filter for critical suppliers by event-driven factors. This step determines criticality according to the buyer-supplier relationship, political factors, the logistics chain, and potential catastrophic risks.

  • Ask: is the supplier’s activity and supply to us significantly affected by political influence?
  • Ask: is the logistics chain volatile or hard to control?
  • Ask: are the supplier’s activities exposed to regions that are prone to natural disasters or war?

Figure 2: Rank suppliers by criticality

The result of the initial six-step review may be that many suppliers qualify as critical. Companies should then consider their own appetite for risk and raise the threshold for criticality accordingly, by assigning critical status only to those suppliers that generate multiple ‘yes’ answers in the initial review, or by assigning scores to selected answers.

From risk to mitigation

The six-element process determines supplier criticality, but determining actual risk demands more detailed analysis. Therefore, a series of further indicators are used to determine the level of supply chain risk for specific suppliers, which can then be ranked according to the need for mitigation. These include product and supplier indicators such as component characteristics, raw material scarcity, number and maturity of suppliers in the market, and supplier performance including cybersecurity performance. They also include market indicators such as technology complexity, costs and competition. Event-driven indicators include regulatory change, political pressures and infrastructure dependence, logistics performance and cost structure, as well as vulnerability to extreme events.

Figure 3: Doing the detail on supplier risk

Cooperation for risk mitigation

Of course supply chain risk management does not stop with identifying and ranking critical suppliers: mitigation measures need to be derived, launched and tracked. In our experience, the key to mitigation is cross-functional awareness. Companies need to be aware of their supply dependencies not only within their markets, but also within the wider business environment. Risks are identified faster and better when this understanding runs right across the organization.

Supplier risks are best mitigated through collaboration within the supply chain. Whether risks are related to logistics, or political stability factors, or carbon emissions, an understanding of a supplier’s operations, transparency, and a shared effort to eliminate risk is vital. The role of the procurement function is critical here, as it is closest to individual suppliers and most likely to hold the levers that are capable of managing risk.

Yet whatever the path to mitigation, the beginning and end of better supply chain risk management is knowledge. As investment professionals often say, the biggest risk you face is probably the one you don’t know about. The Berylls approach to risk identification and scoring is designed to be a pragmatic, low-cost method of eliminating the risk of the unknown.  

Authors

Fritz Metzger

Associate Partner

Hendryk Pausch

Project Manager

Eren Duygun

Consultant

Fritz Metzger

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.

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Making E-Mobility Industrialization Work

Munich, November 2022
F

ive success principles from concept to execution

The launch of new products, new plants and new production lines has always been a critical challenge for auto companies and their suppliers. For e-mobility production, where product and process complexity are greater, this challenge becomes even more acute. So, how can companies bake in success?

At Berylls we have hands-on e-mobility production experience all the way from concept to wheels on the road. As always, we think holistically and help manufacturers to do the same, developing infrastructure and deploying both teams and capital machinery with an end-to-end worldview.

But this is the real world and things can and will go wrong. We have learned that beginning with an understanding of the most common points of failure in an e-mobility manufacturing project means success becomes the likely outcome. Experience tells us that there are five common pitfalls in e-mobility manufacturing development that can be turned into success factors.

Factor One: Design for Production Complexity

E-mobility production is characterized by high complexity. Compared to conventional automotive manufacturing, any one value stream will comprise more components and more process steps. This means the production blueprint needs to be defined in exhaustive detail. Machine specifications and capabilities are critical: quality demands are exceptionally high. And process resilience needs to be designed in, so the production chain can be de-coupled when needed without freezing the entire production process.

  • You have one shot at success, right at the start.

Factor Two: E-mobility is Hyper-Sensitive to ‘Technical Cleanliness’ 

Technical cleanliness is a measure of particulate and other potential contaminants in the production process, usually as defined by the VDA 19 process standard. It sounds routine and that is why it can be underrated. But you cannot afford to underestimate it in e-mobility production. Manufacturers must understand customer demands and cleanliness standards and run them all the way back through the supply chain. Every team member must develop this quality awareness and testing technology must be fully enabled.

  • There is no endpoint for technical cleanliness: improvement must be continuous.

Factor Three: Step Up Project and Partner Management

Pre-determined KPIs for machine performance do not self-actuate: they must be tracked continuously and rolling performance communicated with all stakeholders including suppliers and users. Teams must be KPI-aware and empowered to intervene immediately whenever necessary.

  • Missed KPIs mean delayed launches and spiraling costs.

Factor Four: Feedback is Critical

Operational readiness is not a fixed quality: it depends on rapid feedback from the shop floor and rapid response from decision-makers. That means active involvement from executive managers onsite, from day one. Daily alignment meetings based on feedback as close as possible to real-time are necessary.

  • Feedback has a short half-life: don’t let it decay.

Factor Five: Integrate the Customer

In e-mobility customer requirements can evolve fast. Responding fast means a common understanding of technical feasibilities that allow all stakeholders to understand – but also challenge – requirements as needed. Involving the customer from the beginning and communicating transparently is key here.

  • More than before, be customer-centric from shop floor to boardroom

Key elementes for a safe cell launch

A successful and safe cell launch consists of several elements – Technical Cleanliness is just one ingredient.
Cell suppliers need to “juggle all balls” at the same time while facing ambitious capacity expansions.

The advantage of end-to-end is clear: get it right at the beginning and you are set to get it right all the way through.

This means following a holistic framework from the conceptual basics, to identifying the best possible plant location and defining the production blueprint, and on to building the required capabilities for a successful launch. Whether you are a newcomer to the automotive industry (and in e-mobility there are many) or an established automaker, the end-to-end mindset is key to successful collaboration with stakeholders through every stage of product and process development.

It may seem obvious to say it, but the foundation for successful execution is a strong project management office tasked with coordination: that means coordinating risk analysis and mitigation, time planning, and KPI and measure tracking across all workstreams.

This is end-to-end in practice. From shop floor to the boardroom and back again.

Authors

Dr. Ralf Walker

Partner

Fritz Metzger

Associate Partner

Peter Trögel

Associate Partner

Fritz Metzger

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.

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Dr. Ralf Walker

Dr Ralf Walker (1969) has been a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specialising in the automotive industry, since September 2021. His expertise lies in the areas of operations and task forces.
He has been advising automotive manufacturers and suppliers in a global context since 2008. He also has in-depth expertise in the areas of launch & ramp-up management, turnaround management, production & supply chain optimisation, lean management and strategy development & footprint optimisation.
Before joining Berylls Strategy Advisors, he spent 18 years at PwC Strategy&, Booz & Co, Management Engineers and the Fraunhofer IPT, as well as 5 years at GKN as head of the European team and member of the global team for the introduction of lean and business excellence principles, production manager and head of industrial engineering.
He studied mechanical engineering at RWTH Aachen University and completed his doctorate at the Fraunhofer IPT in Aachen.

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