Quo Vadis, China 2024 – A rat race with no end in sight

Munich, February 2024

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Quo Vadis China 2024 - A rat race with no end in sight

Munich, February 2024
2

023 was a highly turbulent year for the Chineseauto market, which saw it engulfed in a viciouscircle – a “rat race” with no end in sight and pricewars as the weapons of choice.

In the following insight report, we want to explore this rat race in greater detail and provide an outlook for 2024, including the challenges that lie ahead as well as the focal points of foreign OEMs in the highly complex Chinese market.

RECAP 2023

“卷” or the involution of the Chinese auto market Overall performance

The term “卷” (spelled “Juǎn” in Chinese Pinyin) was undoubtedly the prevailing expression in the Chinese automotive market in 2023. It is understood to mean “involution” or “rat race,” depicting a scenario in which all market participants are entangled in an intense battle for market share with no foreseeable conclusion.

And that exactly describes the Chinese auto market with the emergence of a price war as the ultimate solution, while favorable governmental subsidies are on the way out – a vicious circle

Curious? Download the full insight now!

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Quo Vadis China 2024 - A rat race with no end in sight
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Authors
Dr. Jan Burgard

Berylls Group CEO

Willy Wang

Managing Director China

Lois Yang

Consultant

Dr. Jan Burgard

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

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

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

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

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.

Podcast: Die Basis der deutschen Automobilbranche ist super

München, Dezember 2023

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Podcast: Die Basis der deutschen Automobilbranche ist super

München, Dezember 2023

Wie geht es unseren Zulieferern? Wie unterscheiden sich die Strategien der Hersteller? Funktioniert das vielfach angestrebte Agenturmodell im Zusammenspiel der OEMs und Händler? Kann man wirklich mit digitalen Services Geld verdienen? Und: ist die Intermodalität am Ende?

Darüber sprechen Jürgen Stackmann und Dr. Jan Burgard in der neuesten Mobility Pioneers #Podcast Folge.

Jetzt reinhören!

Hier gehts zum Podcast

Autor
Dr. Jan Burgard

CEO Berylls Group

Dr. Jan Burgard

Dr. Jan Burgard (1973) ist CEO der Berylls Group, einer internationalen und auf die Automobilitätsindustrie spezialisierten Unternehmensgruppe.
Sein Aufgabengebiet umfasst die Transformation von Luxus- und Premiumherstellern, mit besonderen Schwerpunkten auf Digitalisierung, Big Data, Start-ups, Connectivity und künstliche Intelligenz. Dr. Jan Burgard verantwortet bei Berylls außerdem die Umsetzung digitaler Produkte und ist ausgewiesener Spezialist für den Markt China.
Dr. Jan Burgard begann seine Karriere bei der Investmentbank MAN GROUP in New York. Die Leidenschaft für die Automobilitätsindustrie entwickelte er während Zwischenstopps bei einer amerikanischen Beratung und als Manager eines deutschen Premiumherstellers.
Im Oktober 2011 komplettierte er die Gründungspartner von Berylls Strategy Advisors. Die Top-Management-Beratung ist die Basis der heutigen Group und weiterhin der fachliche Nukleus aller Einheiten.
An das Studium der Betriebs- und Volkswirtschaftslehre, schloss sich die Promotion über virtuelle Produktentwicklung in der Automobilindustrie an.

Five battles you must win as an OEM to master Pricing & Revenue Management

Munich, October 2023

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Five battles you must win as an OEM to master Pricing & Revenue Management Munich, October 2023

T

he transformation of the automotive industry is in full swing, encompassing both upstream and downstream aspects on national and international scales.

To paint a clear picture of this evolution, various aspects of the automotive sector are being reshaped. New strengths are being cultivated, weaknesses are being addressed.

A critical aspect deserving focused attention is “Pricing and Revenue Management.”

Fig 1: Pricing as the Ultimate Profit Lever

Source: Berylls Strategy Advisors

Pricing stands as the most potent lever for increasing profitability within the automotive sector. Consequently, it should take center stage for all Original Equipment Manufacturers (OEMs). However, it’s essential to recognize that Revenue Management extends beyond Pricing. It involves a strategic business practice adopted by companies to maximize their revenue and profitability through the optimization of product or service pricing. This discipline entails the application of diverse pricing strategies, data analysis, and forecasting techniques to make informed decisions about price setting, resource allocation, and capacity management. The primary components are depicted in the chart below. Pricing emerges as the most significant lever for enhancing profitability, making it of utmost importance for top management.

Fig 2: Revenue Management Encompasses Multifaceted Strategies

Source: Berylls Strategy Advisors

With a number of years of experience across various industries, it is evident that the automotive sector can glean valuable insights and techniques in Pricing and Revenue Management from sectors such as Fast-Moving Consumer Goods (FMCG), software, and industrial fields. Currently, many OEMs are still focusing a lot on factory utilization. This can result in cars being sold with higher discounts, because production and demand are not matching good enough. Many changes occurring in the automotive industry mirror transformations witnessed by other industries in recent years:

  • From Product to Product-Service-Software Combinations: The significance of services and software is growing, necessitating different pricing structures, and enabling novel approaches such as “as-a-service.”

  • From Single- to Omnichannel: Vehicles, services, and software will be sold through an expanding array of channels, including direct and indirect, electronic, and physical, and owned or third-party channels. Decisions regarding what to sell through which channel to which customer segment at what price are becoming more intricate and, thus, more strategically crucial.

  • From Product to Customer Focus: OEMs are increasingly striving to better comprehend their customers (their journey, value drivers, willingness to pay, etc.). This understanding provides a solid foundation for more differentiated pricing, better exploitation of specific customer segments’ willingness to pay, and catering to individual demands for products and services.

  • From Gut Feeling to Data-Based: Modern Revenue Management can be approached much more professionally using data and AI-based methods.

     

Considering these ongoing transformations, now is the ideal time to formulate and implement a 3-5-year development plan to fortify the Pricing & Revenue Management capabilities.

Best practices from Other Industries

Before delving into the specific must-win-battles (MWBs) for Pricing & Revenue Management in the automotive sector, let’s explore some best practices from other industries:

  • Marriott International: Renowned for its revenue management strategies in the hospitality industry, Marriott employs sophisticated pricing algorithms and data analytics to dynamically adjust room rates based on demand, seasonality, and other factors. This optimization maximizes revenue and occupancy rates across its global portfolio of hotels.

  • Amazon: As one of the world’s largest e-commerce companies, Amazon excels in revenue management through its advanced pricing strategies. They leverage extensive customer data to dynamically adjust prices on their marketplace, optimizing in real-time while considering factors such as competitor pricing, demand, and customer behavior.

  • Walt Disney Parks and Resorts: Disney meticulously practices revenue management within its theme parks. They employ various pricing strategies, including seasonal pricing, tiered ticketing, and add-on experiences, to optimize revenue and manage crowd levels effectively.

  • Ferrero: With its diverse brands and sales channels, Ferrero has implemented professional Revenue Management on a global scale. Based on a clear governance, well-defined playbooks and extensive data utilization, Ferrero has achieved significant profitability gains.

Initial Conclusions

Considering these examples, let’s draw some initial conclusions:

1. Pricing & Revenue Management serves as the most substantial profit lever.

2. When benchmarked against other industries, there is ample room for improvement in automotive OEMs.

3. The ongoing developments within the automotive industry underscore the rising importance of Pricing & Revenue Management.

Consequently, we strongly advocate a concentrated focus on Pricing & Revenue Management, with particular emphasis on the following 5 must-win-battles (MWBs):

MWB 1 – Establish a Clear Pricing & Revenue Management Strategy

A robust strategy is fundamental to success, and this holds true for Pricing & Revenue Management. Given the complexity of the automotive environment, the strategy must provide detailed answers to critical strategic questions. These include prioritizing revenue over profitability (or vice versa?), setting objectives for each Strategic Business Unit (SBU), defining target customers, understanding their value drivers and willingness to pay, positioning prices, determining channel strategies for different customer segments, and specifying pricing methods.

Developing a Pricing & Revenue Management strategy for an automotive OEM is a comprehensive exercise that necessitates in-depth insights into and transparency about markets, customers, channels, and offerings, both internally and externally. Of course, it must be mentioned that OEMs are not starting from scratch but have already developed elements or even entire Pricing & Revenue Management strategies.

MWB 2 – Implement a Target Operating Model for Pricing & Revenue Management

Determining the organizational structure of Pricing & Revenue Management is crucial. It’s essential to decide whether the team should be centralized, decentralized, or a hybrid model. This decision should align with the overall strategy and objectives of Pricing & Revenue Management. As always, there´s not THE one solution that is always right:

  • Apple and Skype are having centralized pricing teams because they have strong global brands and high price transparency.*

  • Porsche and Michelin use a split responsibility to foster a high degree of standardization on the one hand side. At the same time, local input e.g., to differentiate local willingness to pay must be considered.*

  • At 3M and Celesio, the Pricing teams are largely decentral with responsibility for a BU or region. This makes sense because markets are heterogeneous with different regulatory requirements for example.*

*Please note that this may not correspond to the current status of the companies.

In addition to structure, harmonizing global Pricing & Revenue Management processes is crucial for automation through digitization. Technology and human resources are integral components of the Target Operating Model. As the era of direct sales is coming closer, this of particular importance, as from than on, the final pricing responsibility stays with the OEM.

MWB 3 – Understand Customer Willingness to Pay and Set Prices Accordingly

A central tenet of Pricing & Revenue Management is understanding customers and aligning strategies accordingly. Effective Pricing & Revenue Management involves precise tools and concepts, with price differentiation being a significant component. Many companies successfully charge different prices to different customer segments for the same product or service, based on willingness to pay. Other industries are already successfully doing this as we speak: Just consider the practice that hotels and airlines are applying very successfully since many years. Amazon is changing the price for certain products up to 40 times a day, based on demand, competitor prices etc. Big insurance companies offer their insurance products at differentiated prices to different customers. Automotive has made recent experience with changing willingness to pay during the time of product shortages. Customers that are used to negotiating prices with their dealer where suddenly ready to even pay way above list price as for example visible in the United States. As product shortages are more and more dissolving now, the old pattern of price negotiation is coming back. A lot more examples of price differentiation exist.

To achieve this successfully, OEMs must understand the willingness to pay of their target customer segments, employing various reliable techniques for this purpose. This not only boosts profitability but also enhances revenue. And always remember that a 1% price increase already leads to a 7% increase in profitability.

MWB 4 – Establish Transparency in Pricing & Revenue Management Performance

Effective Performance Management hinges on knowing the right performance metrics, measuring, and reporting them accurately, and having sound performance management processes in place. Performance metrics vary based on business models, and achieving granularity across different business, customer, and product segments is often necessary. When list prices exist and discounts and rebates can be granted, you might want to use “price enforcement” as one top KPI. When you are for example in an online business, where prices are set by an AI-algorithm, a suitable KPI can be “realized price improvement”, measuring the price increase over a certain period. To add even more quality, “realized price improvement” can be measured against a market price index or internal objectives. The price waterfall can be a good input to discuss suitable KPIs. For OEMs on their way to the direct sales mode, managing price enforcement will be one of the key capabilities to be built to ensure profitability targets are met.

Fig 3: Price waterfall as food-for-thoughts about pricing KPIs.

Source: Berylls Strategy Advisors

Performance metrics should align with the pricing strategy and objectives, and data should be made available in suitable reports, despite the challenges of legacy IT systems and data quality.

MWB 5 – Leverage Data and AI to Optimize Pricing & Revenue Management

Data and AI offer tremendous potential for enhancing Pricing & Revenue Management. Using AI, OEMs can optimize various facets of Revenue Management simultaneously, which is challenging with conventional methods. Additionally, understanding customer behavior and preferences from data can guide pricing strategies and offerings. However, successfully scaling AI projects in Pricing & Revenue Management requires investment in relevant data, systems, and expertise, as data quality and system readiness are often limiting factors.

Conclusion

In conclusion, while automotive OEMs may not be considered Pricing & Revenue Management benchmarks compared to other industries, the changing landscape demands attention. We recommend that OEMs assess their current maturity level in Pricing & Revenue Management and chart a strategic roadmap, centered around these 5 must-win-battles outlined in this paper. With the Berylls Pricing Pathfinder we combine our Pricing & Revenue Management expertise with a powerful tool to reveal what Pricing & Revenue Management excellence looks like, and how to get there.

Author
Thorsten Lips

Partner

Thorsten Lips

Thorsten Lips (1972) is a partner at Berylls Strategy Advisors. He began his career as a management consultant at PricewaterhouseCoopers Düsseldorf in 1998. After spending six years at Malik Management Centre in St. Gallen, Switzerland, he took the cross-industry, global responsibility for Pricing, Sales, Service and Marketing as a partner at Horváth. At Berylls, his area of expertise is Pricing & Revenue Management. This encompasses classical topics like new- and used-car pricing, aftersales pricing and the like. In addition, he is an expert in innovative Pricing and Revenue Management approaches for digital products and services as well as in the field of data-driven Pricing.

Industrial engineering and management studies at the Technical University of Ilmenau and the Technical University of Darmstadt.

Semi-annual index rebalancing: WidsomTree Berylls LeanVal global automotive innovators index

Munich, October 2023

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QUARTERLY INDEX REBALANCING Q3 2022

Munich, August 2022
F

ew things shape modern life as much as individual mobility. Be it as an expression of freedom and individuality, or as an economic driver. 

To reflect this, we have developed the WisdomTree Berylls LeanVal Global Automotive Innovators Index – the WTCAR. It tracks the performance of the 100 most relevant publicly listed automobility players worldwide.

By design, the WTCAR covers the industry’s entire value chain – from vehicle manufacturers and suppliers, to dealer groups, and providers of mobility services or infrastructure.

Rebalancing updates

The automotive industry experienced a severe blow from the capital markets in 2022, and the recent decline in stock prices has wiped out most of the gains that the sector had made from the pandemic lows.

Now, there are still several major effects impacting the global capital markets. First, central banks remain committed to fighting inflationary pressures and have incrementally raised interest rates as a strategic countermeasure over the past months, slowing down the recovery of the economy. Second, supply shortages caused by the Covid-19 crisis is continuously moving into the rear-view mirror, allowing for a more opti- mized production utilization. Third, political influences like the Inflation Reduction Act in the US, the war in the Ukraine, and the pressures bet- ween China and Taiwan are continuing to influence the developments at the global capital markets.

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Semi-annual index rebalancing: WidsomTree Berylls LeanVal Global automotive innovators index
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Authors
Dr. Jan Burgard

Berylls Group CEO

Malte Broxtermann

Associate Partner

Björn Simon

Senior Consultant

Jakob Rüchardt

Consultant

Dr. Jan Burgard

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

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

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

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

Malte Broxtermann

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

Ein Elektrofahrzeug ist wesentlich einfacher zu bauen als ein Verbrennungsfahrzeug

München, September 2023

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Interview - Software wird das treibende Element dieser Branche

München, Juli 2023

Nach der diesjährigen IAA ist klar: “Wir befinden uns in einem gesättigten Markt, nur das Elektrosegment wächst. Daher ergibt es Sinn, die vergleichbaren, elektrischen, Fahrzeuge für die Kunden zur Verfügung zu stellen. Das Problem der über 300 (!) Herstellen von Elektroautos alleine in China ist: Die meisten sind nicht nur bei uns vollkommen unbekannt.“

Auch dadurch dass die Produktion einfacher ist, als bei einem Verbrenner, versuchen unzählige Marken weltweit sich einen Namen zu machen. Ein Problem – auch für Anleger, die mit einem „zweiten Tesla“ den Lucky Punch suchen. Könnte ein ETF auf den WisdomTree Global Automotive Innovators Index helfen?

Hier gehts zum Podcast

Autor
Dr. Jan Burgard

CEO Berylls Group

Dr. Jan Burgard

Dr. Jan Burgard (1973) ist CEO der Berylls Group, einer internationalen und auf die Automobilitätsindustrie spezialisierten Unternehmensgruppe.
Sein Aufgabengebiet umfasst die Transformation von Luxus- und Premiumherstellern, mit besonderen Schwerpunkten auf Digitalisierung, Big Data, Start-ups, Connectivity und künstliche Intelligenz. Dr. Jan Burgard verantwortet bei Berylls außerdem die Umsetzung digitaler Produkte und ist ausgewiesener Spezialist für den Markt China.
Dr. Jan Burgard begann seine Karriere bei der Investmentbank MAN GROUP in New York. Die Leidenschaft für die Automobilitätsindustrie entwickelte er während Zwischenstopps bei einer amerikanischen Beratung und als Manager eines deutschen Premiumherstellers.
Im Oktober 2011 komplettierte er die Gründungspartner von Berylls Strategy Advisors. Die Top-Management-Beratung ist die Basis der heutigen Group und weiterhin der fachliche Nukleus aller Einheiten.
An das Studium der Betriebs- und Volkswirtschaftslehre, schloss sich die Promotion über virtuelle Produktentwicklung in der Automobilindustrie an.

Model Based Systems Engineering in Truck R&D

Munich, September 2023

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New Premium China Survey

Munich, July 2023
T

he trucking industry is currently grappling with significant pressure induced by an ongoing transformation predicated on three fundamental changes to its long-standing operations.

Download the full insight now.

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Model based systems engineering in truck R&D
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Authors
Steffen Stumpp

Associate Partner

Frederik Ruhm

Associate Partner

Steffan Lemke

Consultant

Steffen Stumpp

Steffen Stumpp (1970) joined the Berylls Group in October 2020 as Head of Business Unit Commercial Vehicles. At this point, he already looked back on extensive professional and leadership experience in the commercial vehicle industry. Stumpp started his career in an OEM and went through different roles in research, marketing, product planning and after-sales service. When he switched to the automotive supplier industry, he took over the responsibility for worldwide sales and marketing of a medium-sized tier 1 supplier. After another step as head of sales he decided to join Berylls, where he is now responsible for the commercial vehicle business.

Stumpp is a graduate engineer and has studied industrial engineering at the KIT in Karlsruhe and the Technical University of Berlin with focus on logistics.

TOP 100-Zuliefererstudie 2023

Munich, August 2023

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TOP 100-Zuliefererstudie 2023

Munich, August 2023
D

ie Zuliefererindustrie 2022 war geprägt von Sonderfaktoren wie dem Krieg in der Ukraine, steigender Inflation und weiterhin hohen Rohstoffpreisen.

Obwohl 95 der Top 100 Zulieferer im Geschäftsjahr 2022 steigende Umsätze verzeichnen, schrumpft die Profitabilität bei mehr als der Hälfe. Nach einem Gesamtumsatz von 899 Milliarden Euro in 2021 steigerten die Top 100 dieses Resultat um 18,3 Prozent auf 1.064 Milliarden Euro und durchbrechen damit erstmals die Schallmauer von einer Billion Euro Umsatz. 

Der Beitrag der chinesischen Zulieferer an der internationalen Umsatzentwicklung steigt stetig. Im Jahr 2018 lag er noch bei fünf Prozent, 2022 können die Chinesen bereits einen neunprozentigen Anteil für sich verbuchen. Der Zuwachs geht zu Lasten der deutschen und japanischen Zulieferer. Deutschland war am Gesamtumsatz 2018 mit stolzen 23 Prozent beteiligt, Japan steuerte 28 Prozent bei. Beide Nationen verzeichnen seither schmerzhafte Rückgänge. Die deutschen Zulieferer tragen nur noch 21 Prozent zum globalen Gesamtumsatz der Branche bei, die Japaner 22 Prozent. 

Dass 2022 ein gemischtes Jahr für die Branche war, zeigt sich auch darin, dass trotz starkem Umsatzwachstum die durchschnittliche Profitabilität von 6,3 Prozent auf 5,6 Prozent gefallen ist. Höhere Materialkosten, Unruhen in den Lieferketten und gestiegene Energiekosten werden voraussichtlich auch noch bis in das nächste Jahr reichen. Auf der anderen Seite sind Halbleiterhersteller die klaren Gewinner. Die drei profitabelsten Unternehmen sind in diesem Jahr allesamt in dieser Branche tätig. Und: Auch 2022 gab die allgegenwärtige Elektromobilität die Richtung vor.

Aber sehen Sie selbst!

Weitere Informationen zur jährlichen TOP 100-Zuliefererstudie finden Sie unter www.berylls.com/category/top-100/

Berylls Insight
Die TOP 100-Zuliefererstudie 2023
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Autoren
Dr. Alexander Timmer

Partner

Dr. Jan Dannenberg

Executive Partner

Dr. Jürgen Simon

Associate Partner

Dr. Alexander Timmer

Dr. Alexander Timmer (1981) ist seit Mai 2021 als Partner bei der Berylls Group tätig, einer internationalen und auf die Automobilitätsindustrie spezialisierten Strategieberatung. Er ist Experte für Innovations- und Markteintrittsstrategien und kann auf eine langjährige Erfahrung im Operations-Umfeld zurückschauen.

Dr. Alexander Timmer berät seit 2012 Automobilhersteller und -zulieferer im globalen Kontext. Er verfügt über ein fundiertes Expertenwissen in den Bereichen Portfolioplanung, Entwicklung und Produktion. Zu seinen weiteren fachlichen Schwerpunkten zählen unter anderem Digitalisierung und der Themenkomplex rund um die Elektromobilität.

Vor seinem Einstieg bei Berylls Strategy Advisors war er unter anderem für Booz & Company und PwC Strategy& als Mitglied der Geschäftsführung in Nordamerika, Asien und Europa tätig.

Im Anschluss an sein Maschinenbaustudium an der RWTH Aachen und der Chalmers University in Göteborg promovierte er im Bereich der Fertigungstechnologien am Werkzeugmaschinenlabor der RWTH Aachen.

Dr. Jan Dannenberg

Dr. Jan Dannenberg (1962) ist seit 1990 Berater der Automobilindustrie und seit Mai 2011 Gründungspartner bei Berylls Strategy Advisors. Bis zum Frühjahr 2011 war er acht Jahre international als Partner – davon fünf Jahre als Associate Partner – für Mercer Management Consulting und Oliver Wyman tätig. Er ist ausgewiesener Spezialist für Innovationen und Markenmanagement in der Automobilindustrie und berät im Schwerpunkt Zulieferer und Investoren zu Strategie, Mergers & Acquisitions und Performance Improvement. Zudem ist er Geschäftsführer von Berylls Equity Partners, eine auf Mobilitätsunternehmen spezialisierte Beteiligungsgesellschaft.

Bachelor of Arts in Volkswirtschaftslehre von der Stanford University, Studium der Betriebswirtschaftslehre und Promotion an der Universität Bamberg.

Dr. Jürgen Simon

Dr. Jürgen Simon (1986) ist als Principal bei der Berylls Group tätig, einer internationalen und auf die Automobilitätsindustrie spezialisierten Strategieberatung. Er ist Experte für Vertriebs- und Unternehmensstrategien sowie M&A und kann auf eine langjährige Beratungserfahrung zurückschauen. Er berät seit 2011 Automobilhersteller und -zulieferer und verfügt über fundiertes Expertenwissen in den Bereichen ganzheitliche Strategieentwicklung, Geschäftsmodelle und Commercial Due Diligence. Weitere Schwerpunkte liegen in Markteintrittsstrategien sowie Themen rund um das „Software Defined Vehicle“. Als diplomierter Ökonom der Universität Hohenheim hat er vor seinem Einstieg bei Berylls am Institut für Unternehmensführung des Karlsruher Instituts für Technologie (KIT) promoviert.

Digital Automotive Commerce: Creating Web 3.0 experiences and strategy from business to implementation

Munich, August 2023

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New Premium China Survey

Munich, July 2023
A

pple's newest Vision Pro is here and brings with it the promise of reinvigorated momentum in immersive Web 3.0 applications for OEMs.

 

As we set out in two publications last year, the Web 3.0 applications – namely in “the Metaverse” – are high risk, uncertain reward opportunities that are not for every OEM.

Download the full insight now.

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Digital Automotive Commerce: Creating Web 3.0 experiences and strategy from business to implementation
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Authors
Henry Lundt

Principal

Paul-Alexander Bures

Senior Consultant

Christian Barbuia

Senior Associate

Henry Lundt

Henry Lundt (1984) is a Principal at Berylls Mad Media (part of Berylls Group), the experts for transforming sales & marketing in the automotive industry. He is an expert in digital automotive commerce as well organizational transformation and can look back on many years of consulting experience in various roles.

Henry Lundt has been digitizing automotive sales & marketing for manufacturers and suppliers since 2009 and has experience in the areas of holistic strategy development, digital product development & applying and optimizing agile working models. Beyond this, Henry Lundt built expertise in digital automotive commerce, consulting our clients to build and optimize transaction journeys. Prior to joining Berylls Mad Media, he set up Berylls Digital Ventures as first Berylls Group entity – prior to joining Berylls, Henry Lundt was Head of Automotive at TD Reply, a marketing & innovation consulting firm, focused on digital business.

He graduated as business economist from the University of EBC Berlin in marketing & media with a combined studies in Business Management in University of Sunderland & University of Newcastle upon Tyne (UK).

E-mobility and suppliers – Is an optimistic view of the future appropriate?

Munich, August 2023

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E-mobility and suppliers – Is an optimistic view of the future appropriate? Munich, August 2023

E

-mobility is already here. The growth of the battery-electric vehicle market around the world has been well above expectations over the past few years, with forecasts of even higher growth to come. With soaring registration figures for electric vehicles, the market for E-mobility components looks ever-more attractive – but will headline market growth turn into long-term profitability for suppliers?

Durch die rasant steigenden Zulassungszahlen für Elektrofahrzeuge steigt die vermeintliche Attraktivität des Marktes für Komponenten von Elektrofahrzeugen und damit auch der Druck für Zulieferer, in diesem Markt Fuß zu fassen.

When we asked top managers from the supplier industry how dependent they are on combustion cars now and how that will change in five years’ time, 70% of those who responded said they are currently dependent on combustion cars for more than a quarter of their turnover, with this figure expected to fall to only 51% within five years. On the one hand this underlines the huge transformation the supplier industry is already undergoing, but on the other it shows that many suppliers’ business models will remain tied to the combustion engine until the end of the decade.

Revenue shares depending on ICE
(in %)

Source: Berylls Supplier Executive E-Mobility Survey 2023

Most suppliers see more opportunity than risk in this transformation. Nearly one-in-eight managers surveyed see electromobility as an opportunity for their company (77%), while fewer than one-in-10 (9%) see more risks than opportunities.

Attitude toward electric mobility
(in %)

Source: Berylls Supplier Executive E-Mobility Survey 2023

And despite the uncertainties ahead, a full three-quarters of respondents (75%) expect a positive influence on turnover in the next five to 10 years, with only 13% forecasting a decline in margins due to electromobility.

Potential impact of E-mobility on suppliers‘ revenue & profitability
(in %)

Source: Berylls Supplier Executive E-Mobility Survey 2023

Difficult market conditions for suppliers

This level of optimism is striking, not least because one consequence of E-mobility is a more competitive and less certain market. For many suppliers, E-mobility will bring challenging levels of change, with low or even negative margins, high technological uncertainty and considerable financial risk.

In the E-mobility era suppliers are confronted with high transition costs, rapid development cycles and a shortage of E-mobility skills. All these factors combine to compress margins and intensify competition.

Despite rapid growth, absolute volumes for electric vehicles remain comparatively low, limiting the opportunity to offset high development costs through volume sales. Meanwhile short E-mobility innovation cycles force suppliers to develop and launch new product generations more frequently simply to keep pace with competitors even while OEMs remain focused on efficiency increases and cost reductions. In this environment it is unsurprising to find intense competition for E-mobility engineering skills from both OEMs and suppliers, forcing up labor costs and further squeezing supplier margins. This is only likely to increase as new suppliers attract staff and volumes increase.

Such cost pressures against a background of furious competition from existing suppliers seeking to build their position in the E-mobility market and new suppliers, who may be free of the burden of legacy costs, mean that for many suppliers’ prices are too low to support margins. In some cases, margins may actually be negative. Established suppliers risk becoming trapped in a vicious circle: they need more business to increase their volumes and strengthen their own market position, but that may mean lower average margins and often higher cross-subsidization from other business areas.

In the long run this is not sustainable and sooner or later consolidations will be necessary – indeed, the first signs of this are already apparent.

Clear strategy required

Supplier optimism is good, but for this to be justified it needs to be supported by a clear transition roadmap. Strategy needs to take account not only of long-term positioning, but also of short-term market conditions and resourcing needs, and the implications for product margins.

Above all, supplier strategy needs to target considered volume increases (whether organic or inorganic) to reach a critical size and achieve necessary economies of scale, and build on and extend skills to enable production start-ups.

Strategy implies coordination and resource allocation. With increasing volumes in a product generation that is not yet fully mature, it becomes vital that all functional areas from development to production work together smoothly and efficiently. It is important to manage limited resources effectively because scaling usually requires high investment, with new production lines and sometimes entirely new production plants. Financing needs to be secured and additional technology and management expertise need to be introduced with care to encourage long-term loyalty to the company.

Correct positioning necessary to seize opportunity

E-mobility is a classic case of opportunity and challenge. Although most auto suppliers are still heavily reliant on combustion engines, they fully expect this will change in the next few years. And despite struggling with low margins and high competitive pressure, most suppliers are confident that they will prosper.

Yet to make this optimism a reality, suppliers will need to position themselves properly and make strategic decisions to strengthen their market position and meet the innovation challenge.

Only then will it be clear whether their optimism is justified.

Berylls Insight
E-Mobility Supplier Survey 2023
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Author
Dr. Jürgen Simon

Associate Partner

Dr. Jürgen Simon

Dr. Juergen Simon (1986) is Associate Partner at Berylls Group, 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.