Challenges for the automotive industry in an on demand environment

The automotive industry is facing new and pressing challenges. Globalisation, individualisation, digitalisation and increasing competition are changing the face of the industry as we know it. In addition, increasing safety requirements and voluntary environmental commitments by the automotive industry will also contribute to the changes ahead. Size is no longer a guarantee of success. Only those companies that find new ways to create value will prosper in the future. The purpose of this paper is to present a short overview of the automotive industry today and highlight challenges facing the industry. Based on this perspective, we will discuss strategic levers enabling OEMs to transform to on demand enterprises. Methodology The information, data and opinions presented in this paper are based on a series of interviews that IBM Business Consulting Services held with automotive industry experts, who gave us the benefit of their extensive knowledge. This information and data were complemented by our evaluation of industry studies and reports on various aspects and developments in the automotive industry. The global automotive industry is subject to a range of factors that are increasing complexity and influencing the economic options available to automobile manufacturers. The majority of these factors interact with one another and have strong interdependencies. However, some of these factors are market-induced and, consequently, cannot be influenced directly by the automobile manufacturers. These factors include: • Globalisation, regionalisation and market convergence – Due to the effects of liberalisation, national markets are increasingly globalised. This gives OEMs the chance to expand to new markets, but also increases the threat of new entrants or increased competition in traditional markets. For example, European OEMs currently face an aggressive sales offensive by Korean OEM Hyundai. The reverse side of globalisation is regionalisation, which means that local tastes and consumer preferences have to be considered by companies. The concept of a standardised " world car " as promoted by Ford a few years ago would not succeed in today's world. Another problem for an OEM is market convergence due to digitalisation of almost all products and value-add processes. On the market side, the increased pervasion of products with digital technology leads to new vertical and horizontal partnerships between all kinds of companies (e.g., IBM as a value-add partner for the automotive industry), thus increasingly eliminating traditional industry limits. This eventually raises the question for a company as to who is a partner and who is a …