Competitive scenarios for the auto industry in 2010
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Predicting the future of the auto industry has never been easy. Now, with rapid changes from the beginning of the supply chain right to the dealers, it's become even more difficult, A.T. Kearney wrote in its website. ----------------------------------------------------------------
Traditionally, the application of "conventional wisdom" -- that is, extending the prevailing trends -- has provided a fairly accurate measure of where we are going.
But, with the coming of a new century, it is starting to look as though conventional wisdom may no longer be counted on to provide a realistic vision of the future. For instance, below are five seemingly logical predictions for 2010 based on conventional wisdom.
Only eight large, global vehicle builder groups will remain. The small vehicle builders and niche players of today will be gone or exist only as brands in the portfolios of global giants.
Only 50 to 75 global automotive suppliers will dominate the business everywhere. They will supply major systems/modules to vehicle builders.
Private capital family dealers will become a dying breed, like the family farmer. Publicly traded dealer chains, big box mega- retailers and direct vehicle sales to consumers via the Internet will replace them.
Trends toward freer trade and harmonization of vehicle standards globally will allow the Big 8 and their networks of global megasuppliers to drive out excess capacity and dramatically improve returns on net assets in the auto industry.
The players of the year 2010 will merely be mergers/consolidations of auto industry companies that exist today. No significant new vehicle builders or suppliers will enter this industry and succeed.
An alternative future
Taking another look at the industry's likely competitive structure in 2010, with a reevaluation of certain hypotheses based on "conventional wisdom" can yield some very different scenarios for the future, as follows:
Niche player vehicle builders with strong brands flourish because system integrator/module suppliers help them create unique vehicles, as demanded by sophisticated consumers.
The megasuppliers never achieve economic market dominance that they desire in their targeted segment because the competitive sourcing strategies of the big vehicle builders will not allow it.
The private capital dealers of certain franchises will become more dominant than ever. Together with the vehicle builders, they develop and leverage strong brands, exploit e-commerce, facilitate long-term customer relationships and capture a greater portion of the consumer's "distribution economy" (used cars, parts/service, insurance, financing, fuel/lubricants, customizing/accessories, etc.) expenditures.
National governments can't agree on freer trade and common global vehicle standards, so overcapacity continues and global cross-shipping of vehicles to precisely match local demand is often not viable.
Large market capitalization electronics, software, and communication companies capture a significant piece of the automotive systems integrator business by exploiting trends toward the "living room/office like" vehicle and sophisticated alternative hybrid propulsion systems.
Focusing on those "nonconventional" (and more likely) views of the future, there is a new set of implications and business paradigms based on uncertainty and rapid change.
Achieving high brand value and building life cycle consumer relationships to provide the desired full-range of mobility products and services may be the key differentiators of future winners, because this will be very difficult.
The manufacturers, suppliers and dealers who seize the opportunity to reinvent their "distribution economy" businesses may gain sustainable advantage over those who focus solely on optimizing the industrial side of the businesses.
Government and industry partnerships that focus on improving independent mobility may be the key to addressing the threat of traffic congestion and keeping the promise of independent mobility that is the underlying basis for market growth.
Key technology advances may relate more to improvements in the total driver/vehicle/highway system than to merely building more "high tech" vehicles.
Success in the coming years will vary depending on the individual company's focus. One thing is clear, the winners across the automotive industry will be those who exceed consumers' expectations and provide the most attractive choices, thereby building the strongest brands.