That was the number one question posed at the ECG Conference which took place in Hamburg last week.
The conference, held in the palatial surroundings of the Atlantic Kempinski Hotel, attracted a record number of attendees from all over Europe and further afield.
Following a welcome from Wolfgang Göbel, President of ECG, Christoph Stürmer, Global Lead Analyst at PWC Autofacts offered his views on how the automotive market would evolve. Light vehicle assembly is forecast to grow by 25.6% between 2015 and 2022 with emerging markets driving future industry growth on a volume basis. The growth will follow demand but will also leverage location factors and free trade agreements. China is forecast to be the major winner when it comes to vehicle assembly while its two Asian neighbours, Japan and South Korea will remain at current levels or even decline slightly.
When it comes to global production capacity, Stürmer predicts that the Asia Pacific region will see the biggest expansion with ten plants and 978 product launches scheduled.
The percentage share of powertrain systems in light vehicle registrations is shifting as sales of electrified vehicles are being pushed in selected areas, spurring a long-term revolution. Stürmer told the audience that, after a slow start, hybrids would gain momentum beyond 2020 but are seen as a transitory technology. Electric cars will get a jump-start from local regulation but are expected to become the dominating technology in the longer term.
Stürmer predicted that European new car registrations would increase next year by almost one million units or 6.4% to 15.1 million new cars. Backed by dynamic light commercial vehicle market growth of 10.9%, light vehicle sales are now expected to reach 17.1 million units in 2016.
Stürmer spent some time on the Brexit situation pointing out that, while there is uncertainty, we do know that Brexit is a process not an act, with a period of negotiation in the midst of other political events, not least the French and German elections in 2017 which could have a large impact on the UK/EU negotiations. It is likely that these negotiations will continue for more than two years, possibly as long as ten years. The UK will also continue to pursue a number of free trade agreements with its key trading partners, something which will take time.
The next speaker was Ben Waller, Associate Director ICDP, who titled his presentation, “Bringing the finished vehicle delivery chain into the 21st. Century.” He pointed out that, despite commitment from all involved, the finished vehicle delivery chain could perform better. It is slower than in the past with average factory to dealer delivery lead time up 18% from 1994 to 2012. That year, 13% of orders were delivered late compared to the original promised date. This leads to higher inventory costs and higher lost revenues.
Infrastructure is old and low investment has become normalised said Waller pointing out that many logistics providers survived the downturn of 2008/9 by retrenching and consolidating. This has inevitably meant cuts in investment, including in IT and has resulted in capacity and flexibility constraints and an environment where lack of innovation is the norm.
Data quality is poor, said Waller, which impacts on planning, understanding and the ability to adapt. He pointed to a lack of strategic direction from the OEMs with forecasting undermined by volume ‘push’ and late shifts in market allocation.
However, Waller believes that sales channel digitisation and changes in customer demand will force change. OEMs are in the early stages of developing omni-channel retail services where the customer interacts with the brand, not with a series of silos.
According to Waller, there are plenty of technologies in the marketplace today to help digitise the supply chain. The visibility of unsold orders and stock is a well-established functionality and tracking can be done in many ways to open up the delivery chain.
In the not-too-distant future, Waller believes that autonomous and semi-autonomous cars may change everything. In the meantime, manufacturers need to align internally to realise benefits from their digitised supply chain.
Chris Godfrey, General Manager, Outbound Engineering, Renault Nissan Alliance Logistics Europe, then presented with ‘Evolution or Revolution?’ as his subject. He pointed out that, in land transportation, we have evolved over a long period. The first steam-powered horseless carriage was developed in 1769 and 1807 saw the first car combustion engine fuelled by hydrogen. However, the pace of change is accelerating.
Recent surveys have suggested that customer behaviour in relation to how they buy cars is changing quickly. In a US survey by Accenture, 75% of respondents indicated that, if possible, they would consider realising their car purchase fully online whilst in a survey in France by EMAKINA the number was 58%.
Carsten Amann, Member of the Board, Head of Product and Marketing at Daimler Fleetboard then made a presentation entitled ‘The Impact of Connectivity in the Digital Transformation of Automotive Logistics’. He said that success in automotive logistics is not possible today without telematics. The world is changing and digitalisation redefines the playing field. Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory and Airbnb, the world’s largest accommodation provider, owns no real estate. “Something interesting is happening,” he said.
Amann cited four megatrends in digitalisation which offer a lot of opportunities. Big Data includes almost unlimited opportunities and the challenge is to make smart use of the data and gain profit from it. Technology innovation speed outpaces traditional business models and the challenge is to stay solid in core business while embracing change to be future-proof.The needs of markets and stakeholders are changing faster and faster and the key to competitiveness is having agile structures, processes and mindsets. Platform businesses, former start-ups such as Google and Amazon which have become world market leaders, dominate the digital era.
Amann then pointed out how a platform can be a suitable business model for automotive logistics. He demonstrated some of Fleetboard’s applications for trucks which make car haulage quicker and more efficient.
Carsten Kahrs, Principal, Porsche Consulting, showed how competitive advantage could be created through digitalisation citing the amazing speed of market penetration by companies such as WeChat and Uber. He said that urbanisation, digitalisation and sustainability were the three megatrends driving disruption in the automotive industry. “Software eats hardware,” he warned and showed that the logistics industry is not leading in the Digital Process Index.
Kahns warned that increased digital innovation carried with it threats to the automotive logistics industry. The volume of vehicles might drop because of the sharing economy. New market entrants with enhanced software solutions can offer disruptive business models and autonomous driving can reduce the demand for finished vehicle logistics
Kahns ended by saying that sharing is the future. “Disrupt yourself, before others do. Think big, start small, and scale up what works,” was his final message to the audience.