The Future of the Automotive Value Chain 

The report

In this report, we discussed what the most important drivers of future value chain developments are and how the automotive leaders make investment decisions during the uncertain times, in order to have know-how, production capacity, and stable supply chains in place once markets demand them. According to our scenario-based business modelling, we identified four plausible setups an OEM’s value chain might have in the year 2025, which could help automotive decision-makers challenge their own forecasts and strategic plans systematically.

Viewpoints / key findings

• Disruptive times ahead for the automotive value chain. The automotive industry is in the midst of an historic change right before our eyes. Nearly every day we read in the news about an actual or future shake-up in the market, new business models, or a new value chain. Monitoring development signposts and quantifying their effects in an integrated financial model sheds light on mission-critical transformation steps.
• High-influence drivers for the automotive value chain. The automotive value chain in 2025 will be determined by a multitude of high-impact drivers. These drivers can be grouped into the areas of social change (S), technology advancement (T), economic shifts (E), environmental trends (E), and political developments (P). The drivers with the greatest impact and highest degree of uncertainty are the ones to unfold the plausible scenarios in automotive industry in 2025.

Figure 1. High impact and high uncertainty drivers

• From everything we know about the key trends and drivers for the automotive value chain, we selected six top strategic fields of action, which all automotive decision-makers are most likely to be dealing with up to 2025:
  • E-Mobility: Develop and source for an electrified product portfolio. Between 18% and 36% of all cars sold in the market will have alternative drives – either customers or regulators will drive demand.
  • Autonomous driving: Focus R&D efforts on self-driving vehicles. In markets that fully accept and foster technological possibilities, top quality offering through development alliances and lobbying towards a clear liability situation is crucial.
  • Sharing economy: Adjust your value chain towards shared vehicle use. Building dedicated business only advisable if OEM maintains dominance in the value chain.
  • Digital business models: Build profit pools around data and media. Infotainment and mobility services can contribute up to 20% of total revenue and 19% of the OEM's EBITDA.
  • Manufacturing 4.0: Build the smart factory and administration. Efficiency gains in plant and back offices can improve total EBITDA of the OEM by up to 20% and are a prerequisite for future profitability.
  • Workforce transition: Prepare for restructuring. Up to half of the OEM's production jobs are at risk, while up to 13,000 IT talents might be needed by 2025.
• Based on the investigations in this study, there are four potential futures for OEMs:
  • Become a technology leader with strong branding through massive investment in new business models.
  • Achieve at least mid-term stability of your market position through joint collaboration and lobbying with other OEMs to protect know- how and influence against emerging IT giants.
  • Try to survive by focusing on efficiency improvements, niche markets, and company vehicle business to compete in a tough market environment with financially potent competitors.
  • Set up strategic partnerships with IT giants. The production of high-quality and cost-effective vehicle platforms combined with a strong brand image will result in a mobility offering that leads the white label market.

There is a strong indication that across these scenarios, embracing e-mobility, autonomous driving as well as Manufacturing 4.0 could well be no-regret moves. In order to prepare for the future, OEMs will have to evaluate the drivers according to the internal and external circumstances of their company, and continue playing a significant role in 2025 and beyond.