Auto Industry Execs Expect “Significant” Disruption Ahead – Rail, Road & Cycling


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The annual AlixPartners
Disruption Index
(ADI) is a barometer of the amount of
influence volatile business conditions have on executives, and a
litmus test for their ability to respond. The study, now in its
fifth year, gathers fresh intel from more than 3,000 senior
executives worldwide, delivering both a comprehensive macro story
and sector-by-sector findings.

As part of that, the ADI delivers important insights for
executives in and connected to the auto industry. The 2024 study
finds that while some disruptive forces related to the auto
industry have moderated, it’s hardly time to take hands off the
wheel. The 300 executives surveyed at automakers, suppliers, dealer
groups, aftermarket companies, and shared-mobility firms report
more disruption overall than peers in many other industries,
including the aerospace, consumer products, media, and financial
industries.

Importantly, a substantial number of automotive executives
expect “significant” disruption in the year ahead.

Planning and prioritization are proven ways to successfully
weather disruption, and even to capitalize on it. When it comes to
the auto industry, however, there is clearly a lot of work to be
done.

More than 60% of auto executives in all but one sub-sector
(aftermarket) say it’s increasingly difficult to know which
disruptive forces to prioritize (Fig 1). What’s causing the
confusion?

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Response readiness

Levels of concern fluctuate by topic and region of the world.
For instance, North America-based executives report greater levels
of concern around inflation, interest rates, and aging populations;
those in Europe, meanwhile, see protectionism, tariffs, and
deglobalization as a bigger threat. China- and Japan-based
executives are more alarmed than peers by the threat environmental
concerns and regulatory developments pose.

Meanwhile, concerns about job security are present regardless of
where the executive is based. A quarter of automotive respondents
internationally say they are worried about losing their
positions.

This year’s ADI also looked at several other issues
important to auto executives, including two focus areas that
continue to consume an enormous amount of time, resources, and
thought:

Supply chain: While no longer hamstrung by chip
shortages or pandemic-era shockwaves, supply chain disruption is
still present. Nearly four in ten auto executives say this part of
the business is actually more challenging than 12 months ago.

This is an evolving challenge, however. When asked what concerns
them most when thinking about near-term changes to the supply
chain, twice as many executives (41%) cite keeping up with demand
than those citing “supply availability.”

Seizing tech potential, raising ROI: Europe-and
China/Japan-based executives in our new ADI are more bullish than
North American counterparts when it comes to software-defined
vehicles (SDV), electrification, and autonomous-vehicle
technologies. Across the board, executives see a near-term
opportunity for their companies on several tech fronts, including
SDVs, AI, and automation.

However, tech strides are not yet delivering big returns. While
auto executives say they are spending more on these priorities than
last year, 86% of them say their ROI on that spending is just 10%
or less.

Turning disruption into success

AlixPartners has identified several steps to win in these
disruptive times in auto:

Short-term actions

Strengthen your cash position: Maximize cash by
tuning up your financial warning systems, and understand costs and
revenue at a detailed level to improve reaction time.

Go digital: Reorient your business to become
“digital-first,” aligning people, processes, tools, and
KPIs to support today’s consumers and production.

Expect and embrace disruption: Disruption
presents unpredictable risks, but also unexpected opportunities.
Set up a strategic foundation that includes a high degree of
flexibility.

Long-term actions

Strengthen your supply chain:Nearshoring and
reshoring can minimize potential disruptions, including those
caused by geopolitical issues.

Prioritize operational superiority:Consider
basing business plans on EP (economic profit), which considers the
full cost of what it takes to get a return.

Reduce and retire debt:This is especially
crucial in higher-interest-rate markets.

Look for “smart M&A”
opportunities:
The auto industry continues to transform
and, in the years ahead, will be radically different than it is
today. Don’t be left behind.

Overall, the auto industry is going through more disruption than
it likely has at any period in its more than 100-year existence.
From the truly historic transition from internal combustion to
electrification (which itself has become a roller coaster of late!)
to the promise—and elusiveness—of SDVs and beyond, the
industry really hasn’t seen anything like what’s to
come.

The winners will be those who take action now to turn the
challenges ahead into opportunities.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



Read More: Auto Industry Execs Expect “Significant” Disruption Ahead – Rail, Road & Cycling

2024-04-01 10:05:52

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