The automotive industry is facing an increasingly challenging environment, and many companies are already preparing for a potential recession. The current decline in volume on the global automotive market reflects not just a temporary economic slowdown. Some core drivers of demand for passenger cars are shifting along with the macroeconomic cycle. One factor is the growth of ride hailing and shared mobility in urbanized areas worldwide, resulting in higher asset utilization and fewer cars to handle the same number of passenger miles. Demographics is another factor, especially as the net growth of the driving-age population of 15- to 65-year-olds in the US rapidly approaches zero. The same trend applies to Germany. China is the only region where we see signs of a flatter cycle and quicker rebound to 2018 levels of car production within the next decade. While we cannot predict the “New Normal” precisely, production forecasts as well as the scenarios analyzed by Bain for the rebound all come out well below the 2017 figures—a grim outlook for additional call-off reductions for suppliers in 2020 and 2021. The entire auto industry needs to adjust to greater uncertainty, a foreseeable contraction in mature market volume, and growth in only a few markets and at lower levels.
At Bain, we support our clients in downturn readiness with a ready-to-customize market scenario and stress-test model. We codesign the transformation story for OEMs, Tier 1 and Tier 2 suppliers to win in the downturn by applying best practices in operational and commercial excellence. We codevelop solid strategic foundations for the longer term, including business portfolio reviews; make/buy and footprint setup; strategic capex/R&D allocation; and operating model transformations. We take pride in applying pragmatic, ready-to-use models to our clients’ specific situations, and cocreate the solution with your management and teams to ensure transferable capabilities and full ownership in the results delivery.
Markus Bürgin, Ralf Kalmbach, Michael Weber and Tom Wendt are partners with Bain & Company’s Automotive & Mobility practice. They were assisted by Wilko Stark, an advisor to the practice and a former board member of Mercedes-Benz.
Published in January 2020