What will the automotive industry of the future look like and how will it manage its ever-evolving supply chain in an environment of unpredictable change?
To answers these and other related questions, Thomson Reuters and the Automotive Industry Action Group (AIAG) recently partnered to produce two reports on the future of the automotive supply chain over the next five to seven years — one on the Asia/Pacific region, and the other on the Americas/Europe region.
And now, to provide a more comprehensive analysis of issues facing the global automotive supply chain, Thomson Reuters/AIAG has developed a third report comparing and contrasting results from the first two reports.
This third report — Part 3 of 3: Two Reports, One Conclusion — Grappling with Rapid Change in Uncertain Times — offers a detailed analysis of the global megatrends affecting automotive development, production, and sales worldwide. Covered trends include international trade tensions, regulatory changes, environmental considerations, electric and autonomous vehicles, cybersecurity, labor issues, materials sourcing, and more. The new report also provides industry observers with a preview of what to expect in the next five to seven years as these trends unfold and the automotive market of the future takes shape.
The Predicament of Unpredictability
While the first two reports were based on feedback from professionals working in entirely different parts of the world, a comparison of the results yields several major takeaways, the most important of which is that no matter where automotive vehicles are being produced, manufacturers the world over are grappling with many of the same basic challenges.
Effective supply chains require stability and predictability, as well as the means to anticipate potential disruptions and plan accordingly in order to better minimize risk. Unfortunately for those managing automotive supply chains, a confluence of different factors is creating an increasingly unstable and unpredictable environment in which to operate — one that will likely be characterized by periods of relative calm interrupted by extreme moments of volatility and disruption.
For example, it is virtually impossible to avoid trade and regulatory issues that have a direct impact on the timely delivery of automotive parts no matter what part of the world automotive vehicles are manufactured. Trade tensions between the U.S. and China; the re-negotiated U.S.-Mexico-Canada trade agreement; Brexit; Asia’s Regional Comprehensive Economic Partnership — all of these trade disputes involve various stipulations and restrictions on the manufacture and distribution of automotive parts, as well as where and how vehicles are assembled.
Manufacturers all over the globe are also contending with the logistics and market challenges involved in phasing out internal combustion engines while simultaneously ramping up capacity for electric vehicles (EVs) and investing in the technology for autonomous vehicles (AVs). Given that mass-market adoption of EVs and AVs is many years away, however, maintaining profitability will be a delicate balancing act for most automotive manufacturers in the years to come.
Demand for ever more sophisticated entertainment, navigation, and safety features is also introducing new players into the automotive supply chain — and, as a result, cybersecurity is more of a concern than ever before. Further, in order to ensure a consistent supply of materials and components for EV batteries, automotive manufacturers are now competing with makers of consumer electronics — laptops, smart phones, tablets, etc. — for raw materials such as cobalt, nickel, manganese, and lithium.
An underlying factor in all of these trends is changing generational attitudes toward automotive vehicle ownership as ride-sharing services proliferate, other transit options materialize, and concerns about the environment influence decision-making. Changes in the labor force are also having an impact on the industry, as younger workers eschew manufacturing, older workers retire, and demand for more technically adept personnel continues to increase.
Taken together, these shared issues highlight the fact that the automotive industry as a whole is in the midst of a turbulent transition from its industrial-era heritage to a new, more technologically oriented future the contours of which are only now taking shape. And while supply-chain professionals around the world have differing levels of concern about the challenges ahead, it is evident in these reports that they are all dedicated to developing and maintaining a competitive, nimble, value-driven supply chain capable of sustaining itself well into the 21st century.
Given the variety and complexity of factors affecting automotive supply chains, any number of scenarios could play out in different parts of the world. The only certainty is that the competitive edge will go to those who can anticipate disruptions, plan for them, and successfully mitigate the risk factors involved — all while meeting consumer demand for better, safer, more energy-efficient vehicles of all kinds.