Executive Briefings

As Automotive Industry Gets Back on Its Feet, Innovation is More Important Than Ever

Innovation is more critical in the automotive industry today than ever before"”and it is changing the balance between automakers and their suppliers.

The North American automotive industry has emerged from the recession in far better shape and more quickly than predicted. While overall sales volumes are lower than in the peak years of the mid-2000s, manufacturers and suppliers are healthier and stronger. Sales are exceeding expectations, costs are down, and the industry has established a much more stable platform for profitable growth.

Right now, the automotive industry is in a phase of both rapid and broad technological innovation that spans several scientific disciplines"”chemistry (batteries), materials science (lightweight materials), and consumer electronics (infotainment), to name a few. Given the span of innovation, it's becoming exceedingly difficult and too costly for OEMs to "go deep" across all technologies.

Additionally, some nonautomotive players have superior specialized technical capabilities and R&D scale in specific disciplines. These factors are fundamentally shifting the industry's long-standing model of innovation"”which had been centered around large OEMs and major suppliers"”toward a more decentralized approach in which OEMs serve as integrators, and large and small suppliers play an expanded role.

The industry will need to innovate rapidly in order to remain competitive in an ever-changing market, where the goals include hitting more stringent fuel economy standards, boosting the electronics in cars, developing common platforms around the globe, and attracting younger buyers. Doing this requires significant R&D dollars, both within OEMs and increasingly across a broader innovation landscape.

Understanding this shift will confer real advantage to those that think strategically, act decisively, and execute their game plan.

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Keywords: supply chain management, logistics management, logistics & supply chain, supply chain planning, sourcing solutions, automotive industry supply chain

The North American automotive industry has emerged from the recession in far better shape and more quickly than predicted. While overall sales volumes are lower than in the peak years of the mid-2000s, manufacturers and suppliers are healthier and stronger. Sales are exceeding expectations, costs are down, and the industry has established a much more stable platform for profitable growth.

Right now, the automotive industry is in a phase of both rapid and broad technological innovation that spans several scientific disciplines"”chemistry (batteries), materials science (lightweight materials), and consumer electronics (infotainment), to name a few. Given the span of innovation, it's becoming exceedingly difficult and too costly for OEMs to "go deep" across all technologies.

Additionally, some nonautomotive players have superior specialized technical capabilities and R&D scale in specific disciplines. These factors are fundamentally shifting the industry's long-standing model of innovation"”which had been centered around large OEMs and major suppliers"”toward a more decentralized approach in which OEMs serve as integrators, and large and small suppliers play an expanded role.

The industry will need to innovate rapidly in order to remain competitive in an ever-changing market, where the goals include hitting more stringent fuel economy standards, boosting the electronics in cars, developing common platforms around the globe, and attracting younger buyers. Doing this requires significant R&D dollars, both within OEMs and increasingly across a broader innovation landscape.

Understanding this shift will confer real advantage to those that think strategically, act decisively, and execute their game plan.

Read Full Article


Keywords: supply chain management, logistics management, logistics & supply chain, supply chain planning, sourcing solutions, automotive industry supply chain