Automotive
The industry is facing a combination of unclear demand and constant cost pressure, coupled with financing challenges at high debt levels
What drives the industry according to public sentiment?
Topline uncertainty persists due to ever-reducing volume forecasts leading to stagnant levels in the EU and an unclear call-off situation.
Following pass-throughs in 2022/23, there is now increasing pressure on achieved price levels, adding to the existing pricing pressure.
New entrants from China are intensifying the competitive landscape, especially in the electric vehicle sector. Meanwhile, Europe and North America stagnate, causing a volume shift to Asia and China.
The path to electrification is fraught with high uncertainty around adaptation and regulation, necessitating significant investments in production and R&D.
Cost pressure is mounting as increased fixed and structural costs put a strain on thin margins, which cannot be recovered solely through efficiencies.
Furthermore, rising debt levels and higher rates are changing the behavior and expectations of financing banks, with other financiers stepping in to fill the gap.
How can business leaders take position according to BCG experts?
Firstly, the importance of adapting a cost structure to the "new normal" production volumes can't be overstated. By using AI, managers have the possibility to streamline overhead.
This measure should still be combined with an "always on" footprint efficiency and adaptation of cost-effective program / site fit, while leveraging LCCs.
To tackle new entrants from China, a clear strategic answer has to be defined, and additionally, positioned to deal with Chinese OEMs.
The working capital position should also be streamlined to free up liquidity as an internal funding source.
Lastly, suppliers have to double-down on price negotiations with OEMs.