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WHITE PAPER: THE NEW AUTO-MOBILITY VALUE CHAIN

A core assumption in the traditional automotive value chain is the behavior of the end user – those individuals at the very end of the value chain who, quite naturally, rely on an automobile for their transport needs. However a range of megatrends – including urbanization, the sharing economy, and app-based lifestyles – along with external shocks such as the coronavirus have upended this long-standing model.

The New Value Chain in Auto-Mobility

Published in October 2020 by Neckermann Strategic Advisors in collaboration with Deutsche Post DHL, ‘The New Value Chain in Auto-Mobility’ explores the shifting balance of power in the auto-mobility value chain and considers the crucial role of logistics in the development and transformation of the industry.

Key Developments & Implications

By most projections, all new vehicles will be ‘connected’ vehicles by 2025. It’s clear that more and more passenger and commercial vehicles will be electrified and, in time, fully electric. And responsibility is beginning to shift from drivers to vehicle automation systems – a transformation enabling entirely new form factors and vehicle shapes in passenger and cargo transport, many of which are being trialed around the world.

The role of logistics must evolve to enable tomorrow’s auto-mobility industry success. With the balance of power shifting, it will be essential for traditional and new players – including logistics companies – to collaborate in defining and powering the auto-mobility revolution!

  • As new connected and autonomous features become ever-more popular in vehicles, the volume of high-tech parts and components in cars continuously increases. Today it represents a large share of the value that transits the auto-mobility supply chain. Traditional automotive suppliers and integrators are investing in these new product lines, and new players from the high-tech world are entering the game with strong ambitions. Their commercial and distribution habits are much different to those of the automotive industry, and heated discussions are likely around capacity allocation, delivery methods, and delay penalties.

  • Many new vehicle manufacturers are entering the industry with little knowledge and expertise about efficient logistics and manufacturing processes. In some cases, this gap has accelerated the failure of promising new companies. In a low-margin industry (vehicle manufacturing and sales) that is expected to lose direct contact with end consumers, the mastering of logistics costs and efficiency may make or break a new player’s ambitions. As all vehicle manufacturers are electrifying their product ranges, logistics professionals must take a fresh look at the design of their supply chains.

  • As consumer preference increases for autonomous and electric vehicles, auto-mobility companies must engage in a far more intense dialog with the telecommunication and energy industries to formulate the right commercial model. Connected and autonomous vehicles are already common between the four walls of a warehouse, where AGVs and robots are working alongside humans in an environment that is much easier to control and monitor than urban roads, for example. Logistics operations can usefully serve as a laboratory for connected vehicle development, and logistics will greatly benefit from progress in vehicle connectivity.

  • In the near future most vehicles will be owned by fleets and no longer by private individuals. This change in the vehicle ownership model is critical, as serving a private vehicle owner or a fleet manager are completely different things, especially in the aftermarket arena. Within fleets, vehicles become commercial assets for which uptime must be maximized to ensure an acceptable return on investment (ROI). This will bring a lot more attention to the effectiveness and speed of aftersales logistics, and new models are likely to be invented. Bringing spares closer to main consumption areas and storing them in urban or local distribution centers may be the way to serve repair shops and dealerships faster. This in turn ensures fleet vehicles are back on the road faster.

  • Mobility operators, including companies that are part of an OEM group, and logistics providers will become important stakeholders in vehicle design and maintenance models. They might become the main customers of current OEMs and, in this way, they may influence the way vehicles are designed and manufactured. It is too soon to figure out if this will bring more or less complexity to the inbound-to-manufacturing supply chain and the aftermarket supply chain. The logistics principles that governed the industry over past decades were fit for mass production but won’t allow for the extreme levels of customization that some predict. Logistics will have to enable more operational flexibility and visibility to minimize the total cost of ownership of mobility operator assets from purchase to lifelong maintenance.

  • While the industry presents an unprecedented breadth of opportunities for stakeholders, big companies still face barriers in keeping up within a dynamic environment. Inertia, lack of out of the box ideas, and fear about trying new business models are examples of limitations, but these can be integrated into the organization’s strategic development. Several options exist to support corporates with their innovation programs – such as implementing an incubator, conducting a start-up contest, or even internal initiatives to stimulate intrapreneurship. But one of the most powerful paths to achieve innovation remains start-up acquisitions that drive change and bring the additional necessary fresh vision and energy.

Questions Answered In This Report

  • What are the most significant changes occurring in the auto-mobility industry?
  • Which new players are arriving, and who will be the winners and losers?
  • How can logistics transform to enable auto-mobility industry success?