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Tesla Motors: A case study in disruptive innovation

Senior Director, Cost Benchmarking Services, IHS Markit

Tesla Motors broke the mold. Then reinvented it. Not only did Tesla Chief Executive and Chief Product Architect Elon Musk demonstrate that convention could be defied, he did it in an industry with 100-year-old traditions, norms, and processes. Of course, the auto industry has innovated in the past, but Tesla, which was founded in 2003, has pushed the envelope beyond what most automakers thought possible. The company's Silicon Valley-style "techpreneurship" enabled it to move faster, work more efficiently, and create groundbreaking new ideas around sustainable mobility and automotive technology.

After all, this is Musk's modus operandi. In 1998, he disrupted e-commerce by creating a widely deployable and secure payment platform called PayPal. And in 2002, he launched SpaceX, a company that designs, manufactures, and launches rockets and spacecraft. The company's goal is to enable people to live on other planets. Musk, himself, wants to "die on Mars" and wholeheartedly believes it will be possible.

He is also a lightning rod in the debate around mass transit with an idea some critics refer to as vaporware. Dubbed Hyperloop, Musk's idea is to create a high-speed transportation system that is immune to weather, impossible to crash, uses little energy and recaptures most of what it uses, and travels twice the speed of today's commercial aircraft. He believes the concept could move people from Los Angeles to San Francisco in just 35 minutes. Oddly, he has no interest in making the Hyperloop a reality but, rather, is putting his ideas out there for others to take and improve the human experience.

With Tesla, Musk is focused on disrupting mobility. As of mid-June 2014, the company has released all of its patent holdings, claiming that open-source innovation is more powerful than anything one company could do individually. While IP lawyers cringed, Wall Street applauded, sending Tesla's stock price up 14% to $231 a share. This radical approach to innovation runs deep, as evidenced in the technology and design approach of the company's flagship Model S, its $69,900 luxury car.

In August 2014, the IHS Technology Teardown Team purchased a used 2013 Model S and took it apart to see what made it tick. The team dismantled 12 systems and cataloged every part within each system. The teardown included both the electronics systems inside the car's interior and the drivetrain (see sidebar "What's inside the Model S?").

Technical differences

The teardown confirmed that the Tesla Model S is unlike anything else on the road. A massive plot of real estate in the center stack is dedicated to a 17-inch touch screen infotainment system, which became—since its production launch in 2011—an instant industry benchmark for automotive display integration. There is room left for only two physical buttons on the console—one for the hazard lights and one for the glove compartment release (see sidebar below).

The technical specifications are impressive. The 17-inch screen is a Chi Mei Optoelectronics display with 1920 x 1200 WVGA resolution that includes a projected capacitive touch screen—the same technology employed in many smartphones and tablets. The system runs on a Linux-based operating system, offers Garmin navigation with Google Earth overlays, and computes at speeds still besting most other systems available today with its NVIDIA Tegra 3 processor combined with 2 GB of DDR3 SDRAM.

The system includes an embedded 3G modem from Sierra Wireless that runs broadband data off AT&T's network. It can receive software updates over the air and controls all of the functions of infotainment, audio, navigation, Bluetooth phone, HVAC, and even vehicle settings like windows, door locks, sunroof, trunk release, traction control, headlights, steering, and suspension settings.

In addition, a 12.3-inch fully digital instrument cluster sits directly in front of the driver with its own NVIDIA Tegra 2 processor, which it uses to handle the diverse array of graphics, content, and redundant outputs for the driver. About the only "familiar" driver components are the steering wheel, pedals, and transmission shifter—the latter actually borrowed from the Mercedes-Benz parts bin.

Manufacturing differences

The system is clearly in a class of its own. However, with all of these high-end specifications, how can Tesla sell this as a standard feature in every Model S? More disruption.

The company chose to change up the supply chain and borrow from the electronic manufacturing services (EMS) model of production that is standard practice in the consumer electronics industry. In this respect, Tesla is closer to being a technology company than a traditional automobile maker. Much like how Apple designs the iPhone and then employs Foxconn to build it, Tesla contracted with a leading EMS provider to build its center infotainment system, instrument cluster, and several other systems in the Model S. This model required Tesla to internalize much of the hardware and software development, as well as the systems integration work. Given that Tesla has hired its engineers from all over Silicon Valley and beyond, this was not a problem.

The Silicon Valley culture and the EMS approach to manufacturing were a clear advantage for Tesla at one time but no longer make it unique. The EMS model is expanding in the automotive industry, and the likes of Compal, Flextronics, Foxconn, and Jabil are working with brands including Chrysler, Daimler, Ford, General Motors (GM), Jaguar, and Volkswagen.

However, the transition to the EMS model can be problematic. Ford outsourced the entire infotainment architecture for the development and deployment of MyFord Touch in 2011 to an EMS provider. The initial system had technical software problems that required Ford to issue several software upgrades. This cost tens of millions of dollars, contributed to a poor customer experience, and caused perception problems for Ford, from which the company has only recently recovered.

Development differences

In the last decade, virtually every automaker has relocated portions of vehicle and vehicle technology development to new R&D facilities in the San Francisco-to-San Jose tech corridor. In fact, some early innovators predate Tesla: BMW, Daimler, and Volkswagen set up shop in the Valley in the mid-1990s, and Honda opened its first office in 2003, the same year Tesla was founded.

The reasons for doing so now go beyond manufacturing. Automotive OEMs are co-locating with the likes of Apple, Cisco, Facebook, Google, HP, Intel, NVIDIA, and Oracle to help speed the pace of innovation. This involves accelerating the pace of hardware, software, services, and applications development but also rethinking the process of design.

The development speed of a typical mobile device is often six months or less. Compare that with the design-to-production timing for a new vehicle of approximately four years and it's no wonder car-buying consumers have been underwhelmed by standard in-vehicle electronics. Even today, consumers can find navigation and infotainment systems designed in 2008 for sale in model-year (MY) 2014 vehicles. To give an idea of how ancient that is in "tech-years," BlackBerry held more than 50% market share among smartphone users in 2008. Remember BlackBerry?

Tesla has had a competitive advantage over auto industry rivals in design innovation since day one. Located in arguably the center of the world for technological innovation, Tesla was able not only to construct its vision of mobility in Silicon Valley, but also recruit its employees from many of the leading technology companies to design and build the car there as well. All other OEMs grasping for automotive technology leadership had to learn the culture of Silicon Valley, figure out how to adapt to it, and dissolve the century-old "way of doing things." Tesla was born into it.

Service differences

With Tesla's technology come some very important services. Perhaps at the top of the list is the convenience of over-the-air (OTA) software updates for vehicle recalls, which Tesla has made free and standard for Model S owners. This functionality has, in turn, created plenty of positive press for the company.

It all starts with the connection. The 3G connection in the Tesla infotainment system is already providing this solution via relatively old wireless technology. Since the modular and flexible hardware architecture of its infotainment system allows for mid-cycle technology enhancements, IHS expects Tesla will soon debut true 4G LTE connectivity in its vehicles. The added bandwidth will further enhance the OTA update service, as well as the rest of the services the Model S offers.

IHS forecasts a 60% global penetration rate on embedded cellular connections in cars by 2022, with 4G LTE bandwidth comprising roughly 60% of that market. GM and Audi have actually beaten Tesla to market on this specification as both OEMs already have 4G LTE cars on the road now.

One central purpose of this mass-market vehicle broadband adoption is to accommodate FOTA (firmware over the air) and SOTA (software over the air). Tesla has already deployed this function in part because it allows the company to provide vehicle service without needing to charge (or possibly pay) for service bay labor.

Consider Tesla's recall of the Model S for overheating charger plugs in January 2014. The day the recall notice came out, Tesla had all 29,222 Model S vehicles updated wirelessly and running the new safer version of the software. Ironically, around the same time, GM had a similar fire-related safety recall issued that also required a software update. Despite all of its vehicles having standard OnStar telematics, owners were required to take their cars into a dealership for the software update, costing GM a warranty labor expense on all 370,000 recall service appointments.

While far from a sure thing, nanotechnology offers significant business opportunities for companies willing and able to take the long view. One avenue is to identify a sizable opportunity in an existing market where a nanotech product can displace an existing inferior solution, e.g., a coating for an automobile that keeps itself clean, clears mist from side mirrors, or self-repairs scratches in the automotive paint.

Volume aside, Tesla paid much less on a per-vehicle basis than GM, simply by providing a software update procedure that has been on personal computers for more than two decades and mobile phones since before the BlackBerry.

IHS sees the OTA software trend continuing strongly. With vehicles like the new Mercedes-Benz S-Class claimed to have over 65 million lines of code—10 times that of the Boeing 767 Dreamliner—the automotive industry stands at a crossroads. Software recalls are about to become a major problem, one that will be expensive if this type of technology is not broadly deployed.

As of February 2014, over 530 software-related recalls had been reported since 1994 (see figure below). Among these, 75, or 14%, were issued for MY 2007 alone, with over 2.4 million vehicles affected. Numerous questions arise from the variation in volume by model year—not the least of which is, why have recalls for MY 2007 been so numerous? There are likely several reasons for this spike:

MY 2007 had the last large-sales volume before the economic recession plunged US car purchases from approximately 16 million to 10 million in 2010.

Many new electronics systems were added in MY 2007 for infotainment, advanced driver assistance systems, and core auto control systems, which increased the amount of software in the typical car.

MY 2007 involved recalls of 75 vehicles, the most of any model year. Many automotive OEMs had multiple model recalls with software updates. Toyota had especially high recall rates that included software updates.

It is in this context that IHS expects FOTA and SOTA to be enabled in over 22 million vehicles sold worldwide in 2020 alone, growing from approximately 200,000 vehicles in 2015. Major deployment will begin in 2017. In the meantime, Tesla will continue to leverage its first-to-market status with FOTA and SOTA to help lower overall costs to the end user and improve unit margins on each additional Model S sold.

Powertrain differences

The heart of Tesla's Model S is its electric propulsion system, which includes a battery, motor, drive inverter, and gearbox. The battery is a microprocessor-controlled lithium-ion unit available in two sizes; spending more buys more range and more power. The induction motor is a three-phase, four-pole AC unit with copper rotor. The drive inverter has variable-frequency drive and regenerative braking system, while the gearbox is a single-speed fixed gear with a 9.73:1 reduction ratio. The battery of each Model S is charged with a high-current power inlet, and each vehicle comes with a single 10kW charger and mobile connector with adapters for 110-volt and 240-volt outlets as well as a public charging station adapter.

This powertrain package allows Tesla to deliver a longer driving range than any other EV maker—about 200 miles versus just under 100—plus acceleration and driving performance similar to or better than a traditional gasoline-powered vehicle. While several automakers offer EV powertrains—Nissan's Leaf and Chevrolet's Volt, for example—none matches Tesla's commitment to EV development. And as a clean slate company, Tesla has had the advantage of developing an entirely new powertrain and supply chain without the hindrance of existing dealerships, physical plants, or inventory.

Other EV products use lithium-ion batteries, but in lower kWh and using fewer, but larger, battery cells. For example, the Nissan Leaf uses a 24kWh battery, with 192 cells and EPA-estimated range of 84 miles. The Model S' 85kWh battery has more than 7,100 cells, allowing it to move greater weight faster and with longer range.

To address range anxiety, Tesla has made a significant investment developing charging stations in the US (112 to date, according to the Tesla website), Europe (63), and Asia (17). These supercharger stations can swap out the battery in less time than it takes to fill a tank of gas. Owners must come back and swap again for their original battery. Nonetheless, this helps alleviate drivers' worries about becoming stranded on long trips.

Tesla is working to drive battery costs down in anticipation of the launch of its mass-market, $35,000 Model 3 EV sedan, which is slated to debut in 2017. To that end, the company recently announced a new $5 billion "gigafactory" battery plant in Nevada in partnership with Panasonic. It will reportedly handle all elements of battery cell production, from raw material to battery pack, rather than only battery pack assembly. And Tesla intends to sell its OEM batteries for non-automotive applications, which will enable it to increase production volume and reduce unit cost.

What does the future hold?

• Created a fun-to-drive electric roadster. Check.
• Leveraged the lessons to scale-up to a full-luxury sedan. Check.
• Disrupted the luxury car market and, according to IHS Automotive data, attracted "conquest" buyers from the likes of BMW, Mercedes, and Lexus, not to mention Toyota and other volume brands. Check.
• Diverged from entrenched supply chains to develop technology in-house and lowered per-unit development costs for an industry-leading infotainment platform. Check.
• Addressed a software-related vehicle safety recall in one day for almost 30,000 cars. Check
• Created a company destined to influence the industry as a whole and did so while pleasing Wall Street. Check.

Tesla has established benchmarks for infotainment system hardware, software flexibility, and manufacturing supply chain. The company innovated powertrain design, which has proven both robust and viable for everyday use. And it has received plenty of accolades for aesthetic design from the automotive media. The result is that "made in Silicon Valley" is no longer roundly dismissed as an option for an automotive OEM.

So what's next for Tesla? How does it maintain its leadership in technology development? Has it created a sustainable competitive advantage? Can it deliver on promises of a new luxury crossover with the Model X and a new high-volume EV competitor with the Model 3? Will Tesla be able to steal market share from not only luxury marques, but also from higher-volume brands?

Going forward, Tesla faces five distinct challenges:

Consumer demand. Perhaps the most significant is consumer acceptance of electric vehicles. In the first eight months of 2014, EVs accounted for only 0.7% of the 11.2 million light-vehicle sales in the US. Even Renault-Nissan CEO Carlos Ghosn, a staunch supporter of EVs, last year acknowledged Renault-Nissan would miss its original 2016 target of selling 1.5 million EVs by four to five years.

Dealerships and service. Today, Tesla's direct-sales model is illegal in most US states. As Tesla attempts to go mainstream, it will need the legal restrictions lifted or be forced to adjust its model. Further, as vehicles age and the numbers sold increase, there will be maintenance issues that cannot be handled by OTA software updates. Tesla will need to build out an after-sales service network that is robust enough to handle the demand.

Marketing. To date, demand for the Model S exceeds supply. But as the company targets the mass market with the Model 3 and aims for 500,000 units sold in 2020, it will need to beef up its marketing. Tesla's Apple Genius-bar-inspired dealership model has worked for the affluent early adopters, but can it be scaled up to meet its sales targets?

According to IHS registration data, 51.8% of all Tesla buyers have annual household incomes over $150,000. By comparison, the percentage of Chevrolet Malibu buyers with a household income higher than $150,000 is only 6.5%. Tesla will need to create a marketing strategy that targets economy-car consumers, who are notably different than those who buy the $80,000 to $100,000 Model S.

Production Boosting output will likely mean growing pains for Tesla as it transitions to a high-volume production model. How the company manages the transition will determine Tesla's near-term future. Of course, many automakers have had difficulties ramping up new plants or launches and yet overcome the challenges in the longer term. While growing pains are to be expected, there is no reason to believe Tesla does not have the capacity to become a volume manufacturer.

Innovation. Tesla has already made a name for itself around technology adoption and innovation. But it will be challenged, as all first movers are, to maintain that lead and continue to push the boundaries with future products. Assuming the gigafactory and its supply chain allow Tesla to make a mass-market offering and keep its infotainment stack as an industry benchmark, the company's next move will be automated driving. Musk has already stated that Tesla will "hit the market" by 2017 with a partially self-driving vehicle. With many other OEMs targeting this time frame as well, Tesla might not be as disruptive in automated driving as it has been in infotainment design and sustainable mobility

But then again, it might surprise the market and break loose another game-changing product or technology before the rest of the automotive industry is ready—because that's how Silicon Valley works.

Tesla's user-experience focus sets it apart

We live in an era of smartphone ubiquity. So we are routinely disappointed when we get into our cars and are forced to make do with resistive touch screens (if we are lucky) or LEDs and vacuum fluorescent displays controlled by dials and buttons (if we are not). Tesla understands the importance of smartphone ubiquity to modern life, so it's no accident the transition is seamless when one climbs into a Model S

That is not the case with the majority of comparably priced vehicles from other auto manufacturers. Indeed, many of the recent automotive infotainment systems that the IHS Teardown Team has analyzed feature relatively small displays (typically 7-inch diagonal size or less) and low resolution (typically 800 x 480 WVGA or less).

Then there's the touch technology. Many of the touch screens IHS tears down in automotive head units are using resistive technology. Combine these legacy technologies with often underpowered processing chips and proprietary software and you often end up with a user experience that is unfamiliar, not intuitive, and has a lot of "latency" issues (meaning it's slow).

At the center of the dashboard in the 2013 Model S is the Tesla Premium Media Control Unit, which blows away all of the head units we have seen in specs, not to mention sheer size. The 17-inch diagonal display with touch screen makes for a very large assembly when removed from the dash. Inside the unit are many subassemblies, which are all modular, giving Tesla numerous design options for future models.

Several of the printed circuit board (PCB) assemblies, including the main assembly, feature Tesla Motors logos and copyrights, meaning that they are all designed and controlled by Tesla. In and of itself, this is unusual, as we find that most automotive OEMs entrust and outsource the bulk of their head unit designs to third parties such as Harman

Automotive, Panasonic, Alpine, Denso, Pioneer, and others. Tesla is thus designing and controlling the bill of materials down to the component level. This is closer to Apple's design-and-build model than it is to other automakers.

Such an approach affords Tesla leverage in the supply chain, more direct control over the finished product, and ultimately more control over the user experience. It also gives Tesla a potential performance and technology edge that others might find difficult to quickly emulate, as so much of the design is done in-house at Tesla rather than by the head unit suppliers.

Many other PCB assemblies are modular and come from third parties, such as the processing PCB, which is a turnkey solution from NVIDIA, and the air interface module, which is from Sierra Wireless.

All told, there are 10 PCB assemblies in Tesla's media control unit. The modularity of this design is not unusual for automotive electronic systems and allows Tesla many options. If Tesla wants to upgrade the processing power or change the air interface module, it may be possible to achieve this more easily and with less redesign than if all of the functions were integrated into fewer PCB assemblies. In this sense, modularity of design, rather than aggressive integration, has always been an automotive electronic standard. Not only does modularity give automotive designers many upgrade options, it improves reparability.

The center console of the Tesla Model S is dominated by a 17-inch touch screen infotainment system, which is an industry benchmark for automotive display integration.

What's inside the Model S?

In August 2014, IHS bought a second-hand 2013 Tesla Model S. The Los Angeles-based IHS Technology Teardown Team set to work pulling it apart to examine all primary systems inside the car. The team has cataloged every component and developed a detailed bill of materials for each system that includes the technical specifications, cost, and manufacturers of the components. In addition, the team estimated the labor and manufacturing cost of each system.

The 12 systems analyzed by the IHS Teardown Team comprised the following:

• Premium Media Control Unit
• Instrument Cluster
• EV Inlet Assembly
• High-Voltage Junction Box
• Battery Charger
• Thermal Controller
• Liftgate Left Hand Taillight
• Power Liftgate Module
• Body Control Unit
• Sunroof Control Unit
• Passive Safety Restraints Control Module

Mark Boyadjis, Senior Analyst, Infotainment and Human-machine Interface, IHS Automotive Andrew Rassweiler, Senior Director, Teardown Services, IHS Technology Stephanie Brinley, Senior Analyst, Americas, IHS Automotive Posted 7 October 2014

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Ideas Made to Matter

New case study takes up Tesla’s entry into the auto industry

Dylan Walsh

May 13, 2019

Within three years of Tesla’s founding in 2003, Elon Musk had invested $55 million of his own money in the company. And yet things were not going as planned. CEOs were leaving after short tenures. The company’s first model, the Roadster, was experiencing cost overruns. In response, in October of 2008, Musk appointed himself CEO. “I have so many chips on the table,” he explained. “I need to steer the boat completely.”

How has he done at the helm? A new case study  on MIT Sloan’s LearningEdge website considers the question with in-depth context about the U.S. automobile market and Tesla’s position within it.

“Prior to Tesla, no domestic manufacturer had entered the U.S. automotive market at scale since the Second World War,” said Donald Sull , a senior lecturer in innovation and entrepreneurship at MIT Sloan and one of the case study’s co-authors. “This case, which includes rich data on the industry, customers’ willingness to pay for electric vehicles, and Tesla’s financial situation, explores whether Tesla’s strategy of establishing a beachhead in the luxury segment and out-innovating its competitors can trump the challenging fundamentals of the auto industry.”

Tesla went public in June 2010 at a price of $17 per share. Eight years later, the stock was trading at $335, making Tesla the most valuable car manufacturer in the U.S. But the company had only posted two profitable quarters by that point. Investors were skeptical of its long-term viability, and media coverage wasn’t helping: the mass-market Model 3 was woefully behind schedule, lost in “production hell,” while a series of errant tweets by Musk brought SEC scrutiny and an eventual fine. The company has continued along a bumpy road, with a record $312 million of profit between July and September of 2018, followed by a plunge in stock prices, followed by a slump in sales, followed by promises of a driverless taxi fleet by 2020.

Given this wild variability in Tesla’s performance — sometimes a shining example of Silicon Valley potential, sometimes appearing to be on the brink of collapse — investors and industry experts are split on the company’s future. Where does the company stand? What are its prospects in a broader car market experiencing seismic changes?The case study explores these questions, beginning with a broad overview of how automakers, their suppliers, and their customers define one of America’s most fundamental industries. It then provides detailed background on four modern and connected forces powerfully reshaping this market:

Electrification.  In 2017, 200,000 electric vehicles were sold in the United States, a 25% increase over 2016 sales. The trend is continuing, and new business opportunities are emerging.

• Autonomous driving.  Self-driving cars are drawing investment from many giant companies, and the implications are striking. As one industry observer put it: “In the past, cars were primarily about driving and secondarily about content consumption. With autonomous cars, that prioritization will be reversed. Fully automatic cars will be battery-powered living rooms on wheels.”
• Connectivity.  As cars increasingly connect to the internet, old automotive business models are coming into question. The CEO of one Chinese conglomerate suggested that he would eventually be able to offer his company’s electric car for free, earning money instead from services the company sold to customers.
• Alternatives to car ownership.  A 2017 transportation study out of Stanford University predicts that by 2030, 95% of U.S. passenger miles will be served by on-demand autonomous electric vehicles and there will be an 80% drop in private car ownership in the United States.

Against this backdrop, the case study positions the emergence of Tesla — how the company has both driven and responded to these radical evolutions in the automobile market.

According to Sull: “This case is perfect for analyzing an industry in flux, the financial and operational risks of a disruptive strategy, and how to create value by driving up willingness to pay in an industry with limited product differentiation.”

Related Articles

• Original Article
• Open access
• Published: 30 December 2020

Sustainability in the automotive industry, importance of and impact on automobile interior – insights from an empirical survey

• Wanja Wellbrock 1 ,
• Daniela Ludin 1 ,
• Linda Röhrle 1 &
• Wolfgang Gerstlberger 2  

International Journal of Corporate Social Responsibility volume  5 , Article number:  10 ( 2020 ) Cite this article

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Sustainability is currently one of the main issues in all media and in society as a whole and is increasingly discussed in science from different sides and areas. Especially for the automotive industry, sustainability becomes more and more important due to corporate scandals in the past and topics such as electric motors, lightweight construction and CO2 emission reduction are key issues. Although the focus is primarily on other components, the interior cannot be neglected either in terms of sustainability. Interior is the most frequently seen part of the car by the driver. Therefore, e.g. the use of natural fibres especially for premium brands can only be considered in connection with highest standards regarding practical and aesthetical aspects. Consequently, the following research question arises: How do the three pillars of sustainability (economical, ecological and social issues) influence interior development at premium brand manufacturers and how do customers accept sustainable solutions? The focus of the paper is exclusively on premium brands due to the higher spread of sustainability effects compared to volume brands. A quantitative study is carried out to determine the expectations on the customer side regarding more sustainability in the automotive industry in general and in the interior sector in particular and to derive corresponding challenges and potentials for original equipment manufacturers.

Introduction

Sustainability is regarded as the keyword of the twenty-first century and the importance of the topic is not yet sufficiently widespread (Mittelstaedt, Shultz II, Kilbourne, & Peterson, 2014 ). The associated topic of resource conservation, which has been important since the eighteenth century, is now more relevant than ever. Above all, the automotive industry, which is the most important branch of industry in terms of turnover and the growth engine for Germany, has to deal more intensively with sustainable development and the associated effects and challenges. Automotive manufacturers are under pressure to comply with both political guidelines and internal specifications, as well as with constantly changing individual customer wishes (Thun & Hoenig, 2011 ; Wallentowitz & Leyers, 2014 ).

For the automotive industry, topics such as electric motors and the associated optimization areas, lightweight construction and CO 2 emission reduction are key issues. Nevertheless, the car’s interior cannot be ignored. After all, the interior is the part of a car most frequently seen by the driver and must therefore be practical, aesthetically pleasing and at the same time weight saving. The use of natural fibres as alternative materials in the interior plays an important role and is a further step towards greater sustainability (Pischinger & Seiffert, 2016 ).

Consequently, the following central research question arises: How is the new development of the interior by premium brand manufacturers influenced by the three pillars of sustainability (economical, ecological and social issues) and what are the challenges for original equipment manufacturers (OEMs) and suppliers? The contribution focuses exclusively on the German premium manufacturers Audi, BMW, Mercedes-Benz and Porsche, since sustainability at these companies is already more integrated into the manufacturing process.

Based on a literature review on sustainability in the automotive industry, previous efforts to increase sustainability in the interior sector will be elaborated on. Subsequently, an empirical study is used to determine the expectations on the customer side regarding more sustainability in the automotive industry in general and in the interior sector in particular and to derive corresponding challenges and potentials for OEMs and suppliers.

Sustainability in the automotive industry

Long-term success in the automotive industry is primarily achieved through consistent innovation strategies, strong branding, global efficiency in the value chain and qualified and motivated employees. Research and development can be argued as the key to long-term success - after all, no other industry invests more than the automotive industry in this area. Currently, the automotive industry is arguably witnessing the greatest phase of upheaval in its history. Mega trends such as emission reduction, lightweight construction, automated driving, connectivity and mobility services have changed the landscape for good. In line with these trends, the supplier industry is also adapting and undergoing fundamental changes (Dannenberg, 2017 ; Koers, 2014 ; Pischinger & Seiffert, 2016 ).

The topic of sustainability in the automotive industry is also gaining more momentum in the scientific community. Nunes and Bennett, for example, carry out a fundamental comparison of environmental initiatives of automobile manufacturers, conclude that these are often still very vague, and require further concretization. Another criticism is that the focus is primarily on the ecological dimension (Nunes & Benett, 2010 ). Azevedo et al. develop a theoretical framework for analysing the influence of green and lean SCM practices on the sustainable development of automobile manufacturers. Ecological (e.g. CO 2 emissions), social (e.g. supplier screening) and economic (e.g. operating costs) aspects are considered as performance indicators (Avezedo, Carvaho, Duarte, & Cruz-Machado, 2012 ). Azevedo and Barros complement this with an analysis of a sustainable business model for the automotive industry that integrates all three dimensions of sustainability. This contribution also shows that there has been a clear improvement in sustainability performance in the automotive supply chain over the last decade (Avezedo & Barros, 2017 ). Sinha et al. emphasize that sustainability management in the automotive industry is only possible through a holistic process approach starting with the conception and continuing right up to the series production of the product. In addition to these rather conceptual contributions, several authors consider concrete materials about their sustainability potential for the automotive industry (Sinha et al., 2015 ). Kumar and Das consider, for example, the suitability of bio composites especially in the field of dashboards (Kumar & Das, 2016 ), whereas Dunne et al. focus primarily on the suitability of natural fibres (Dunne, Desai, Sadiku, & Jayaramudu, 2016 ). Hetterich et al. consider the specific attitude of motorists towards sustainable materials in the interior sector. The focus here is on the willingness of customers to actually pay more for renewable raw materials (Hetterich, Bonnemeier, Pritzke, & Georgiadis, 2012 ).

In sum, the issue of sustainability in the automotive industry may well be gathering momentum and scientific focus, but the interior design sector in particular has been largely neglected. A few papers focus on the topic of sustainable interior, but mostly with a strict technological view (e.g. Bergenwall, Chen, & White, 2012 ; Jasiński, James, & Kerry, 2016 ; Mayyas, Qattawi, Omar, & Shan, 2012 ; Mcauley, 2003 ; Sopher, 2008 ; You, Ryu, Oh, Yun, & Kim, 2006 ). Some others analyse the potential of sustainability as a customer requirement, but misses the focus on automotive interior (e.g. Biju, Shalij, & Prabhushankar, 2015 ; Hetterich et al., 2012 ; Moisescu, 2018 ; Panuju, Ambarwati, & Susila, 2020 ). The article attempts to close this gap.

Sustainability in the interior of automobiles

The widespread innovation efforts in the field of electric mobility and autonomous driving also offer the potential to rethink and redesign the car’s interior. The vehicle interior has to be transformed into an increasingly attractive living space. This can be achieved, for example, through attractive surfaces made of sustainable materials. The interior plays an increasingly important role in purchasing decisions. It arouses emotions, offers comfort, safety and functionality and radiates brand identity as a fusion (Laukart & Vorberg, 2016 ; Pein, Laukart, Feldmann, & Krause, 2006 ).

The interior of a vehicle can be divided into six assemblies: the cockpit, the seats, the door and side trim, the headliner, the luggage compartment and the floor trim. The developments in this area is a balancing act between the pressure to innovate and the need to keep costs down. (Dölle, 2013 ).

Characteristics of natural fibre materials

Already in 2005, more than 30,000 tons of natural fibres were used in the automotive industry in Europe (Sullins, 2013 ). In 2015, the figure was already 50,000 tons, of which ten to 20% were European hemp fibres. Hemp belongs to the category of baste fibres, which are most frequently used in automotive components. Hemp, kenaf and flax are suitable alternatives to glass fibres because they are less expensive, have a lower density, a high strength and are more environmentally friendly. The use of natural fibres can result in cost savings of ten to 30% compared to glass fibers. Due to its strength, it can be used as a reinforcement for vehicle interior parts such as door panels. In addition, kenaf, which is cultivated mainly in China and Thailand, has one of the best CO 2 absorption rates in the plant world (Adekomaya, Jamiru, & Sadiku, 2016 ; Dunne et al., 2016 ; Suddell, 2008 ; Sullins, 2013 ; Verma, Gope, & Shandilya, 2012 ).

Another advantage is that the natural fibre-reinforced plastic does not splinter and can break without creating sharp edges. Its low weight and high load-bearing capacity are an advantage for lightweight construction and safety requirements and have a positive influence on crash management. Due to the positive cost performance ratio and the other advantages described, composite materials based on natural fibres have been used for several years for thermoplastics, thermosets and elastomers in automotive interiors. Well-known examples of this are doors made of flax or sisal fibres and polymeric binders such as polypropylene (thermoplastic) or polyurethane (Bjurenstedt & Lärneklint, 2004 ; Hull & Clyne, 1996 ; Laukart & Vorberg, 2016 ).

When selecting alternative materials, great care should be taken. For one, fibres from natural sources are not always more environmentally friendly than conventional fibres. Large amounts of water, pesticides, chemicals and energy are needed to prepare and dye the fabric during cotton degradation and processing. In addition, natural fibre reinforced plastics are neither as strong nor durable as metal or synthetic fibres, so they need to be replaced more frequently, resulting in increased energy consumption in the long term.

Whereas natural fibres were previously concealed behind a thick film lamination, they are now becoming more and more visually perceptible and are increasingly finding their way into the premium interior as a design element. At the same time, suppliers and vehicle manufacturers are in equal demand to conduct even more intensive research in the field of natural fibre-reinforced plastics and to bring technologies to series maturity that make it possible to further increase the proportion of natural fibres in vehicle interiors (Dunne et al., 2016 ).

Sustainability measures in the interior

The new hybrid materials and vehicle concepts pose a challenge for manufacturers and suppliers. The lightweight construction required for this should continue to offer the best surfaces in the interior since the appearance conveys a direct impression of quality, which is especially important for premium brands (Dunne et al., 2016 ; Hassan, Zulkifli, Ghazali, & Azhari, 2017 ; Karus & Kaup, 2002 ; Puglia, Biagiotti, & Kenny, 2005 ). Therefore, corresponding solutions with bio-composite materials are of great importance, as, for example, the supplier Dräxlmaier shows with his Kenaf door trim for the BMW i3 electric vehicle. The component is made exclusively of natural fibre-reinforced polypropylene with functional elements (Bröker & Ostner, 2017 ; Gelowicz, Günnel, Hammer, & Otto, 2017 ).

The use of natural fibre materials as a design element that underlines the sustainable character of a vehicle was not an option until now. They had not previously met the requirements of OEMs for a high-quality appearance and the technical process conditions of the manufacturers made it difficult to use the materials. After a long development period, the supplier Dräxlmaier and the manufacturer BMW have now joined forces to bring the innovation of visible natural fibres in the interior to series maturity. Requirements for design elements and weight reduction have been met and, at the same time, the materials are ecologically compatible. The “Fast Fibre Forming” developed by Dräxlmaier makes it possible to implement the “Visible Nature”. Panels are made of kenaf fibres and coated with a wafer-thin transparent plastic film. The purity of the plant material used ensures a particularly high-quality surface appearance compared to other natural raw material sources such as hemp or flax (Bröker & Ostner, 2017 ).

In the BMW i3, the visible door beams and the instrument panel cover are also made of the fibres of the tropical mallow plant Kenaf. The reasons for the selection are that Kenaf has a high degree of fineness and purity of the fibres compared to flax and hemp, which is essential for a high-quality surface. This is an elementary prerequisite because the design philosophy of BMW i vehicles combines a consistent focus on sustainability, which becomes visible and tangible in the interior, with simultaneous fulfilment of the OEM’s premium claim (Schmiedel, Barfuss, Nickel, & Pfeufer, 2014 ).

A further example is presented by Johnson Controls for the new BMW 3 Series with wood fibre components that not only relieve the burden on the environment but also reduce weight by 20% compared to solutions previously used (Focus, 2012 ).

The use of renewable and natural raw materials as a sustainable alternative to plastics is in direct harmony with the needs of the young generation. Yanfeng Automotive Interiors, for example, deliberately presents the recyclable, artistically designed natural fibre middle parts of the door panel in a natural look. According to Han Hendriks, Chief Technology Officer at Yanfeng, there is currently a shift towards more personalisation and individualisation. Drivers want to be sustainable and at the same time be safe and in touch with the spirit of the times (Yanfeng, 2017 ).

The supplier International Automotive Components (IAC) optimizes component designs for OEMs. A new product is the “Fibre Frame” technology. The natural fibre semi-finished product “EcoMatHot” replaces the classic material sheet steel in the mounting frame of the vehicle roof lining with panoramic or sliding roofs. The material consists of 70% renewable raw materials. A weight reduction of up to 50% is possible (Industrie, 2017 ).

In the future, it is expected that the use of renewable raw materials and recycled materials will continue to gain in importance. Visible components made of renewable materials will be found more frequently in the interior of the cars of tomorrow. In this context, the natural materials must be designed haptically and optically so that they can no longer appear only in laminated or mixed form with plastics (Focus, 2012 ).

Empirical study on customer expectations regarding sustainability aspects in interior design of cars

Based on the information from the previous chapters an empirical large-volume study is conducted to investigate the expectations and potentials that customers see in sustainability elements, particularly in the interior sector. The empirical survey focuses exclusively on customers of premium brands (Audi, BWM, Mercedes-Benz and Porsche), since sustainability measures are already more widespread in this area and customers have even higher expectations with regard to design and equipment (Skala-Gast, 2012 ).

Structure of the empirical study

The empirical study is based on an online survey with purposively selected persons from the Heilbronn University of Applied Sciences, the University of Stuttgart and the company Valeo Schalter und Sensoren in Bietigheim-Bissingen. The survey was conducted via Survey monkey. All persons with a minimum age of 18 years were contacted through the official university or company mailing lists and send on to the questionnaire’s homepage. Therefore, the participants were mainly students and employees of the above mentioned Universities and companies. The age limit has been set the minimum age to drive a car in Germany. One hundred forty-one participants fulfilled the desired characteristics, which can be divided in 100 male and 41 female test persons. With regard to premium brands, Audi and Mercedes-Benz each dominated with 34%, BMW followed with 25% and Porsche with almost 7 % of the participants.

The questionnaire consists of 23 questions developed by the authors, divided into three sections: “general sustainability”, “specific sustainability in the automotive industry and the interior” and “future expectations”.

Empirical results

The participants of the study recognize the fundamental importance of sustainability. With the exception of two persons, all respondents attach fundamental importance to sustainability in different areas of life. For 81% the focus is on nutrition, followed by energy supply (66%) and living (63%). The area of mobility follows a little behind with 47% (see Fig.  1 ). This shows that a fundamental need for sustainability exists, but mobility is not the most important area.

Areas of life with high importance of sustainability. Source: Own illustration

Regarding the question of which factors are decisive when buying a car, quality, price, performance and design are on the first ranks. Sustainability plays an important or even very important role for only 34% of the respondents, which is the lowest value of all factors (see Fig.  2 ). This result shows that sustainability is discussed regularly in the automotive industry, but at the same time, it has only a limited influence on customers’ purchasing decisions, especially in the premium segment.

Aspects decisive for the purchase of a passenger car. Source: Own illustration

The willingness to accept additional costs for sustainable materials in the car is also very indifferent. Almost half of the respondents (47.5%) are not prepared to accept higher costs for sustainability aspects in the car. This is quite a high number and shows the problem of automotive manufacturers to transfer additional costs to the customers.

Looking at the single modules of an automobile, power unit (41%) and electronics (38%) receive the highest relevance for sustainability from the customer’s point of view. For almost 35%, sustainability is important in all areas of the automobile, whereas 30% highlight especially the interior sector (see Fig.  3 ). This result demonstrates that although the customer focuses on the sustainability of the interior, at first glance the drive system and electronics in particular have a higher sustainability potential from the customer’s point of view. The further investigations now relate exclusively to the interior.

Modules of an automobile with high relevance for sustainability. Source: Own illustration

A majority of 74% of the respondents agree that the OEM should place more emphasis on the selection of sustainable and natural materials in the interior. Only 7 % reject this, which represents a clear message to the OEM.

In order to control the customers’ design perception of natural materials in the interior, a picture of an untreated door panel was shown to the participants (see Fig.  4 ). The reaction to whether the test persons could imagine this in their automobile was very positive. 71% of the respondents could imagine such a door, if properties as haptics, appearance and economy are retained. Only 9 % of the respondents could not imagine such a door.

Untreated door panel with natural materials. Source: Dräxlmaier, 2018

Looking at additional aspects, which should be fulfilled by sustainable and natural materials in the interior, quality (74%) and safety (71%) receive the highest percentages, followed by smell and optics (60%), haptics (57%) and comfort (55%). At the end of the scale, individuality only receives 18%, which is surprisingly low compared to the wide variety of variants in the automotive industry (see Fig.  5 ).

Aspects that should be fulfilled by sustainable and natural materials in the interior. Source: Own illustration

Looking at the individual types of material, it turns out that customers would like to see more sustainable implementations in the interior, particularly for plastics (67%), textiles (52%), leather (45%) and wood (40%) (see Fig.  6 ). Especially for the first three materials, sustainable solutions are already available, as described in the previous chapter.

Materials with a high sustainability potential. Source: Own illustration

Regarding the variety of natural alternative materials, biomat-plastic (54%) and recycled material (52%) receive the highest percentages of people evaluating it as relevant or even very relevant for the interior sector. Overall, all known alternative materials such as ligneous, hemp, kenaf or sisal are well accepted by customers and the percentages for irrelevance are usually much lower for all materials (see Fig.  7 ).

Relevance of natural alternative materials in automobiles. Source: Own illustration

As an optional question, the participants were asked to decide which material they prefer for which interior component. The blue words are the result of the majority customer decision (see Fig.  8 ). The results show that the materials selected for the centre console, door trim and decorative elements are already sustainable. Other natural materials such as recycled material or natural rubber also achieve a high level of approval for individual interior components, although they do not yet represent a majority opinion.

Interior components with corresponding materials. Source: Barnes-Clay, 2012

The question whether natural materials should be more noticeable in interior design compared to conventional materials also produced a mixed response. 34% of all participants highlight that natural materials should be noticeable, whereas the same percentage disagree with this statement (see Fig.  9 ). Therefore, a meaningful picture cannot be derived.

Assessment of the perceptibility of natural materials in the interior. Source: Own illustration

The participants also answered the question whether the usage of natural materials in the interior is a long-term mega trend or only a short-term fashion trend. Only 51% of the respondents assume it a long-term mega trend, whereas the other half expect only a short fashion trend without long-lasting influence on the automotive industry. Therefore, this question can also be said to paint a much-divided picture.

The final topic is the future relevance of sustainable materials in the interior. Nearly 75% of the respondents rate the future relevance as very high or at least high, thus prophesizing an increase in meaning and relevance in the coming years (see Fig.  10 ).

Future importance of natural materials for the interior ( n  = 141). Source: Own illustration

Overall, it can certainly be seen that the issue of sustainability is present in people’s awareness. A tendency towards greater openness for new, more sustainable materials among customers of premium automobiles is recognizable. The priority for customers is that sustainability is taken into account in manufacturing and production, but not to the detriment of appearance, feel, comfort or price.

Discussion of the results

While there is an agreement in business practice that sustainability is not just a short-term fashion trend, but also a permanent indicator, this is not fully backed up by the empirical results. Only 50% of the respondents agree with this statement. The cost factor, which, according to the OEM, would have to be compensated, is an obstacle for approximately 50% of the customers. This means that for every second respondent a conflict of objectives with the OEM exists.

All participants principally agree that sustainability should play an overall role in the automobile and should not be restricted to individual areas. Although the majority of respondents chose the modules power unit and electronics, the category “everywhere” follows close behind in terms of importance. Therefore, the interior as a single module has to be integrated into the overall automotive design.

The customers also highlight that all traditional criteria connected to automobiles – especially appearance, haptics, comfort, smell, quality, safety and value – must also be fulfilled in a sustainable interior. At this point, manufacturers often see a problem. Natural materials fulfil certain properties, but others sometimes not. Consequently, manufacturers need to look more closely at this issue in order to satisfy the wishes of their customers.

As seen in the empirical study, the majority of participants can imagine a centre console made of ligneous wood or a door panel made of natural fibres such as hemp or kenaf. In addition, the topic of recycling is important for the customers. Therefore, the manufacturers should begin to work on innovative solutions regarding this topic.

The majority of customers also see an increase in the importance of sustainability for the interior on the horizon. It is therefore crucial for manufacturers to be innovative, show initiative, take advantage of emerging market opportunities and to act proactively. The focus should be on achieving first mover advantages, and it is crucial for OEMs to maintain their position as technology leaders and premium manufacturers, both in Germany and beyond. Therefore, it is imperative that premium manufacturers concentrate on the existing mega-trend of sustainability (Gelowicz et al., 2017 ; Schade, Zanker, Kühn, & Hettesheimer, 2014 ; Skala-Gast, 2012 ) and especially take more efforts on sustainable automotive interior solutions. However, all against the background that costumers accept compromises in comfort, practicality and price only to a very limit extend.

Referring to previous research in this area, the paper adds new insights to the topic of customer requirements regarding automotive sustainability in general and sustainable automotive interior in detail. The main result of the paper is to provide further details on the connection between sustainability and customer comfort in the automobile industry and to confront the needs of the customers with the challenges of the companies. This made an important contribution to the research field sustainability in the automotive industry.

The automotive industry is a prime example of small steps bringing change and contributing to a more environmentally friendly world. Suppliers are working with manufacturers to find solutions for a more sustainable interior and the importance of implementing sustainability along the entire supply chain is also well known to those involved. As a result, technological progress and the refinement of processes for the development of natural fibre products make it possible to replace products that currently pollute the environment more simply and cost-effectively with more environmentally friendly products, and at the same time to produce them in a more environmentally friendly way (Dunne et al., 2016 ; Hetterich et al., 2012 ).

This article focuses exclusively on premium manufacturers and their customers. The further research project will analyse whether there are significant differences when it comes to volume manufacturers. Furthermore, no distinction has been made between age, gender and automotive brand. Another limitation is the purposive sample of the study. The participants were mainly students, which cannot be taken as an average of the population. All of these will be explored in further research activities.

Availability of data and materials

The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.

Abbreviations

Original Equipment Manufacturers

International Automotive Manufacturers

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Authors‘information

Prof. Dr. Wanja Wellbrock is a professor for procurement management at Heilbronn University. His main research areas are supply chain management, strategic procurement management, sustainability and big data applications in cross-company value chains. He is the author of various English- and German-language publications and project manager of several practice-oriented research projects in these areas. Prof. Dr. Wanja Wellbrock gained practical experience in management positions in the automotive and aviation industries as well as in management consulting.

Since 2015, Prof. Dr. Daniela Ludin holds the professorship for general business administration at the Heilbronn University of Applied Sciences in the Faculty of Management and Sales on the Schwäbisch Hall campus. To anchor the principle of sustainability as a central moment in her courses is one of her main targets. Since 2017, Prof. Dr. Daniela Ludin is responsible for the Bachelor’s degree programm Management & Procurement Management (B.A. MBW); since 2019 also fort he Bachelor‘s degree programm Sustainable Procurement Management (B.A. NBW). Since 2015, Prof. Dr. Daniela Ludin is also a member of the Council for Sustainable Development at Heilbronn University, which she has also chaired as Sustainability Officer at Heilbronn University since 2019. Before her time at Heilbronn University, Prof. Dr. Daniela Ludin worked from 2009 to 2015 at the Rottenburg University of Applied Sciences with a professorship for law, environmental and forest policy. Her main research areas are sustainable procurement management, sustainable mobility, sustainable consumption, sustainable financial products and sustainable data management.

Prof. Dr. Wolfgang Gerstlberger is currently Professor of Operations Management at the Tallinn University of Technology (Estonia). Previously, he was Associate Professor for Innovation Management at the University of Southern Denmark in Odense and Endowed Professor for Innovation Management and SME Research at the International University Institute of the Technical University of Dresden. Professor Gerstlberger completed his doctorate and habilitation in the field of general business administration at the University of Kassel. In addition, he has led and carried out numerous innovation and sustainability projects for companies, the EU, associations and public administration organizations as a freelancer. His current research interests are in the areas of sustainable innovation and operations management, digitization and sustainable logistics.

Linda Röhrle finished her Bachelor degree in Management and Procurement Management at the Heilbronn University of Applied Sciences.

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Wanja Wellbrock and Linda Röhrle analyzed and interpreted the survey data. Daniela Ludin performed the general sustainability background and Wolfgang Gerstlberger the sustainability aspects regarding automotive interior. All authors were major contributors in writing the manuscript. All authors read approved the final manuscript.

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Correspondence to Wanja Wellbrock .

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Wellbrock, W., Ludin, D., Röhrle, L. et al. Sustainability in the automotive industry, importance of and impact on automobile interior – insights from an empirical survey. Int J Corporate Soc Responsibility 5 , 10 (2020). https://doi.org/10.1186/s40991-020-00057-z

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DOI : https://doi.org/10.1186/s40991-020-00057-z

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• Sustainability
• Automotive industry

Case Study: How Technology is Helping Automotive Manufacturers Achieve Sustainable Goals

• April 28, 2022

A digital transformation in car production is supporting manufacturers as they transit towards sustainable manufacturing.

Car manufacturers face a range of challenges globally as they strive to move towards sustainable manufacturing. Central to this is ensuring production processes remain as clean and efficient as possible while maintaining product quality and reducing wastage. Digital transformation is underpinning this as cloud-based technology such as artificial intelligence (AI) and machine learning (ML) play pivotal roles.

Accuracy and timeliness

One area where ML is supporting car manufacturers is in  reducing production line interruptions . Automotive industry specialist Richard Felton explains that ML systems can help avoid unplanned maintenance by analysing data to improve predictive maintenance schedules. “If you avoid unnecessary maintenance, you reduce costs, increase productivity, and do not have unplanned downtime,” he said. “ML not only handles the sheer scale, breadth and accuracy of the data, but also the timeliness.” The technology can also help manufacturers navigate current global component shortages. “Manufacturers are using ML to anticipate shortages and  how to handle those shortages in components more efficiently ,” he added.

Efficient component inspections

Additionally, ML supports component quality inspections using data from camera inspections to check assembly processes and sequences in terms of complexity, speed and accuracy. “The machine learning can spot anomalies that human operators might miss across millions of data points,” he added. This digital transformation is supported by companies such as  Amazon Web Services (AWS) , which as a cloud service provider, enables customers to access and manage data, scale globally and make data driven decisions in real-time using AI, ML and other advanced services. AWS services help with sustainability, digital manufacturing and supply chains and improves the overall equipment effectiveness by capturing, analysing and visualising plant floor data. The services brings all this together as a holistic solution to support the automotive industry. Felton, who is the senior practice manager,  AWS for Automotive , said the platform has purpose-built capabilities, drawing on expertise from across the automotive industry and offers the “broadest partner eco-system of any cloud specifically for automotive customers to help them transform their businesses.” We helped VW tackle that very complex operation with the digital production platform, with analytics in the cloud to help them achieve efficiency, quality and sustainability.

Automating processes with AI

In one example, the company supported a digital production platform for Volkswagen (VW), which has 12 brands operating over more than 120 sites, 1500 suppliers and 200 million parts a day entering its factories to make 11 million cars a year. “We helped VW tackle that very complex operation with the digital production platform, with analytics in the cloud to help them achieve efficiency, quality and sustainability,” saidFelton. During production, Volkswagen Group brands apply 25 different labels that contain country-specific safety, usability and specification data with over 2,000 variants. To automate this process, VW brand Porsche developed a solution using the services, which saw a manual label inspection programme replaced with an AI-driven programme to conduct the process automatically and with  greater speed and accuracy .

Providing integrated solutions

Manufacturers are increasingly looking for  integrated solutions  that combine manufacturing systems with those operated by their supply chain partners to reduce transport costs and lead to more sustainable ways to move millions of parts. In this instance, the digital platform configures route optimization and ensures correct demand forecast to reduce component waste. With a trend towards electric vehicles driven by sustainability goals and emissions regulations, computer aided engineering can support durability, crash protection, safer use of batteries and thermal modelling of advance cooling systems. The services can help customers predict and understand battery health, capacity and failures, range and weather conditions impacting battery performance. The company also works with Rivian Automotive on high-performance computing for design engineering for crashworthiness, aerodynamics and durability. “There is a significant time and cost saving by doing simulation in the cloud as it gives access to a scale that you do not have on present systems; you have almost limitless capacity to do simulations,” said Felton.

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Whether tests in the passenger car and commercial vehicle sector, vehicle camouflage, competencies in the field of electromobility, fleet management, vehicle repair centers or much more: The case studies, articles and white papers show the complexity of our services in the automotive industry and provide you with an interesting insight into our projects.

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Technical Representation C5 – A key service to assure supply chain quality

QCC Support for Yamaha Motorcycle Production in Brazil

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Increase Efficiency in Vehicle Software Management with Full Scope HIL-Management

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Comprehensive Expertise in physical and software Testing

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Commercial Vehicle Testing – Under Realistic Conditions

Article in Informel 1/2019 | Due to the rapid development of increasingly complex vehicles, manufacturers are counting on experienced partner support in the field of vehicle testing. Formel D is responsive to this environment and is continually expanding the scope of its services in this area.

Vehicle Testing 2.0

Long version of interview in OEM & Lieferant 2/2019 | Vehicle tests help ensure vehicle quality under a wide range of external conditions. Formel D supports its customers in preparing, organizing, and carrying out test runs on public streets as well as private tracks and test sites.

The right components at the right time

Article in Top Company Guide 2019 | In the summer of 2018, Formel D joined the “Retail Enabling Parts Management” (REPAM) project as a strategic partner, supporting dealers of a premium German manufacturer in optimizing their stock management processes.

Comprehensive Services for new Mobility

Article in Automobil Industrie | E-mobility, connected cars, shared mobility, autonomous driving or increasing digitalization: Based on the global trends in the automotive industry, the key to success and sustainability more than ever lies in the optimization of quality assurance processes.

Quality assurance for vehicles of all sizes

Article in OEM & Lieferant | The Formel D Group offers a comprehensive range of services along the entire automotive value chain for vehicle types of all sizes.

Electric Future – Supplier management in China

Article in customer magazine Informel | China is increasingly becoming a pioneer of electric mobility. In light of the booming market for electric vehicles, Formel D is active in the field of supplier development for various OEMs in the People’s Republic.

Professional Hotline Support

Article in customer magazine Informel | Since 2015, Formel D has been active in the fields of service management and technical support for a German premium manufacturer. The Group assists the automotive manufacturer with its comprehensive system knowledge and experience and helps to increase customer satisfaction.

Quality Confirmation Center (QCC)

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Customer service now plays an increasingly important role in the holistic consideration of the vehicle lifecycle. Proactive quality- and solution-oriented handling in this field forges a sustainable positive relationship to the brand. Formel D is aware of the importance of customer loyalty, so it now offers a similarly wide range of services in the aftersales area as it does in development and production. Service, vehicle, dealer and warranty management form the basis of the service portfolio in this segment.

Interactive Workshop Media

The time management of visits to passenger car workshops makes a crucial contribution to customer satisfaction. Complex repairs in challenging installation geometries can be very time-consuming. The law prescribes comprehensive repair instructions for each vehicle derivate, but it does not specify all of the parameters. Formel D develops easy-to-understand workshop literature with multimedia approaches and an especially high information content with the aim of supporting a convenient and effective repair process.

Pre-Delivery Inspection (PDI)

Formel D uses structured concepts for pre-delivery inspections to support manufacturers with their upstream fleet management. At specially equipped sites, the service provider processes vehicles for internal delivery. This ensures that they are in perfect technical and optical condition at all times while taking the manufacturer’s guidelines into account.

Holistic Assurance and Verification

Article in Automotive Testing Technology International | The automotive sector is characterized by progressively shorter development times and an increasing density of derivates. Also, the rising proportion of electronic components in vehicles leads to new and expanded demands for solutions in the field of vehicle, software and component tests. Formel D as an experienced partner of the automotive industry expertly maps these scopes of services in everyday virtual and real-life testing.

Quality Assurance using the E-Report

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Vehicle Management Worldwide

From the East Coast to the West, Formel D gives expert support to a German premium manufacturer in its Performance Centers in the US using its globally standardized procedures and qualified professionals.

EDI – Electric Data Interchange

Article in OEM & Lieferant | The global economy is currently experiencing a period of increased and unprecedented activity in which the worldwide exchange of goods and services gives rise to supply relationships with far-reaching economic impacts. Worldwide communication between, and integration of, suppliers is required in order to meet all present-day requirements of a corporation acting globally.

Competence center for E-Mobility

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Global supplier analysis and qualification for our customer ABB

Since the start of 2012, Formel D has been lending its support to the global group, ABB, to develop its suppliers. Engineers and quality managers employed by the service provider ensure on-time delivery in line with agreed quality standards.

Processing of show cars for Volkswagen

For the second time in succession, Formel D was responsible for smooth procedures and a perfect optical impression of the show cars at the 9th Group After Sales Conference (GASC) held by Volkswagen. The Formel D team offers a complete solution for this purpose, including logistics management, individual processing, subsequent quality checking and support during the days of the fair.

Innovative production processes and future-oriented technologies

The Formel D Group supplies a German premium manufacturer with various quality-assuring service tools to ensure an optimum production process in vehicle manufacture.

Packaging Management – Perfectly packaged

For 18 years Formel D has been working in the field of packaging manage- ment. The premium service provider specifies, constructs, improves and tests packaging materials and develops packaging concepts for the after sales sectors of Opel/GM and BMW.

Preparation of show cars for BMW

At the Leipzig car show, BMW gave its visitors a few moments that were literally illuminating. They were made possible by the vehicles’ special interior lighting system – which was installed by Formel D. It’s just one of the many services that the service provider offers in its CARing. portfolio.

Tracing errors and preventing new ones

Guarantee and warranty costs burden the automotive industry worldwide swallowing up tens of billions. They are a clear indicator that further improved processes and controls need to be established. The Formel D Warranty Solution Center (WSC) offers solutions for cost reduction and quality optimisation along the entire process chain.

Problem solving – made easy

In order to constantly improve the quality of serial production processes, the automotive industry relies on the standardised problem management process (PMP). BMW conferred the search and identification of possible error patterns also to the Formel D Group.

On board from the beginning

It was 18 years ago that the foundation was first laid for the creation of customer and workshop literature and the determination of labour time for Opel AG. Since 1997, Formel D has also been responsible for serviceability tests and other coordinating activities in the GM After Sales division. Today, Formel D is in charge of projects in these areas for GM/Opel all over the world.

Interview literature and serviceability

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Formel D opens RMC – Refining Manufacturing Center

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Five trends transforming the Automotive Industry

The mobility of the future is “ eascy”  – electrified, autonomous, shared, connected and “yearly” updated. In this study, we describe the factors influencing the sector leading up to 2030 in the key US, Europe, and China markets. It also describes how the automotive industry should restructure itself in terms of volume, scale, and complexity.

Through mathematical modeling of key performance indicators and demographic trends, the paper discusses:

• Mobility behaviour of users through social personas and how they could influence traffic demand;
• External factors that will influence mobility habits, vehicle mileage and frequency of usage;
• Predictions of car inventory, replacement cycles and new sales; and
• Implications for manufacturers, suppliers, service providers and their business models. 

Electrified  – the transition to emissions-free mobility will become a global requirement. Electricity used to charge vehicles will increasingly come from renewable sources to ensure carbon dioxide-neutral mobility.

Autonomous  - The development of vehicles which require no human intervention will reduce the use of public mobility platforms and offer individual mobility to new user groups.

Shared  – Professionally managed fleets of shared vehicles will reduce the cost of mobilty by a significant amount through more efficient use of expensive mobile assets.

Connected  – This applies in two ways: communication between cars or with traffic management infrastructure or between vehicle occupants and the outside world. The car of the future will become a “third place” between home and workplace, combining features of both. 

‘Yearly’ updated  – The range of models will be updated annually to integrate the latest hardware and software developments, and react to changing requirements of shared fleet buyers.

Our mobility habits will change 

The percentage of shared and autonomous mobility in overall road track will rise significantly.

Our forecasts suggest that by 2030, more than one in three kilometres driven could already involve sharing concepts. At the same time, user preferences will move more towards autonomous mobility. We calculate, based on mileage, that by 2030, the share of autonomous driving in overall traffic may rise to as much as 40%. Developments in Europe and the US are expected to happen at a roughly parallel pace. In China, by contrast, the proliferation of shared and autonomous mobility could happen faster than in the Western world. This would make China the leading market for the transformation of the automotive industry. 

Effects on the automotive value chain

The comprehensive and rapid reorganisation of the automotive sector after 2025 will have far-reaching consequences for the entire industry and its value chains. Elementary structures and attitudes will have to change fast in order to cope with the developments by 2030 and beyond.

If they want to remain successful, both manufacturers and suppliers will have to offer user-oriented innovations. All these trends are likely to become increasingly apparent between 2020 and 2025 – which means that these are decisive years for manufacturers and their suppliers.

Download report (4.2mb) Five trends transforming the Automotive Industry

Related content, the automaker’s dilemma: getting more impact from innovation capital.

The current wave of auto innovation has emerged with remarkable speed: new safety features, connectivity gadgets, and real progress toward bringing autonomous...

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ServiceNow | Automotive industry case study

Putting the client in control

The Backstory

A major automotive manufacturer had spent a number of years outsourcing its service management capabilities and IT service desk. However, the services they were getting were not meeting quality nor cost expectations, and it became evident that they needed to take more control of the processes themselves. While they could outsource these services, it was their responsibility and management that would provide the most value to their organization.

As the contract with their provider was coming to an end, the client decided to take control of these functions themselves, building out an overall service management organization. Ultimately, this shift would unify their people, process, and tools. The aim was to create a brand new platform that would improve the existing level of customer service, streamline support tasks, and place responsibility for the performance of IT back into their hands. 

The Challenge

We were brought in to assess the service management plans the client already had in place, discover what would be needed to enhance them, and create a transition road map that aligned with their priorities. As their previous contract drew to an end, the client faced the prospect of not having an ITSM platform in place. This was not an option: The deadline for the transition was fixed and had to be met. We began in February and needed to go live by July. This left no margin for error to successfully implement ServiceNow across six different IT process areas and for about 1,500 IT users in North America. A project of this size would typically take a year to complete, but we dove right in!

Our Approach

Achieving their objectives required a significant amount of “jump-start” tools and an agile development approach. KPMG brought both. We decided to gather and respond to requirements from the client in real time. Instead of building the platform all at once, we began with identifying the client’s needs, prioritizing them, and developing solutions for them as they came in. We started with our view of critical functionality and leading practice and then confirmed what the client’s absolute “must-have” capabilities were. We challenged the status quo with new ideas and ways of thinking. We then underwent a 12-week sprint cycle to make those key protocols functional, providing regular views of the build through “show-me” sessions and adjusting priorities as needed. Around all this, we supported organizational change, training, and testing activities to help ensure adoption despite the aggressive time line. Once the basic processes were complete, we then introduced elements that we knew could support that infrastructure. This would test our flexibility, experience, and capabilities to the fullest.

The Results

By the end of the project, we had deployed a true platform to run the IT business. The solution included the configuration of six core ServiceNow applications, service catalogue of over 70 services for end-user consumption, over 150 reports including a custom view of “business disruption”, and a configuration management database with 20 CI classes and over 60,000 CI records. The solution provided an improved experience for their users. It gave the client a detailed map of their applications and infrastructure, helping them understand impact, potential, and relationships. It provided levels of consistency and automation that they had not seen before. We were then able to start passing control to the client, helping them build out an ITSM governance structure and allowing them to manage the system themselves, enhancing it to their needs as they evolved.

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The Indian automotive industry: From resilience to resurgence?

Automotive is one of the core sectors of the Indian economy and, to a great extent, serves as a bellwether for its current state. An ominous fall in commercial-vehicle (CV) sales foretold impending economic challenges in both 2012 and 2019, while a steep rise in passenger-vehicle (PV) and two-wheeler (2W) sales was a harbinger of good economic news in 2010.

The manufacture of transport equipment accounts for 10 to 12 percent of the gross value added (GVA) within India’s manufacturing sector. 1 As reported by the Reserve Bank of India and the Government of India. Any decline in that area significantly hurts India’s economic outcomes. Employ­ment is also hard hit when vehicle sales fall, since the automotive sector provides 37 million direct and indirect jobs while stimulating job creation in other industries.

While the Indian automotive industry has faced many recent challenges , including the devastating COVID-19 pandemic, its growth potential is clear. In fact, the sector is expected to account for 65 million new jobs within India by 2026 as compa­nies increase production. 2 National Automotive Mission Plan 2016–26 (AMP 2026), Government of India and the Society of Indian Automobile Manufacturers. To help domestic and international players in India capture new opportu­nities as the market expands, we examined the current state of the country’s automotive sector and identified imperatives and enablers for success.

Past challenges and the potential for growth in the Indian automotive industry

What started as a small fire in September 2018—a dip in sales of CVs after the regulatory change in the axle-load norms—turned into a full-blown conflagration, at a scale not experienced in the last two decades, as fundamental economic challenges roiled the Indian automotive industry. Credit availability fell, demand slowed (especially in infra­structure and mining), and discretionary spending dropped, all of which contributed to a decline in auto sales. In early 2020, just as the industry was expected to recover, the COVID-19 pandemic introduced challenges that hurt demand and inter­fered with the automotive industry’s deeply intertwined supply chains.

More recently, however, the situation has looked brighter. In late 2020, government travel restrictions eased, India’s harvest was good, and the festive season stimulated demand in some high-volume seg­ments. Both 2Ws and PVs showed a recovery in month-over-month sales during that time (exhibit). 3 VAHAN (Ministry of Road Transport & Highways, Government of India).

Despite the ongoing challenge of COVID-19, the Indian automotive industry seems to be overcoming most of its challenges, and many are now in the rearview mirror.

Despite the ongoing challenge of COVID-19, the Indian automotive industry seems to be overcoming most of its challenges, and many are now in the rearview mirror. The sector is also benefiting from new tailwinds, such as global supply-chain rebalancing, government incentives to increase exports, and technology disruptions that create white spaces. These developments will help create opportunities at all levels of the automotive value chain.

Industry participants are now beginning to see a clear highway, where they can push on the gas, accelerate, and go into a higher gear. From our research, we have distilled a set of imperatives and enablers that industry participants must understand as they attempt to fast-track their value-creation trajectories.

Imperatives for the Indian automotive industry

Three imperatives are crucial for successful companies: pursuing growth, increasing resilience, and striving for leadership by promoting disruptive trends.

Focusing on domestic, international, and downstream growth

Growth is oxygen for any business, more so if the industry is coming out of a challenging phase. For that reason, players in the Indian automotive industry should consider pursuing all promising opportunities.

The domestic market. While first-time buyers have long dominated the Indian automotive market, the focus is shifting to repeat customers. With the government bringing out a revamped scrappage policy, the resale market may become even more important. If automakers want to concentrate on repeat buyers, they must develop new strategies to facilitate the resale of existing vehicles across categories. Already, some start-ups have attempted to simplify and improve the process of buying and selling used cars. If automakers proactively shape the resale landscape, they could help revive urban demand.

Indian automotive players should also attempt to bring value-seeking customers back into the market. This segment shrunk because the Indian govern­ment’s Bharat Stage VI emissions norms increased prices by about 7 to 9 percent for 2Ws and 3 to 5 percent for cars. To lower the upfront cost of owning a vehicle, automakers should consider embarking on a new wave of productivity transformation.

Automakers can innovate by creating alternate ownership options for prospective customers. Simultaneously, they can open additional avenues for new customers to enter the market. Some automakers now offer leasing options , especially in the PV segment, but their offerings have narrow limits for vehicle type, lease duration, and other features. As millennials’ mobility needs evolve and move away from direct ownership, the development of better leasing options will become imperative within the domestic market.

With digital channels gaining popularity among India’s consuming classes, automakers must develop direct-to-customer options. A best-in-class digital and analytics transformation can also help leaders differentiate themselves from the competition.

With digital channels gaining popularity among India’s consuming classes, automakers must develop direct-to-customer options.

International opportunities. International markets, especially those in Africa that are similar to India, are experiencing a rise in per-capita GDP and reaching the levels at which automotive sales tend to expand significantly. Indian companies have already navigated this transition at home and can follow the same script to succeed in international markets. By expanding inter­nationally, Indian automakers will increase growth and sales volumes while diversifying risks and reducing demand cyclicality.

When expanding internationally, Indian automakers will not have to start from scratch. Their brands already have a strong global presence in certain segments, such as 2W and 3-wheeler (3W), and they have learned from this experience. Indian products, with their high customer value and functional quality, are likely to offer a strong fit for emerging-market customers. Traditionally, Indian automakers have only pursued international opportunities sporadically. Now, however, they should double down on select international markets and invest in expanding their brand, distribution, and service reach to build a lasting franchise.

This may be the best opportunity for Indian automotive suppliers  to expand internationally in decades because of recent tailwinds. As global automakers rebalance their supply chains, they are looking for sourcing hubs outside China. Simultaneously, the Indian government is offering production-linked incentives, totaling $7.5 billion over the next five years, to encourage exports. Automotive suppliers can leverage their strengths, including their competitive costs, process expertise, high quality, and innovation focus, to pursue international growth and leverage the recent tailwinds. Many Indian companies have already done so successfully. For instance, exports account for about 60 percent of revenues at the leading forging player and between 20 to 40 percent at many tire companies. With production-linked incentives continuing, more companies could achieve similar results.

Downstream value chain. Expanding into the downstream value chain could provide an additional avenue of growth for Indian automotive companies. On average, the upfront cost of a vehicle only accounts for 20 to 25 percent of lifetime ownership costs. Other major components include fuel, service, financing transactions (such as vehicle loans and insurance), and resale value.

Globally, some OEMs have already ventured into these downstream-value-chain elements through new businesses, such as BMW’s Secure, which offers finance and insurance services. Others have pursued partnerships, such as Ford’s agreement with Geotab, which allowed it to enter the vehicle-data value chain. Even in India, there have been some early experiments in downstream ventures, such as Service Mandi from Ashok Leyland and True Value by Maruti Suzuki. First movers in this space have an opportunity to shape a digitally enabled downstream ecosystem that provides a one-stop solution for various customer needs, including scheduled service, breakdown service, resale, and purchase of personalized accessories. Such comprehensive solutions would create a best-in-class ownership experience.

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Achieving greater resilience in operations, especially the product, manufacturing, and supply-chain dimensions.

The last couple of years have laid bare a simple fact: operational efficiency must be matched with operational resilience. A McKinsey study  has estimated that supply-chain disruptions, some lasting over a month, could occur every 3.7 years across industries. Amid such uncertainty, com­panies will need operational resilience across the entire value chain, especially within product development, manufacturing, and supply chain.

To increase resilience, automakers should under­take a thorough review of their product portfolios to make them more customer-centric. They should also reduce the number of product variants to become more focused. In addition, automakers should reexamine their product-platform architectures and strive to reduce complexity by emphasizing modular product designs. This strategy can reduce part counts by 20 to 30 percent and improve the cost base by decreasing material costs by 6 to 8 percent. One leading Indian car manu­facturer already has more than seven of its car models and over 60 percent of its sales volume on one platform. Other automakers should aim to cut the number of their vehicle platforms by half or more to achieve lower cost structures and faster time-to-market with new products.

As the manufacturing and supply-chain philosophy expands from being just-in-time to just-in-case, companies can win by embedding digital and ana­lytics into their operations. In addition to reducing inefficiencies, this strategy will help companies build the robustness and resilience needed to respond to unpredictable external challenges. Globally, auto­makers are moving very fast to incorporate digital and analytics into their daily work. Consider Volkswagen, which has embarked on a massive Internet of Things and cloud-enabled digital transformation of production and logistics across its 124 plants globally.

As the manufacturing and supply-chain philosophy expands from being just-in-time to just-in-case, companies can win by embedding digital and analytics into their operations.

Becoming a leader by promoting disruptive trends, especially within emerging markets

The mobility landscape will fundamentally transform over the next ten to 15 years, with ACES trends —autonomous driving, connected cars, electrified vehicles, and shared mobility—amplifying their impact. The evolving landscape presents a perfect opportunity for Indian automakers to lead the disruptive changes occurring across segments and gain a competitive advantage.

Today, only about 2 percent of new vehicles sold globally are electrified. The opportunity ahead is much larger, and the winners and losers are yet to be decided. Indian players can become homes for innovation, both domestically and in similar markets abroad, supplying complete products, aggregates, or components worldwide. In traditional micromobility segments (2W and 3W), Indian players can be the global leaders from day one. For PVs, such as cars and SUVs, and light CVs, Indian players can win by following the frugal design requirements essential for emerging markets.

Industry disruptions also create a huge opportunity for automotive suppliers to double down on building a strong position in the global EV supply chain. That will help suppliers gain additional revenues—an important consideration, since most have started to tap out opportunities in the local Indian market. A move into EV will also help suppliers diversify their portfolios and reduce risks related to market demand.

The ACES disruptions may prompt global auto­makers to reassess India’s position in their global priorities. In addition to increasing sales within the country, they may see new opportunities to turn India into a global manufacturing center. Some leading multinational automakers, including Ford and Volkswagen, are already ramping up their exports play and increasing the scale of their Indian operations to sell more products from those facilities abroad.

The unexpected trip: The future of mobility in India beyond COVID-19

Enablers for the indian automotive market.

Three enablers are essential in helping automakers to succeed in the evolving Indian automotive landscape.

Reimagining the partnership ecosystem

The days of going it alone are limited, since the increasing threshold of required investment often necessitates pooled resources. Companies may also find that they can access new customer seg­ments by working with other companies that offer complementary products in areas that their current portfolio does not cover. Likewise, automotive players can benefit from working with partners with complementary capabilities or by sharing the risks associated with certain ventures.

Globally, automakers are reimagining their strategic partnerships to up their game across all the imperatives described above. Some are working at the product level, as GM and Honda are now doing with EV platforms and battery technology. Others are focusing on manufacturing or supply-chain management, as seen in the partnership among Volkswagen, AWS, and Siemens.

As Indian automotive players pursue new partnerships, they should clearly establish their core strengths (the “gives” from their side), as well as the areas where strategic partnerships will be helpful (the “gets” from the partners). They can then move from engaging in transactional relationships to forming “win–win” partnerships with long-term benefits.

Building the organization of the future

Automotive organizations have traditionally had a vertical functional structure with a clear hierarchy and reporting lines. That has served their needs very well for many decades, but it is increasingly creating bottlenecks and preventing companies from being nimble and agile in the face of change. In fact, many business experts claim that companies in other industries should not follow the example of auto­motive organizations, since their siloed structures slow them down.

For best results, automakers should reimagine their organization by developing two end-to-end systems for critical processes: A Product-Creation and Development System (PCDS) facilitates the product-development process from conception through vehicle development for production-ready models. A Customer-Value Delivery System (CVDS) provides a complete operational framework for all processes, from manufacturing to sales and service, thereby reducing siloes and building agility.

Automakers must also build a talent-to-value (T2V) view at each level of the organization by identifying the most critical roles and staffing them with top employees. Although this sounds simple, most orga­nizations fall into the trap of using hierarchy, relationships, or intuition to make decisions about the appropriate talent for different roles . Organizations should move from these heuristics to more scientific and quantifiable T2V measures to identify and fill the most critical roles. To help employees build the capabilities needed in critical roles in the future, companies should create data-based, individualized leadership development plans that are connected to their business objectives.

The focus on developing new systems combined with a T2V view may help companies leapfrog to the next level of performance and successfully execute all their major imperatives.

Transforming the organization through digital and analytics

Digitization and advanced analytics are already enabling unprecedented productivity improvements and increasing the focus on customers. Most leading automotive organizations have articulated a bold aspiration for unlocking real bottom-line impact from these technologies and have created a CXO-level role to drive the transformation.

The first wave of change for automakers is underway. Leading companies get 20 to 30 percent more customer enquiries in their sales system by engaging in targeted digital marketing and partnering with digital platforms to generate leads. They are also deploying advanced analytics to create personalized sales pitches in real time, increasing lead conversion by 5 to 10 percent. Globally, innovative brands such as Tesla and Lynk & Co view digital channels as their future, as opposed to the traditional brick-and-mortar channel. Closer to home, a leading car brand announced a massive increase in digital enquiries—approaching 2 million—and a significant gain in digital sales to levels over 200,000 over the past 18 months.

Automotive suppliers have traditionally leveraged technology much more on back-end operations, with many use cases focusing on enhancing yield, energy efficiency, quality, and throughput in their plants. They have also used technology to make smarter, system-driven decisions on production and supply-chain planning. Now, however, automotive suppliers should undertake an end-to-end digital and advanced-analytics transformation that focuses on business impact rather than technology.

It should have a user-centric design and involve selective investments in critical talent, including tech specialists. To avoid unnecessary delays, companies should adopt an agile approach when developing and testing digital and analytic use cases.

The automotive sector will play a central role in India’s aspiration to become a $5 trillion economy. The recovery from the COVID-19 crisis has created a unique situation in which automakers can reinvent their industry and emerge stronger, both within India and globally.

Brajesh Chhibber and Nitesh Gupta are partners in McKinsey’s Gurgaon office.

The authors wish to thank Gandharv Vig for his contributions to this article.

This article was edited by Eileen Hannigan, a senior editor in McKinsey’s Waltham office.

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Cox automotive 2024 path to ev adoption study suggests electric vehicle consideration will surge in second half of decade.

Tuesday May 14, 2024

Article Highlights

• The switch is coming: Many EV Skeptics will become Considerers in the next three to five years.
• Consideration dips, even as EV demographics shift and become more mainstream.
• Dealers and automakers are fostering a more balanced, strategic relationship to accelerate EV adoption.

ATLANTA, May 14, 2024 – A second, significant wave of shoppers ready to consider buying an electric vehicle (EV) is poised to begin entering the market in the second half of the decade, according to the latest findings from the 2024 Path to EV Adoption Study by Cox Automotive. The findings indicate that nearly half of all vehicle shoppers in market today are not even considering an EV – a group the study identifies as Skeptics , shoppers who are only considering vehicles powered by traditional internal combustion engines.

But the Skeptics are coming, the study suggests. As technology improves, the U.S. charging network expands and prices moderate further, 54% of current Skeptics will become EV Considerers within three to five years. Within the next ten years, 80% of today’s Skeptics will be ready to consider an EV as more barriers fall.

Last year, EV sales in the U.S. market surpassed 1 million units for the first time, according to sales estimates by Kelley Blue Book, a Cox Automotive brand. Sales growth continues, albeit slowly, and electric vehicle prices continue to decline, thanks mostly to higher incentives and drastic price cuts by market leader Tesla. Still, EV consideration has waned in the U.S. after peaking in 2022. The latest study from Cox Automotive suggests the recent drop in consideration and slowing of EV sales growth is likely a shift in market dynamics as EV sales enter a new phase of development.

“While we’ve seen EV sales growth slow and consideration dip, we believe this is part of a normal growth curve and not the end of the story,” said Isabelle Helms, vice president of Research and Market Intelligence at Cox Automotive. “We remain bullish on the long-term future of EV sales in America, as many Skeptics today will be carefully considering an EV by the end of the decade. With more infrastructure, education, and technological innovation and improvements, we believe electric vehicle sales will continue to grow in the long term.”

Key findings from the 2024 Path to EV Adoption Study by Cox Automotive include:

EV Skeptics – The Next Wave Is Coming

The Cox Automotive 2024 Path to EV Adoption Study suggests a second wave of EV Considerers is preparing to enter the market. The study projects EV consideration will notably increase in three to five years, with 54% of current Skeptics expected to become active EV Considerers. Within 10 years, 80% of today’s Skeptics will have become EV Considerers. By that time, most vehicle shoppers – looking at both new and used vehicles – will be actively considering an electric vehicle.

As Skeptics slowly become Considerers, overall EV consideration in the U.S. is forecast to increase dramatically. Currently, only 45% of consumers in market for a vehicle within the next 12 months say they are considering an EV, down from last year when 51% of in-market shoppers were looking at EV options. In the 2026-to-2028 timeframe, research suggests that 79% of vehicle shoppers (both new and used) will be considering an electric vehicle. By 2033, 90% of all vehicle shoppers will have electric vehicles on their lists.

The expected shift is being driven largely by expectations for significant technological advancements and a notable improvement in the available EV charging infrastructure. Many current-market Skeptics are waiting for better range, longer battery life, improved reliability and overall technological advancements. Current-day Considerers often note “price” as the top barrier holding them back from purchase. On the other hand, Skeptics consider the “lack of charging stations” the top barrier.

Demographics Shift as EVs Become More Mainstream

The new research from Cox Automotive also suggests that the EV market is slowly becoming more mainstream. While current EV ownership is heavily tilted toward luxury and high-earning households, the study shows the EV market is casting a wider net, attracting Gen Z, multicultural and less-affluent shoppers. The market is also seeing a notable uptick in used EV consideration. In 2021, 62% of EV Considerers were looking at used EVs. Today, 77% are considering used electric vehicles.

While Tesla continues to be far and away the most considered EV maker, many mainstream brands are making inroads. The new report shows that electric vehicles from Toyota, Hyundai and Kia have experienced notable increases in awareness and consideration since 2021. Meanwhile, Ford continues to be the most-considered EV maker not named Tesla. Still, apart from Tesla, a majority of vehicle shoppers are not even aware of EV offerings from other major automakers, the Cox Automotive study reveals, suggesting many shoppers are not researching EV products. For example, only 33% of vehicle shoppers – consumers in market for a product – have awareness of EV offerings from Nissan, a brand that helped pioneer EV sales in the U.S. market.

A More Balanced Partnership Between Dealers and Automakers

The new study from Cox Automotive also documents the improving relationship between dealers and automakers when it comes to selling and servicing EVs, a partnership that has become more strategic and balanced since 2019.

Dealerships report that they have enjoyed increased support in marketing, sales and service since 2019 but express a need for additional resources beyond training in selling EVs. More EV incentives are high on their list, as are programs like free maintenance and funds for additional advertising. Dealers also feel the urgency to sell: 65% of dealers report feeling pressure from their automakers to hit EV sales targets, up from 39% in 2019. Luxury dealers are more likely to feel higher pressure.

Still, the research also demonstrates the level of commitment that dealers have to selling EVs. Among franchised dealers, 86% say they are likely or somewhat likely to continue making investments required by the automakers. With this commitment to continue investing in EV infrastructure, dealers are signaling a collaborative effort to accelerate EV adoption.

Background and Methodology

The 2024 Path to EV Adoption Study by Cox Automotive assessed the current landscape and prospects of electric vehicle (EV) adoption in the United States. The research was undertaken in Q1 2024 and included a nationally representative sample of 2,557 American vehicle shoppers and 526 dealers to understand their perceptions, preferences, and attitudes toward electric vehicles. The methodology was structured to capture a broad spectrum of demographic variables, including age, income, geographic location, and current vehicle ownership, to ensure the findings accurately reflect the diverse landscape of the American consumer base.

The findings from the 2024 Path to EV Adoption Study provide a comprehensive overview of the current state and future trajectory of EV adoption, offering valuable insights for consumers, dealers, and automakers alike as they navigate the transition toward a more sustainable automotive ecosystem. Download the study summary and an infographic .

About Cox Automotive

Cox Automotive is the world’s largest automotive services and technology provider. Fueled by the largest breadth of first-party data fed by 2.3 billion online interactions a year, Cox Automotive tailors leading solutions for car shoppers, auto manufacturers, dealers, lenders and fleets. The company has 29,000+ employees on five continents and a portfolio of industry-leading brands that include Autotrader®, Kelley Blue Book®, Manheim®, vAuto®, Dealertrack®, NextGear Capital™, CentralDispatch® and FleetNet America®. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately owned, Atlanta-based company with $22 billion in annual revenue. Visit  coxautoinc.com or connect via  @CoxAutomotive  on X,  CoxAutoInc  on Facebook or  Cox-Automotive-Inc  on LinkedIn.

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Evaluation of online job portals for HR recruitment selection using AHP in two wheeler automotive industry: a case study

• ORIGINAL ARTICLE
• Published: 12 May 2024

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• S. M. Vadivel   ORCID: orcid.org/0000-0002-5287-3693 1 &
• Rohan Sunny   ORCID: orcid.org/0009-0002-2347-3081 2  

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Automotive companies are booming worldwide in the economy. In order to sustain in the highly competitive world, every organization tries to create itself a trademark in the market. In our research, we looked at how two wheelers automotive company's selection enhances an organizational performance, which ensures the company's future growth. In today's fast-paced, globally integrated world, human resources are one of the most important production variables. It is critical to preserve and improve economic competitiveness by properly selecting and developing these resources. The main aim of this study is to identify the best online job portal website for recruitment at Two Wheeler Company and to suggest an HR strategy which resonates company’s values and culture. In this study, we have selected 6 criteria and 6 online popular job portals for recruitment with a sample of 15 candidates have been selected. Findings reveal that, AHP method has significant results on the selection of best employer, which helps HR Manager to finalize the decision making process/strategies. Towards the managerial implications section, the researcher aims to design an functional and effective HR strategy that can grasp, engage and retain the top talent in the organization.

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Assessment of Factors Influencing Employee Retention Using AHP Technique

Evaluating E-Recruitment Data Quality in Employee Hiring Process

Human Resources Marketing and Recruiting: Introduction and Overview

Availability of data and material.

'Not applicable' in this section.

Abbreviations

Analytic hierarchy process

Artificial intelligence

Analysis of variance

Chief Human Resources Officer

Consistency index

Curriculum vitae

Consistency ratio

Decision making

Faculty Development Programme

Hierarchical linear modelling

Human resources

Research and Development

Randomized index

Structural equation modelling

Search engine optimization

Triple bottom line

Technique for order preference by similarity

Maximum Eigen value

The normalized value of ith criterion for the jth alternative

The normalized value of jth criterion for the ith alternative

The number of alternatives for a certain MCDM problem

The number of criteria for a certain MCDM problem

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Acknowledgements

The authors would like to express their gratitude to two wheeler Automotive Industries in Chennai, Tamil Nadu, India, for their invaluable assistance and cooperation. We greatly acknowledge Ms. Ruchi Mishra, Research scholar from NIT Karnataka, for editing this manuscript in better form.

There is no funding provided in this research.

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S. M. Vadivel

Vellore Institute of Technology Chennai, Vandalur-Kelambakkam Road, Chennai, 600127, India

Rohan Sunny

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S M Vadivel: Methodology, Writing—review & editing, Supervision. Rohan Sunny: Data Curation, Writing—original draft preparation.

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Correspondence to S. M. Vadivel .

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This manuscript has a research study involves human participants (Interview Candidates) for studying job portal evaluations in Indian two wheeler company running in Chennai, Tamil Nadu.

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Vadivel, S.M., Sunny, R. Evaluation of online job portals for HR recruitment selection using AHP in two wheeler automotive industry: a case study. Int J Syst Assur Eng Manag (2024). https://doi.org/10.1007/s13198-024-02358-z

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Received : 04 December 2023

Revised : 07 April 2024

Accepted : 25 April 2024

Published : 12 May 2024

DOI : https://doi.org/10.1007/s13198-024-02358-z

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Asset management, / report, ai and the next wave of transformation, global asset management report 2024.

By  Dean Frankle ,  Alex Belyakov ,  Johannes Burkhardt ,  Joe Carrubba ,  Peter Czerepak ,  Lorraine Felix ,  Paul Hutchinson ,  Bingbing Liu ,  Maitreyee Malpekar ,  Michele Millosevich ,  Kedra Newsom Reeves ,  Edoardo Palmisani ,  Ian Pancham ,  Neil Pardasani ,  Ella Rabener ,  George Rudolph ,  Lior Valitsky ,  Andrea Walbaum , and  Ivana Zupa

The global asset management industry’s assets rose to nearly $120 trillion in 2023, reverting from a decline the year before. However, asset managers are facing a variety of challenges to their growth. Investors are gravitating to passively managed funds and other products that have lower fees even as asset managers’ costs increase. Their efforts to create new products that would differentiate them from competitors have largely fallen short, with investors sticking mostly to established products with reliable track records. Historically, the industry has been able to weather these pressures thanks to revenue growth that has been largely driven by market appreciation. In the years ahead, however, market appreciation is expected to slow, creating further challenges to the industry.

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