Product creation

Automotive product creation is more than ever a game of high stakes: OEMs and suppliers invest about 4% of sales in R&D. Yet only one-fifth of investments result in successful and profitable innovations that set a company apart from the competition. Furthermore, key challenges such as meeting regulatory demands by developing environmentally friendly, more fuel-efficient and increasingly safe vehicles require new technologies, competencies and processes. This calls into question the way R&D has been organized along the automotive value chain for decades.

We support our clients in facing these challenges by identifying strategic issues and developing actions to align automotive product creation with today's global market and technology trends.

Automotive product creation is more than ever a game of high stakes: OEMs and suppliers invest about 4% of sales in R&D. Of this, 20% is necessary nowadays just to keep up with legislative requirements. Over 40% of investment will never reach series production and only 20% will result in successful and profitable innovations. Considering the ever-increasing number of models and variants to be supported, this alone puts a lot of pressure on management, not to mention the challenges of the near future.

Powertrain electrification

One of today's key challenges for the automotive industry is developing environmentally friendly, more fuel-efficient or even zero-emission vehicles to meet the increasingly stringent emission regulations worldwide. This includes lightweight construction and new powertrain technologies employing electric motors, new battery concepts and fuel cells, as well as the advancement of alternative fuels.

Serious efforts in powertrain electrification are underway. The main question is not if, but when (nearly) zero emission vehicles will penetrate the market. For the most part, technical issues for battery and key electrical components have been resolved, but major challenges remain regarding cost, infrastructure and regulations. This will determine how fast the market will develop.

However, it is clear that powertrain electrification will reshape the current mobility value chain, forcing consolidation and new partnerships as well as opening up new revenue and profit pools for existing and new players. The future will be decided on four major battlefields, most of them heavily influenced by industrial policy:

1. High-power and high-energy batteries (a market worth EUR 10-30 bn by 2020): While Western companies such as Phostec Lithium (Süd-Chemie), 3M, BASF and others have a strong position in active battery materials, players from Japan and Korea dominate cell manufacturing. And Chinese players are fast closing the gap, leveraging extensive government support and unique access to critical raw materials. Because of the massive R&D and CAPEX needs, fast consolidation is likely, with probably fewer than ten companies dominating cell manufacturing by 2020.
2. Equipment for battery cell manufacturing (a market worth EUR 3-8 bn by 2020 for automotive applications alone): This market is currently dominated by Japanese and US manufacturers. Due to the high automation of cell manufacturing, European countries such as Germany can participate only if their companies are able to leverage their expertise in precision engineering.
3. Electric motors/e-machines (a market worth EUR 4-9 bn by 2020): Incumbent manufacturers are today's technology leaders. However, they face a major threat from Chinese newcomers who have better access to the rare earths needed for electric motors that rely on permanent magnets. Suppliers from triad markets therefore need to increase their efforts to develop alternative technical solutions and must not lose that business.
4. Energy, infrastructure and additional services (electricity alone
   is a market worth EUR 2-10 bn by 2020, plus several times that in additional revenue opportunities): Utilities all over the world are currently jockeying for position – and are being challenged by new players such as Better Place. These newcomers are taking advantage of global reach and investing heavily in additional services and new technologies to increase customer value. OEMs need a clear strategy to participate here as well, so as not to be marginalized by a long-term shift from selling cars to providing mobility services.

Companies need to define a robust strategic roadmap to benefit from the upcoming changes. A structured approach is necessary to answer the five most important questions:

1. Evaluate the strategic importance of the topic for yourself – How aggressive do we need to be to enter this field?
2. Assess your resources – How much can we afford to put into this new market?
3. Synthesis: Define your general strategic roadmap – Where is our technology focus and what is our implementation plan?
4. Define your position in the new electric mobility value chain – Where should the future focus of my business be? Are there opportunities for creating additional value?
5. Adapt your current business – Where do we need to reallocate resources?

The challenges are daunting, but the potential rewards are enormous. There is no better time to start the change than today!

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Car-to-car and infrastructure networking

Another rapidly evolving area is safety. Increasingly stringent regulations require innovative driver and driving assistance systems, integrating passive safety features with the intelligence of active safety applications. And further technology convergence is on the way. To avoid accidents, reduce energy consumption and manage traffic flows more effectively, vehicles are increasingly seen as part of a larger system. They will communicate with each other and with the environment to make transportation of the future safer and more efficient without slowing it down.

New material technologies in the automotive domain

While these trends already require major shifts in competency profiles, the breakthroughs of the next decade will be achieved by applying emerging sciences such as nanotechnology to the automotive domain. This will put further strain on R&D.

Low-cost cars

Besides all the efforts to develop high-tech cars, the increasing demand for low-cost cars needs to be addressed as well. Realizing that these segments cannot be served simply by stripping down existing products, OEMs and suppliers are struggling to employ technologies appropriately in dedicated vehicle concepts.

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OEM and suppliers are responding to these challenges by refining their product roadmaps plus their make-or-buy and partnering strategies on a global scale. Core competencies and research networks are redefined and value chains adapted accordingly.

Lastly, the cost and value-for-money challenge is becoming even tougher. While delivering innovative solutions for future transportation needs, automotive players need to keep a constant focus on cost improvements – making cost innovation another top priority. We support our clients in analyzing the impact of future technologies and market drivers, and taking the right actions concerning product and technology portfolios, competency mix and R&D organization. We take a holistic view that combines a business perspective with sound engineering judgment.

Our mission: to help our clients master these challenges

In close cooperation with our clients, we tackle strategic issues and implement operational solutions. More than 150 experienced automotive consultants located at 23 offices worldwide provide up-to-date expertise in diverse fields and markets, guaranteeing the right mix of competencies for your project.

In our projects, we have advised international automotive OEMs, suppliers and financial investors on a wide range of topics. Recent projects included technology-related growth strategies, product and technology portfolio strategy development, core competency alignment, product optimization and engineering efficiency management, as well as globalizing engineering organizational structures.

We strive to remain at the forefront of the industry by continuously conducting top-notch research and studies on key industry issues.

One of the most important challenges for the industry is to reduce fuel consumption and emissions in transportation. We have advised a large number of OEMs (incumbents and new players), suppliers (both traditional and new ones, such as the manufacturers of Li-Ion batteries), financial investors, utilities, mobility and logistics service providers as well as government agencies to assess the impact of these challenges on their business models, strategies, organization and processes. We then help them turn these challenges into opportunities for further growth and profits. To do that we rely on our proprietary, scenario-based market model for conventional and alternative powertrains and a comprehensive database of related products and technologies, which is constantly updated on a global scale.

Together with our clients, we employ our vast global expertise to improve efficiency and support them in achieving outstanding results.