Challenges in the auto industry

Issue #49, Jan 11th, 2021

Challenges in the auto industry today are no longer the traditional issues. Capacity utilization, supply chain bottle necks, product issues and recalls etc have been witnessed in the past few years. But as cars become mechatronic in nature with onboard software, the challenges faced are unique as reported in media recently - chip shortage halting production across countries, price and supply issues with batteries, competition from remote collaboration tools like Zoom, bi-cultural business leaders who understand both an OEM's parent country and a target country as customer base and COVID-19. This issue reports these challenges faced in the industry.

Global chip shortage halting production

A semiconductor shortage is pinching some of the world’s biggest auto manufacturers, costing Daimler, Nissan, Honda, Ford and Fiat Chrysler production for a range of cars. Mercedes-Benz maker Daimler joined its German peer Volkswagen in announcing it’s affected by the industrywide supply bottleneck, without quantifying the impact. Honda said it will cut domestic output by about 4,000 cars this month at one of its factories in Japan, while Nissan is adjusting production of its Note hatchback model. - Bloomberg

Vertically integrating batteries for EV making

Even though batteries are by far the costliest component in an electric vehicle (EV), automakers around the world have been content until recently to source battery cells and systems from a handful of well-established Japanese and Korean battery companies, and a growing number of battery upstarts. Given the industry’s historic commitment to vertical integration, the willingness of automakers to leave the supply of such a critical component to newcomers is surprising. With some experts predicting that EVs might account for 58% of new car sales by 2040, automakers are now in a hurry to catch up. - Forbes

Bi-cultural design chief for Tesla, China

Tesla is searching for a design director in China, part of efforts to open a "full-function" studio in Shanghai or Beijing and design electric cars tailored to Chinese consumer tastes. They are looking for "bi-cultural" candidates with 20 or more years of experience who are familiar with Chinese tastes and can bridge the gaps between China and the United States.

"I think something that would be super cool would be ... to create a China design and engineering centre to actually design an original car in China for worldwide consumption. I think this would be very exciting", Elon Musk said at a media event in Shanghai. - Channel News Asia

Competition from Zoom during pandemic

Before the pandemic, almost 40% of the miles traveled by passenger vehicle in the U.S. were for commuting or shopping, according to data collated by KPMG. At least a chunk of that seems likely to disappear as people work at home more and order more products online. Demand for vehicles should follow. KPMG said more U.S. families might get by with one car in the future, potentially reducing the average number of vehicles per household to 1.87, from the pre-Covid level of 1.97. - WSJ

COVID-19 and virtual product launches, sales

The challenges were far too many as the pandemic completely derailed the auto industry with zero sales in April and a loss of a quarter of sales. In addition, Covid-19 is a global health crisis and securing the health and safety of our people and our customers was our utmost priority. Nevertheless, every crisis gives an opportunity and so did the pandemic. The growing online consumption of luxury cars due to the ease of acceptance of our online offerings has been a positive takeaway for us. It was a novel experience for us to launch products virtually. - Martin Schwenk, MD & CEO of Mercedes-Benz India. - Forbes India