COVID-19 in the automotive industry

How companies can master the crisis and position themselves properly for the post-Corona era

COVID-19 has hit the automotive industry with full force — on the demand and production side. Together with my colleagues at diconium I have been thinking about how the crisis can be overcome in the short term and how even a long-term advantage can be gained from it. I summarize the most important findings for you here. However, the topic is so complex that it can only be outlined at this point. For the complete overview of problems and solutions I recommend our brand new whitepaper (only in German).

Survival of the fittest

The automotive industry was already facing great challenges even before Corona — due to the pressure of transformation caused by attackers like Tesla. COVID-19 now increases this pressure enormously. This not only affects the car as a product (“iPhone on wheels”), but must encompass the entire value chain of an automotive company — from the supply chain to production and distribution to the end customer.

Just one example: Anyone who has not yet or only half-heartedly pursued the digitalisation of sales channels and customer contact points has lost his “connection” to the end customer due to the closure of the car dealerships in March of this year. Even if car dealerships are allowed to resume business operations in a reduced form, an increase in spontaneous visits from customers is not to be expected. In the car industry, the fact that the expansion of digital sales channels and contact points has only been half-heartedly pushed forward is now taking its toll. Pilot tests by manufacturers and specialized third-party platforms are still a niche existence in Germany. A peek at China shows what would be possible with consistently digitized customer journeys, online live streams and omnichannel buying opportunities, right through to platforms like Tmall.

Strategic recommendations

In the short term, automotive companies must maintain their business capability under the COVID-19 framework. To do this, they must first adapt their operating procedures to ensure that they meet additional hygiene requirements. In addition, special content-related challenges must be solved at each stage of the value chain.

First of all, however, two overarching strategic guidelines are absolutely central to success in the detailed design and implementation of the measures — if one does not want to lose oneself in activism:

Firstly, the interlocking of short-term survival measures with long-term transformation

Second, digital excellence through technological capabilities and agile, flexible structures

Measures by the stages of the value chain

Strengthen cross-company collaboration and secure the supply chain against the failure of critical elements

In extreme cases, the completion of a vehicle depends on a single screw. These dependencies must be made transparent throughout the entire supply chain. On this basis, plans for restarts and failure scenarios can then be designed. In the long term, the monitoring of supply flows must be expanded to digital end-to-end tracking of components across all tiers

Adapting production processes, making them more flexible and connecting them digitally

Production processes must be adapted to meet the stricter hygiene requirements associated with COVID-19. In this context, shift and work schedules must also be reviewed in order to reduce the risk of infection and, if necessary, to be able to compensate for individual absences due to illness. A high and continuous digitalization of production control right down to the employees creates additional flexibility and helps to avoid bottlenecks.

Digital transformation of the sales organization and empowerment of partners

It is now an opportunity for existing digital purchase offers to break out of their niche existence. In the long term, automotive companies must integrate already existing digitalization activities, which were hastily carried out in an emergency situation, into a holistic and customer-oriented overall concept. This requires scalable software platforms and the appropriate skills of the sales organization and sales partners, integrated into a common digital ecosystem.

Flexible financing models and special service offers — mobility needs change from quantity to more quality

In the current situation, the economic situation is highly uncertain.Customers are therefore hesitant about making an investment-intensive vehicle purchase. Attractive financing offers and free coverage of financing (e.g. in the event of unemployment) enable automotive companies and their sales partners to noticeably minimize the risks for the end customer. Subscription models (“Car Flat Rates”) can be an interesting alternative to traditional financing, especially for younger target groups under the Corona framework conditions.

Conclusion

The good news is that those who do their homework now will not only survive the Corona crisis, but will even come out as winners in the long run. The challenges are anything but new for the automotive industry. But the pressure to act resulting from the crisis means that previously disunited stakeholders are suddenly pulling in the same direction and that the already urgently needed transformation from car manufacturers to technology companies is being accelerated. Perhaps this is also the urgently needed initial spark to implement a digitalization story “made in Germany” instead of continuing to look in amazement at Silicon Valley. Let’s do it and stay healthy!

Managing Director @ diconium | #Innovation #DigitalTransformation #Mobility | How do we transfer the successful German art of engineering into the digital age?