Trend #7: Growing the Service and Aftermarket Business

Not just auto suppliers, but manufacturers of all types of industrial products and equipment, are learning that a future differentiator and real source of revenue growth will develop from expansion of their service and aftermarket businesses. Services such as spare parts, preventive maintenance, testing, field support, repairs, and quality management can help differentiate an automotive company from competitors and earn a loyal revenue stream from OEMs that no longer have the resources to carry out many of these functions in-house.

The aftermarket business has exploded over the last few years and is now a more than $75 billion global industry. Automotive companies can generate significant revenue by offering aftermarket items within their product portfolio.

Trend #5: Forming More Global Alliances

Globalization in the automotive industry is playing out in many ways. Many OEMs and their suppliers are moving operations to new, lower-cost areas. Meanwhile, other regions like China, Russia, and India are emerging as major factors in automotive consumption and production. China is, by far, the most dramatic new player in the automotive industry. It is now the third largest car market after the U.S. and Japan, and automakers have only scratched the surface of the potential Chinese market. Every major OEM now has established operations in China, and many are pressuring their suppliers to follow them. Suppliers will be solidifying an increasing number of global alliances throughout their own enterprise and that of the OEMs. To survive the requirement for globalization, suppliers will need to diversify not only their plant locations, but also their customer base. They will form new alliances with companies based in foreign locations, maximizing their revenue but adapting their value-added products for local OEMs as well as for the domestic OEMs they have followed overseas or across borders. They will exploit the new markets by becoming an integral part of the economies in which they operate.

Trend #6: Reducing the Cost of Quality and Fixed Costs

In such a highly competitive, fluid, global market, quality must be a “given” for every supplier. Any manufacturer producing less than world-class quality simply is unlikely to survive in a world where OEMs have a wealth of suppliers from which to select. Therefore, suppliers will need to compete by reducing the cost of quality – offering valuable, reliable systems at a lower cost than competitors and by lowering their fixed costs within their plants. Just as knowledge workers relied on suites of software to achieve these goals in the office, automotive companies will be implementing integrated solutions on a larger scale to keep quality high while the costs of operations diminish. The focus must be on consistently improving productivity over the long term and forming strategic partnerships up and down the supply chain to reduce the total cost of quality.

Trend #4: Efficiency at Lower Volumes

Paradoxically, the automotive market has become more fractionated and diverse at the same time that it is being subjected to mergers and consolidations. The aggressive expansion of all OEMs on a global basis has created niche markets and entirely new types of vehicles – vehicles that are designed to sell anywhere from a couple thousand units to 75,000 units, as opposed to hundreds of thousands of a particular model. Also, companies that once were luxury brands are expanding downstream and companies that once were only economy brands are now moving upscale.

Trend #3: Increasing Revenue through Products with Higher Added Value

OEMs are pushing more responsibility down to their supply base, and successful suppliers will be the ones who can integrate the automakers’ needs into value-added modules and systems, going beyond straight components. Additionally, OEMs will rely more than ever on their suppliers as sources of innovation. Those that generate new products and add a greater intrinsic value to the OEM’s assembly process and/or the end user’s preferences will have a significant competitive advantage.

This need for demonstrating higher added value also will require suppliers to become involved in product development earlier in the vehicle design cycle. Suppliers, as a result of greater collaboration, may well find themselves leading more design and engineering and driving more innovation.

Trend #2: Diversifying the Customer Base

Suppliers are diversifying their base for both survival and revenue growth. No longer can the supplier rely on a single primary customer as a source of growth. The auto industry has become too fluid; a string of acquisitions, mergers, and restructuring could leave a dedicated supplier in desperate straits before preventive action can be taken. Of equal importance, the supplier’s growth potential in the years ahead will more likely reside in the ability to provide innovative, integrated, and niche products to a variety of auto makers, rather than in reliance on expansion within an individual OEM’s production.

And finally, as suppliers go global to meet the needs of their customers, they will find it increasingly valuable to service not only the domestic companies that they originally followed, but also local manufacturers in these new nations, capitalizing on the security and additional revenue that true globalization can bring.

Trend #1: Following the OEMs Geographically

The base of the automotive industry is regrouping rapidly in the Southeastern United States. States like Georgia, Alabama, Tennessee, Mississippi, and South Carolina have become the new focal points for expansion by domestic automakers and for the introduction of facilities by Asian and European transplants, including Honda, Hyundai, Nissan, and BMW. All are seeking to become competitive in the new economy by finding green fields where land is plentiful and facilities can be built with less worry about hidden environmental dangers or jamming. Even more significant, some of these plants are able to operate as non-union locations, cutting labor costs dramatically and changing the economic equation within the industry.

The automotive industry is also expanding rapidly in the new European Union, especially Eastern Europe (Slovakia, Hungary, and Romania/Poland), as well as in many areas of Asia-Pacific (including Thailand, Malaysia, and China). The automotive industry in India is expected to grow considerably over the next few years as well.

MAJOR GROWTH / DECLINE TRENDS In AUTOMOBILES SECTOR

The environment for the automotive supplier has never been more erratic. To succeed, it’s important to understand what you are up against in this shifting industry landscape. Infor’s automotive industry analysis indicates that, for major players in the automotive supply chain, seven current trends are having the greatest impact. Though differences emerge from region to region, it’s clear that all apply to your business to some degree. It’s also clear that these trends are all interrelated, forming a web of both challenge and opportunity. There Are Seven Major trends in that automobiles industry.