The Automotive Industry
Exploring opportunities in uncertain times
The automotive industry is undergoing radical change. Norway plans to halt sales of new fossil fuel cars by 2025. By 2030, Austria, Sweden, Denmark, the Netherlands, Slovenia, and Ireland aim to follow. Germany will join by 2035 as part of the EU’s “Fit for 55” package*. OEMs must adapt to the exit from combustion engines and the growing influence of Chinese suppliers, including new e-motors in Europe.
The automotive industry in Europe faces significant challenges such as de-risking, developing software-defined vehicles, and restructuring. Successfully managing these changes is important. Companies that adapt and innovate will thrive despite downsizing, plant closures, and relocations.
Interim managers can provide essential support in these situations.
* The European Union’s Fit for 55 package aims to reduce greenhouse gas emissions by 55% by 2030.
Insights from Germany
The German automotive industry holds a substantial market share in Europe, with German manufacturers accounting for about 25% of new passenger car registrations. Brands like Volkswagen, BMW, and Mercedes-Benz dominate both European and global markets.
Germany’s automotive market is not only significant in terms of sales but also in production. The country remains one of the leading car producers in Europe, focusing on innovation in electric vehicles (EVs) and autonomous driving technologies. The industry is a key driver of the European economy, contributing a large share to the continent’s overall car exports and maintaining a robust trade surplus in the automotive sector.
Prof. Bernd Gottschalk, an automotive expert and EIM Advisory Board member, highlights the need for German companies to secure their economic future and competitiveness, which has been challenged in recent years. He states:
Prof. Dr. Bernd Gottschalk
“The German automotive industry faces technological, structural, and social challenges. Companies must adapt and innovate to succeed long-term.”
According to Gottschalk, OEMs and suppliers are addressing these challenges by optimizing portfolios, focusing on earnings and liquidity, closing unsustainable divisions, and managing costs and working capital. Restructuring is crucial for future readiness.
Therefore, any European component manufacturers should closely monitor developments in the German automotive industry, given its significant impact on the broader European economy. Key areas for further development include:
- Technological change
- Globalization
- Cost competition
Primary Challenges:
De-risking, software defined vehicles, restructuring
De-risking
Reducing import dependency through precise monitoring and foreign trade analyses is essential. This allows companies to develop strategies that ensure long-term independence from other countries, positioning suppliers as reliable development partners.
Software Defined Vehicles (SDV’s)
SDVs, primarily controlled by software, represent a significant shift from mechanically based vehicles.
Features include:
- Integrated infotainment systems;
- Communication with other vehicles and road infrastructure;
- Over-the-air updates;
- Advanced safety systems like “brake- by-wire” and “steer-by-wire”.
SDVs also serve as the foundation for transitioning away from combustion engines to battery-powered drive systems and advancing autonomous driving capabilities. For suppliers, this means investing in software development or pursuing strategic collaborations.
Restructuring and Transformation
Many companies in the automotive sector are prioritizing restructuring to stay competitive in the future. For example, in Germany, despite a 10% increase in turnover to EUR 558 billion for car manufacturers and suppliers in 2023, there’s concern because new orders are decreasing. To address these challenges, companies need to strategically reposition themselves. Restructuring initiatives may include:
- Carving out specific processes
- Optimizing or closing underperforming locations (footprint)
- Relocating manufacturing plants
- Balancing downsizing with addressing skilled labour shortages
- Consolidating operations across the organization
- Embracing automation and digitalization initiatives
The role of Interim Management in the Automotive Industry
The automotive industry is facing challenges such as digitalization, reducing dependence on imports, and increasing production of software-defined vehicles. Simultaneously, tough decisions like employee layoffs, plant relocations, or even site closures need to be made. Despite these seemingly conflicting demands, there are effective ways for both OEM’s and suppliers to manage these changes.
Key Benefits of Interim Management
Interim managers are expert professionals capable of swiftly executing restructuring initiatives and driving transformative change within organizations.
They can start working right away when needed. For top management, the benefit lies in their temporary engagement, which can lead to significant cost savings in targeted areas. These managers quickly grasp the company’s challenges and leverage their expertise to effect rapid changes. Moreover, they alleviate the workload of internal teams, enabling them to prioritize core responsibilities. Additionally, interim managers share important knowledge and skills that stay in the company even after they leave.
What goals can Interim Managers achieve?
In Europe, businesses face challenges such as high financing and operational costs, coupled with inadequate charging infrastructure.
Despite these challenges, initiatives like the EU’s “Fit for 55” package underscore the necessity for ongoing investments in battery electric vehicles (BEVs) and adapting production accordingly.
Europe’s attractiveness as a business hub is declining due to workforce shortages, rising energy and labour expenses, taxes, and bureaucratic hurdles. Traditional combustion engine plants are expected to cease operations, while new facilities for green technologies are likely to emerge abroad. This shift poses diverse challenges based on location. Interim managers specializing in international company construction or relocation play a critical role in ensuring smooth transitions.
Previously, there was a trend towards relocating production to Eastern Europe, but recent geopolitical changes are altering this landscape. Countries like Mexico, the USA, Canada, and India are now gaining favour. However, managing new or relocated production isn’t the sole focus. Interim managers also support organizations through carve-outs or comprehensive restructuring, particularly in scenarios involving workforce reductions.
Strategically deploying interim managers enables companies to enhance project execution and efficiency significantly. By leveraging their expertise, firms can handle changes in the industry with more flexibility and strength.
With nearly three decades of experience with top automotive companies, EIM understands the complexities of the industry.
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Interim Management:
A strategic opportunity for the Automotive Industry in changing times
The automotive industry is facing significant shifts with the rise of electric cars, new technologies, and evolving market demands. In these turbulent times, interim management offers a valuable opportunity for companies to adapt quickly and strengthen their competitiveness.
Flexibility when it’s needed most
Interim managers can be quickly integrated into an organization to address specific challenges and lead transformative projects. This flexibility is crucial for responding promptly to new demands without the delays of traditional hiring processes.
Expertise for a successful transformation
As the industry moves towards more technology-driven operations, interim managers bring crucial expertise. They offer fresh ideas and effective strategies to solve complex problems and manage changes within the organization.
Reducing risk while increasing efficiency
Using interim managers helps companies make smarter decisions and use resources more effectively. Short-term contracts allow for evaluation before committing long-term, enabling companies to adjust quickly to changes in the market.
An opportunity for innovation and competitiveness
In times of change, innovation and flexibility are key to long-term success. Interim managers not only bring proven methods but also challenge conventional thinking, driving innovation and helping companies stand out from their competitors.
Achieving Long-term Success
Overall, interim management offers a unique opportunity to successfully adapt to changing market conditions and emerge stronger. By leveraging the flexibility, expertise, and innovative capabilities of interim managers, companies can strengthen their competitiveness and ensure long-term success.
Interim managers provide the flexibility, expertise, and innovation needed to navigate the automotive industry’s challenges.
Contact us to learn more about how we can support your company’s transformation.
International case studies
Our cross-border business sets us apart from our competitors and is a unique strength of EIM.
EIM Argentina
Company:
An international auto parts company, a leader in the tire industry, acquired several factories to strengthen its market position and expand production capacity. One factory was in Mexico.
Project:
The challenge was integrating and optimizing the supply chain. The main objective was to improve existing processes and prepare the organization for a smooth and efficient integration.
Interim Supply Chain Manager para Industria de Neumáticos – EIM Argentina
EIM Italy
Company:
A major international supplier of brake technologies and components based in Germany.
Project:
A strategy was formulated to expand into new Asian markets, both nationally and internationally. The approach involved analyzing potential business sectors in collaboration with top-tier automotive suppliers and electric vehicle manufacturers to establish a foundation for sustainable growth.
EIM Spain
Company:
An international company specializing in manufacturing access components acquired an industrial group in Portugal through its Spanish subsidiary and initiated the integration of all processes to establish an Iberian entity within the EMEIA multinational structure.
Project:
During this intricate international integration, EIM Spain enlisted an experienced interim manager to map key processes (such as purchasing, logistics, and customer service) and recommend improvements to standardize operations across the Iberian region.