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AUTOMOTIVE

sector Overview:

Following a century of non-stop growth there is large scale over-capacity in much of the motor industry. Widespread incentives and longer-term warranty programmes have been applying pressure, and financial strains are increasing due to closer partnerships between vehicle manufacturers and suppliers, higher commodity prices and sub-sector consolidation. With little recent significant M&A activity, growth in vehicle production has largely been organic . As the US big three struggle to be profitable, other established players such as Honda and Toyota have focused on steady growth by developing, producing and distributing new models with increasing efficiency. Unlike their counterparts, they have avoided price reductions, choosing instead to introduce an evolving range of high-quality vehicles and new design-led sub-brands such as Lexus and Infiniti. This may seem like incremental rather than radical change, but underneath continuous technological and consumer-led innovation is taking place.

The main development of note at the moment is in emerging markets where both China and India are fast moving from follower to leader status. Having been traditional markets for established manufacturers to offload old designs, the tables are turning as Chinese and Indian brands emerge into the world market with an ambition to pioneer new innovation. For example, it is forecast that China will produce 130 million vehicles in the next 20 years – by contrast Ford has only produced 90 million in the past century. Such volumes hitting already crowded streets demand advanced innovation to simultaneously satisy the growing middle class whilst avoiding gridlock. Although intelligent vehicles and hydrogen fuel cells have been pushed by US and European manufacturers over the past few years, many commentators now see that it will be in China and India that such developments occur first on a mass scale and, in so doing, allow domestic manufacturers to leapfrog the established multinationals.

ONES WE ARE WATCHING

 

GM
Although still suffering the impact of legacy financial obligations, there are several signs of GM’s innovation-led recovery. Alongside sustained growth of the Saturn brand in the US, new models in 2007 included the Chevrolet Volt concept car - the first mass-market prototype designed to operate purely using an electric motor. In addition, as it focuses on delivering a stream of mass-market incremental innovations in response to new insights on use of the family vehicle, the Meriva Concept has been built on the theme of interior flexibility. With doubled sales in Russia, more than 1m vehicles sold in China and 500,000 in Brazil, GM’s global brands are starting to fight back against Toyota.

Tata
As well as being the new owner of the premium Land Rover and Jaguar brands, India’s Tata Motors recently unveiled the world's cheapest car, the Tata Nano. Rather than offering low-performance versions of existing models as other have done, this product fundamentally rethinks what a mass-market car should be and delivers it as a complete, accessible, low cost, high volume package. Providing a ‘car for the people’, the Tata Nano uses extreme simplicity at the heart of its strategic intent, while at a global level, as a potential breakthrough platform innovation, the repercussions as versions 2 and 3 come into play could be huge.

  

 

 

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