Analysis: The Evolving Value Chain Of The Car Industry
The evolving value chain of the car industry
The automotive industry is one of the most progressive and forward-thinking industries. It confronts a number of trends that create new challenges while also providing opportunities for growth. One of the major trends is the demands of operating in a “connected” world.
For more than 100 years the automotive industry has created competitive advantage mainly through engineering excellence. Moving forward, this will no longer be sufficient. Automotive manufacturers need to decide how to respond strategically to digital disruption when new digital technologies affect their business (see exhibit 3 - Digital disruption challenges in the future).
The auto industry is now on its way to change and alter these …show more content…
Tier 1 suppliers’ power is increasing rapidly. Suppliers’ bargaining power used to be low but this scenario has changed over the years (see exhibit*****). Suppliers’ value addition in the auto industry increased from 56% in 1985 to 82% in 2015. Automakers are now more like assemblers than like manufacturers, leading the suppliers to capture the most value in the car industry value …show more content…
However, suppliers are still considered as the highest investor in R&D in the car industry value chain. The car’s hardware platform and the elements that control this platform capture the most value of the R&D investment.
Till now, Tier 1 suppliers create, design and supply components under the direction of OEMs, which assemble them in order to reach the final product stage and to sell the product to the public. However, as result of the rise in the new disruptive technology of the connected car technology and the shifting in consumers demand to pay for digital content of automotive innovation, tier 1 supplier will no longer capture the most value of the car industry value chain. Returns on R&D investments on non-digital components, such as engine, batteries and doors, will decrease over the next few years.
The rise of the connected car technology will shift the car industry value chain from retail-sales mentality and physical products to a new value chain that depends mainly on how to connect your car to the world through IoT platforms, autonomous driving, and other digital
The automotive industry is one of the most progressive and forward-thinking industries. It confronts a number of trends that create new challenges while also providing opportunities for growth. One of the major trends is the demands of operating in a “connected” world.
For more than 100 years the automotive industry has created competitive advantage mainly through engineering excellence. Moving forward, this will no longer be sufficient. Automotive manufacturers need to decide how to respond strategically to digital disruption when new digital technologies affect their business (see exhibit 3 - Digital disruption challenges in the future).
The auto industry is now on its way to change and alter these …show more content…
Tier 1 suppliers’ power is increasing rapidly. Suppliers’ bargaining power used to be low but this scenario has changed over the years (see exhibit*****). Suppliers’ value addition in the auto industry increased from 56% in 1985 to 82% in 2015. Automakers are now more like assemblers than like manufacturers, leading the suppliers to capture the most value in the car industry value …show more content…
However, suppliers are still considered as the highest investor in R&D in the car industry value chain. The car’s hardware platform and the elements that control this platform capture the most value of the R&D investment.
Till now, Tier 1 suppliers create, design and supply components under the direction of OEMs, which assemble them in order to reach the final product stage and to sell the product to the public. However, as result of the rise in the new disruptive technology of the connected car technology and the shifting in consumers demand to pay for digital content of automotive innovation, tier 1 supplier will no longer capture the most value of the car industry value chain. Returns on R&D investments on non-digital components, such as engine, batteries and doors, will decrease over the next few years.
The rise of the connected car technology will shift the car industry value chain from retail-sales mentality and physical products to a new value chain that depends mainly on how to connect your car to the world through IoT platforms, autonomous driving, and other digital