Robust growth projections in auto sales coupled with unevenness in global markets are forcing Auto/OEMs to react strategically to shifting demands. This post, highlighting 3 evolving trends in the auto industry and the challenges confronted is establishing sustained OEM growth strategies and profitability in the next 3 to 5 years.

• First, macro price and cost pressures. Consumers are demanding lower auto prices and expecting high-end features (e.g. sophisticated infotainment) to be standard. OEMs are challenged with managing steeply increasing material costs and provide alternative low-cost & efficient inputs.
• Second, expanding regulatory controls demanding tighter fuel economy, safety features, and green vehicles which is getting more expensive. This pushes OEMs to source lightweight composites, invest in safety engineering, and as well share the burden of increased green costs.
• Third, shifting focus for vehicle content with increasing electronic and software content posing a challenge to OEMs to differentiate their products by building new technology (hardware, software, and mobile) capabilities.

OEMs are experiencing 5 primary drivers in the following order of impact and likely scenarios that will emerge out of them to fuel OEM growth strategies.

1. Lighter vehicles with clearly feasible low-cost Carbon Fibers as an alternative to other metals and composites that offer fuel economy. Dialogue is on with OEMs to exploit ORNL and Weyerhaeuser’s efforts on lowering carbon fiber raw material cost to a level of US $5 to $7 per lbs.
2. e-Mobility, meaning electrical/hybrid powertrains, including batteries, as well as in lightweight & aerodynamic drag-reducing technologies resulting in lower costs and enabling safety & green vehicle. As the storage costs are attainable close to $200/KWh, the total cost of ownership for battery electric vehicles (BEVs) would compare favorably to HEVs and PHEVs even if gas prices stay in the range of $3 to $4. This is leading to a scenario of consumer purchase decisions based on a TCO basis to trade-off content and other features against petroleum expenses which increases revenues for automotive suppliers and OEMs.
3. Increasing infotainment & telematics content as a result of consumer demand for customization, entertainment, and communication (V2V, V2I). The cost of electronics and software content in autos was less than 20 percent of the total cost a decade ago and today it is as much as 35 percent. One scenario is of integrating in-vehicle-infotainment (IVI) leveraging connected car solutions with driver-assist features that help commuters experience connected world on-the-go and as well designing early warning systems that enabled the auto manufacturer to predict vehicle part failure, take early correction actions, and estimate future warranty claims. Telematics features, including semiautonomous driving aids such as automatic parallel parking and lane-keeping assistance as well as sensor-based reporting on car maintenance and usage, also present the scenario to forge a closer relationship with customers and increase margins. OEMs and dealers are piloting offerings on more convenient proactive service, alerting a car owner to upcoming maintenance or repairs. In addition, telematics features affording opportunities for tie-ins with insurers, such as offering discounts for customers who drive safely.
4. Platforms and part consolidations. The emerging use of 3D printing with composites for making automotive parts in less time is opening doors to the mass production of automotive parts. It is projected that the share of components as % of vehicle costs that will have a sustainable basis for creating value will fall about 55% today to just over 40% by 2020. Part consolidation with a one-piece design that can potentially reduce vehicle weight by 35 to 40%. Also test rig optimization in virtual product development for vehicle technology is another lever for OEMs.
5. Composite Recycling advancements. Few real-life examples include closed-loop CFRP recycling technology by BWM for its i3, a collaboration between BMW and Boeing for recycling, etc.

OEMs are closely watching these trends and drivers to come with a path forward and define a roadmap what companies, teams, and the industry as a whole should follow to be future-ready enabling the next wave of OEM growth strategies.

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