Automotive Market Cadence Creates Opportunities and Challenges, IHS says
Launch Readiness, Logistics Efficiency and Legislative Influence are Key Factors for Suppliers
Following five years of unprecedented light vehicle production growth in North America where volumes essentially doubled to more than 17 million units, the industry will face the challenge of slower growth rates through the balance of the decade. Required advances in technology, stiffening legislation, tightening product cycles and increased launch activity will create a challenging, yet opportunistic environment in the years ahead for original equipment manufacturers (OEM) and suppliers alike, according to IHS Automotive, a global provider of critical information and insight to the automotive industry and part of IHS Inc. (NYSE: IHS).
Michael Robinet, managing director-advisory services, for IHS Automotive addressed some of the industry’s key challenges today during the annual Center for Automotive Research Management Briefing Seminars event here.
“In today’s environment, suppliers must be proactive in their approach to the market or risk falling behind,” he said. “Success will come to those that have the ability to be flexible in their product design processes, understand OEM needs, optimize their research and development activities, and efficiently implement new technology.”
The industry is currently navigating a quicker product cadence that spans a significantly shorter timeframe between changeover and vehicle redesigns, according to Robinet. Globally, the average light vehicle will be completely redesigned every five years by 2020. The implementation of global architectures has driven all regions closer from a product timing perspective with the greatest change in developing markets of China, India and Brazil. In addition, vehicle manufacturers are altering the role of the mid-cycle freshening occurring every 2-3 years. Today, these events are an opportunity to make significant design and content changes; previously the domain of a major cycle change.
As an example, a mid-cycle refresh no longer includes just front and rear fascia and minor content changes, said Robinet. In many cases, it now encompasses a completely new interior, modified body panels, integration of the latest active safety technology, powertrain upgrades, infotainment and software updates.
Today’s suppliers need to adapt to a world of faster cycles, gaining or losing business at a swifter pace. “The industry’s global scope has never been more important,” Robinet said. “It is now a necessity to have strong regional production and design capabilities which can include integration of partners which bring new breadth. The ability to meet growing customer demand for innovations while continuing to address lightweighting, emissions or safety requirements from government in a cost-efficient manner will be a careful balance. Keeping vehicle costs under control within a tightening legislative environment will be this decade’s most important industry challenge.”
Suppliers are challenged with shorter product cycles, he added, with even more pressure to perform flawless launches and demonstrate required production speed as quickly as possible. By 2018, there will be more than 160 new product/plant launches around the world – more than double the pace from 2010. The industry is increasingly focused on launch performance (capacity and speed) meaning there is less room for error.
Though the pace of growth in the industry is slowing a bit, IHS Automotive forecasts that more than 88 million vehicles will be built globally this year, more than one percent higher than 2014.
“These factors highlight tremendous opportunity and require suppliers in every stage of the supply chain to adapt quickly to change and work to implement the swift requirements necessary for future success,” Robinet said. “Those that succeed will be well-positioned for future growth.”
About IHS Automotive (www.ihs.com/automotive)
IHS Automotive, part of IHS Inc. (NYSE: IHS), offers clients the most comprehensive content and deepest expertise and insight on the automotive industry available anywhere in the world today. With the 2013 addition of Polk, IHS Automotive now provides expertise and predictive insight across the entire automotive value chain from product inception—across design and production—to the sales and marketing efforts used to maximize potential in the marketplace. No other source provides a more complete picture of the global automotive industry. IHS is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs about 8,800 people in 32 countries around the world.