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1、CIM IT Services Market Outlook:Global Automotive IndustryBusiness Intelligence GroupAugust 2003BUSINESS INTELLIGENCE GROUPContents1.Executive Summary2.Automotive Industry Business Challenges1.Global2.Regional:US,Europe,Asia-Pacific,Rest of World3.Automotive IT Spending Trends1.Global&Regional IT Spe

2、nd Forecasts2.Automotive Industry IT Trends4.Automotive IT Services Industry:Competitive Profiles5.Automotive IT Services Market:BearingPoint Alliances6.Sources and ContactBUSINESS INTELLIGENCE GROUPExecutive SummaryAutomakers are currently faced with slower sales,over capacity and declines in profi

3、tability.Big 3 are losing market share to Japanese automakers.Toyota,Honda and Nissan increased their U.S.sales and market share in the first half of 2003,while the Big Three manufacturers(GM,Ford,DaimlerChrysler)saw their sales decline despite spending heavily on incentives.Currently the global aut

4、omotive industry has too much capacity(roughly 30%)and as sales fall,the problem continues.Car prices have been falling making already thin margins even more pressured.The global automotive industry is faced with more competition,greater price transparency,rising customer expectations and quality im

5、provements,making the pressure even greater on price and profitability.China presents the best opportunity for automakers due to increased government incentives and cooperation,cheaper labor,and proximity to a large population of potential consumers.China continues to make progress towards a market

6、economy which has led to global businesses,like automotive companies,trying to ramp up in order to tap into the countrys large marketplace of 1.3B consumers.A year after entry into the WTO,in 2003,Chinas automotive industry produced 3.25M motor vehicle units(38%growth compared to the year before).IT

7、 Issues:Industry in survival mode,pressuring spending;Opportunities for CRMnMost manufacturing verticals,including Automotive,have been operating in“survival mode”,spending very little on capital and operational expenses;IT spending has suffered as a result.The North American manufacturing market co

8、nstitutes approximately 45%of the total world manufacturing IT spend.BUSINESS INTELLIGENCE GROUPExecutive SummarynCurrently in the automotive industry there is less significance placed on the role of IT in supporting business strategies,especially in comparison to industries like Financial Services

9、or Healthcare payer industries.This is a large determinant of IT budget.nIn order to understand their near-term sales volume,option mix and price sensitivity,automakers have to start understanding their customers better through the many signals they see from their consumers interactions.Much of this

10、 can be accomplished through CRM initiatives.nWhile dealer incentives have been used by most of the major automakers,especially in the US,companies leveraging their existing CRM might be able to get more for less.The data gathered from incentive programs flowing back to manufacturers and dealers can

11、 allow follow-up campaigns that bridge the gap between sales and marketing.nERP vendors are turning their focus to delivering extended applications in areas of SCM,CRM and PLM to compensate for the loss of revenue from large-scale projects.Competitors and AlliancesnDeloitte Consulting has a joint in

12、itiative with SAP to support the automotive industry in the deployment of the mySAP Automotive solution on a worldwide basis.As part of this initiative,DC and SAP are developing methods for customer-specific analysis on feasibility,cost-benefit,and ROI.nIBM encourages their engineers to rotate in an

13、d out of the field,spending time solving real-life problems while not abandoning their inside research.IBM has created an innovation services group within its research unit dedicated to working on automotive customer problems,making them capable of taking their research and apply it to business issu

14、es.nIn the European automotive industry,SAP is currently focusing on cross functional processes,packaging their SCM,PLM and CRM all in one,using different modules,approaching it from the perspective of the business processes that cross these areas.Global Automotive Industry:Business ChallengesBUSINE

15、SS INTELLIGENCE GROUPGlobal Automotive Industry is on a Gradual SlideThe worlds automotive industry has been on a gradual downward slide over the past year,accelerated to some degree by the likelihood of a major bankruptcy and further restructuring of the industry.nInhibitors include weak(regional)c

16、onsumer confidence,high unemployment and uncertain global equity markets,all of which have led to lower sales.nIn Europe,the first five months of 2003 saw sales drop by 4%while new registrations for May fell the lowest in five years.The US market is forecast to shrink 4%this year.nCurrently the glob

17、al automotive industry has too much capacity(roughly 30%)and as sales fall,the problem continues.Much of the over-capacity is due to each individual company expecting to grow faster than its rivals.And while the 90s showed strong returns,many automakers invested in additional capacity,created risky

18、models,built more factories and entered into emerging markets that had more long term promise than short term.nFor many years the largest truck and car makers have continually sustained losses out of their primary businesses of car sales,often making profits through money made from selling spare par

19、ts at inflated prices,through financing businesses or through exchange rates.This structure is increasingly exposed in a downturn,especially when incentives like 0%financing have hampered the financing business.nCar prices have been falling making already thin margins even more pressured.The global

20、automotive industry is faced with more competition,greater price transparency,rising customer expectations and quality improvements,making the pressure even greater on price.nIn the US,incentives like 0%financing or money back have kept volume up but have also pressured prices.While incentives are e

21、xpensive,whenever automakers push prices back up their volumes collapse.BUSINESS INTELLIGENCE GROUPGlobal Automotive Industry is on a Gradual SlideAside from product issues,The Big 3 have under-funded pension liabilities and health-care benefits for retirees.Ford is losing cash and their bonds have

22、been downgraded to junk status.If the US market continues to slide a large-scale competitive restructuring could occur.European carmakers,like Fiat,which is laden with debt and production issues,could be purchased by other companies like GM(that owns 20%),or eventually be bought out by the state.The

23、 industry upsides for the Big 3:General Motors will continue to pursue its growth strategies in order to remain competitive.Daimler Chryslers is in the midst of its improved cost structure,allowing it to better compete with GM.Ford is spending a lot of money on capital expenditures.If the company do

24、es not execute,it may be in crisis.The Big 3 products have higher quality than ever,although the perception of quality is not as high as it should be.CompanyPensionHealthcareGeneral Motors$19,300$51,000Ford$7,300$22,741DaimlerChrysler3,10012,113Pension and healthcare source:MSDW,Based on Mmgt.Discus

25、sionsTotal US Pension Fund and Healthcare Liability(in MM)BUSINESS INTELLIGENCE GROUPUS Automotive Market:Slowing,but Still the LargestThe US auto industry is the most important one to the global industry since there were 16.7M registrations in the United States in 2002(down by more than 3%from the

26、all time high in 2000).The US market for light trucks and SUVs(8.6M registrations in 2002)surpassed the car market in 2002(8.1M registrations).nThe low level of US fuel taxes boosted SUV sales far more than in any other country,although rising oil prices and environmental legislation could reduce sa

27、les.nIn 2002,roughly one-fifth of the cars,light trucks and SUVs registered in the United States were foreign.California has the highest rate of passenger car purchases,accounting for roughly 13%of the total.nThe US industry,regardless of its high numbers,is currently saturated.The stock of passenge

28、r cars per head was the ninth largest in the world in 2002.With nearly 500 cars per 1000 of the population,the US has more cars per head than the United Kingdom,but slightly fewer than Italy and Germany.nCar usage is extremely high in the United States over other countries in the world.The average p

29、erson in the United States travels about 9,000 km per year,compared to 6,000 km in Western Europe and 4,000 km in Japan.BUSINESS INTELLIGENCE GROUPBig 3 Continue to Lose Market Share to JapanAs the automotive industry gets more competitive,American consumers are buying more Japanese automobiles due

30、to their reputation for quality and value.Toyota,Honda and Nissan increased their U.S.sales and market share in the first half of 2003,while the Big Three manufacturers(GM,Ford,DaimlerChrysler)saw their sales decline despite spending heavily on incentives.This trend started in 1998,when domestic man

31、ufacturers started to lose nearly 10 points of share,and the Japanese gained nearly 5.Industry-wide,car and light-truck sales were down 2.5%through June,to 8.2M.However,the three biggest Japanese manufacturers sold 100,000 more vehicles,and the domestic Big Three sold 200,000 fewer.Market share for

32、all Japanese brands is at an all-time high of 28.5%,and domestic brands have shrunk to a historic low of 60.5%.The economic downturn has favored automakers like Toyota since consumers have become more stingy and discriminating with their purchases,thus favoring quality and value,which are the major

33、selling points for most Japanese automakers(versus,for example,luxury autos).The Japanese continue to grab bigger chunks of the market despite record spending on incentives by their domestic rivals.At the beginning of June,incentives for Chrysler,Ford and GM averaged$3,389 per vehicle,versus$1,062 f

34、or Japanese brands.Korean makes averaged$1,371 and European brands averaged$1,945.01020304050607019962003DetroitsBig 3JapansBig 3US Car/Truck Share 1996 vs.2003Source:The Economist,June 2003BUSINESS INTELLIGENCE GROUPBig 3 Continue to Lose Market Share to JapanThe Big 3s incentives(14%of sale prices

35、)are likely unsustainable.Their dependence on increasingly large incentives to offset the lower resale value of US cars reflects perceived problems with their long-term quality and durability.For example,Toyota and GM cars can be virtually identical(sometimes made on the same assembly line as part o

36、f a GM-Toyota joint venture),but because GM sells in the used-car market for 15-20%less than Toyota,2GM routinely offers purchase incentives of$1,000 a car,four times more than Toyotas givebacks.3 The Big 3 continue to concentrate their testing efforts on the defect rates of product components.Howev

37、er,this focus doesnt increase the likelihood of producing a more appealing car.For the Big 3,tests rate the cars components but with less emphasis on the performance of the entire car as measured by the desired attributes(such as quietness).Conversely,Japanese automakers are particularly effective a

38、t testing for the attributes that excite their target customers.The Honda Civic,for example,is tested extensively for three key attributes:fuel efficiency,initial product quality,and durability.The resulting vehicle is more than a collection of defect-free subsystems;it is a car that performs well i

39、n the areas that customers have come to expect from Honda.The upside for domestic automakers is that it is doubtful the Japanese can continue increasing their share at the same pace.Fewer segments are left for the Japanese to invade.The Toyota division,for example,offers a full line of vehicles comp

40、arable to Ford or Chevrolet,and it has a range of models in the Lexus luxury division that includes sedans,SUVs,and sports cars.Profitability is also pressured at the Big 3 compared to Asian manufacturers.For example,Honda averages$1,581 in profit per vehicle(sold in the US)and Toyota gets$1,214.Gen

41、eral Motors,however,earns only$701 while Chrysler Group makes only$226.Ford loses an average of$114 on each vehicle sold last year.BUSINESS INTELLIGENCE GROUPGlobal Automotive Industry:Market Share by RevenueDaihatsu 1%Nissan4%Honda5%Volkswagen8%Porsche AG1%Fiat5%Peugot6%Renault3%BMW AG4%Mitsubishi2

42、%Suzuki1%DaimlerChrysler14%Ford15%General Motors17%Toyota10%The global automotive industry is highly concentrated while market share is shifting.nDaimlerChrysler,Ford Motor,and General Motors make up 44%of total global sales.However,this is one percent less than last year,indicating the Big 3s loss

43、of market share to smaller competitors.nWhile Toyota has greatly increased its market share in the US,the company has also lost a percentage of market share since last year.nImports to North America are the highest theyve been since the late 80s.Of particular concern to American manufacturers,light

44、truck sales,once the major profit generator,are losing share to foreign competitors like Toyota and Nissan.Source:Standard And Poors,2003BUSINESS INTELLIGENCE GROUPIndustry Profitability Severely PressuredThe large automakers have been fighting the downturn and trying to sustain sales with large reb

45、ates and easy credit in the US and increasingly in Europe.However,these strategies have seriously pressured profits.DaimlerChrysler reported in July 2003 that net income fell worse than it has since the industrys last poor earnings period in late 2001.Mitsubishi promoted easy credit,including loans

46、that deferred payments for a year to consumers with weak credit but have recently rescinded this promotion due to profit erosion.PSAs profit was hit mostly due to the rise of the Euro,especially against the British Pound and Brazilian Real,Brazil being where it has one plant.Some automakers are attr

47、ibuting this span of poor earnings to the bottom of the current cycle of slowdown,however many are still seeking structural improvements and better pricing power to buffer this cycle.CompanyEarnings StatusIssuesGeneral MotorsOperating profit fell 87%,Announced earnings August 8,2003Intense US price

48、war severely pressured profitsDaimler ChryslerSecond quarter 2003 operating profit fell 62%Chrysler losses,US price war,Mercedes sales slackingRenaultOperating profit fell 588 million.Last reported 7/24/03Global sales decline(4.5%)in first half;adverse currency movesPSA Puegot CitreonOperating profi

49、ts in auto division down 27%in first half 2003Strong euro,weak French demandVolkswagen400 million off its pretax profit,announced May 2003Foreign-exchange moves,weak European salesMitsubishiForecasting$674M net loss as of July 2003US sales down 20%in 6 mos.April;anticipates$420M charge for bad car l

50、oansFord96%drop in operating profit in mid July announcements$525M loss at Ford of Europe,US price warSource:Wall Street Journal,Earnings ReportsBUSINESS INTELLIGENCE GROUPAutomakers Still Poor at Aligning Supply and DemandProfits in the global auto industry are suffering since OEMs cannot align the

51、ir supply with consumer demand.While consumer demand data is readily available,carmakers follow lagging indicators and the result is ineffective advertising and rebates and inventory overstocks.The current methods that automakers use to satisfy demand are out of alignment.nIn record sales years(such

52、 as 2001),profits in the automobile industry averaged a mere 1.2%and only three companiesBMW,Honda and Magna International-had 5%profit.nForecasts often miss actual demand.For example,demand for Daimlers PT Cruiser far exceeded supply when it came on the market.Then DCX ramped up capacity to 230K un

53、its,making it ordinary and buyers moved on.Right now the factory is discounting the model,further eroding the models image.nSuppliers are hurt by variation.When an OEM plans incorrectly on a particular platform volume,of about 10-15%,the factory has to raise or lower volume suddenly.nIn 2002 sales w

54、ere the lowest in four years,leaving vehicle inventory at 70 days.Seventy days of inventory can mean$40B in capital sitting on lots.Meanwhile dealers and OEMs spend$3B and$11B,respectively,every year on advertisements.nThe loop from production planning to manufacture to sale and back takes up to 6 m

55、onths,which is too long to fix overproduction of an unpopular configuration or to inform suppliers of surges in demand.With a lagging market,intense competition and more rapidly shifting consumer tastes,this poor alignment has been more obvious in the industry than ever.nAutomakers are still applyin

56、g last years sales results to the current years pre-planned volume without consideration of how many days it took to sell specific vehicles.BUSINESS INTELLIGENCE GROUPUS Automotive Distribution:Inefficient NetworkDealers account for nearly all US car and commercial-vehicle sales,but these networks a

57、re increasingly inefficient.Automotive companies have not been able to relocate or shut down poor performers due to state laws.However,it is possible to reshape dealer networks by orchestrating a series of ownership changes,encouraging weak performers to exit the market,helping top performers to exp

58、and,and encouraging dealers to improve sales skills.Given tight profit margins,manufacturers can definitely use the extra profit that a more efficient distribution system could deliver.U.S dealer networks were built in an incremental and uncoordinated way over several decades creating room for conso

59、lidation as well as other efficiency-enhancing improvements.Manufacturers have awarded franchises to thousands of independent owner-operators ranging from small family businesses to large scale national chains.Once a dealership opens for business,the manufacturer cant exert much direct control over

60、it and must be content,essentially,with the role of product and financing supplier.Multi-brand manufacturers face the additional complication of dealing with several overlapping networks that work against one another.A dealer has substantial power to put a manufacturers top and bottom lines at riskf

61、or example,by cutting back its investment in facilities,pushing the brands of competitors,or pursuing fewer but higher-margin sales at the expense of the manufacturers volume goalsthereby optimizing its profits and undermining those of the OEM.US automotive manufacturers rely almost entirely on deal

62、ers to distribute their products.In 2001,dealerships had sales of more than$800 billionclose to 100%of the manufacturers total vehicle sales.The manufacturers also depend on their dealer networks to provide the after-sales parts and services that are fundamental to their success.Source:McKinsey Quar

63、terly,Strategy&Business,Wall Street Journal,EIUBUSINESS INTELLIGENCE GROUPUS Automotive Distribution:Inefficient NetworkFactorsIssuesGeographic Distribution1.Outlets must be close to customers but not too close to one another.2.The once robust networks of the Big 3 were built largely in the 1920s-19

64、50s and havent been adapted to demographic shifts.These networks are too tightly clustered in urban areas and too sparse in the suburbs.Dealer Sales1.Some dealers are better at running their businesses than others yet manufacturers can not eliminate poor performing dealerships.2.The experience of on

65、e major manufacturer suggests that,adjusting for market size and location,dealers in the top quartile sell three to four times as many vehicles as dealers in the bottom quartile.Business FormatProviding service and parts is essential to the health of dealerships and manufacturers whose reputation de

66、pends on service.Some dealers cover 100%of their fixed(and even other)costs through parts and service.Some dealers do not capture downstream revenues in full.Traditional business formats require authorized dealers to provide service only at or near their showrooms.If a local market cant support the customary full sales and service operation,dealers have no way of providing service by themselves,4and the network forfeits tens of billions of dollars to independent repair shops and third-party part