From Our CEO
Shifting Gears in Automotive
By ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE
Everybody remembers their first car. Mine was an old Lincoln Continental with doors hinged at the rear, often referred to as “suicide doors,” which are apparently being brought back by the automaker. It was a behemoth of a car — barely getting nine miles per gallon, at a time when the United States was dealing with a gas price spike from 38 to 55 cents!
But times are changing. Increasingly, teenagers are choosing not to get a driver’s license at all. Likewise, more adults today are opting to forgo a car. Instead, they are living and working in big cities, enjoying the convenience and time savings of Uber, and electing to do their part to reduce planet-warming emissions. Even most automotive industry executives believe that a full 50 percent of current U.S. car owners will lose interest by 2025.
“The automobile — once both a badge of success and the most convenient conveyance between points A and B — is falling out of favor in cities around the world as ride-hailing and other new transportation options proliferate and concerns over gridlock and pollution spark a reevaluation of privately owned wheels,” write Keith Naughton and David Welch in Bloomberg Businessweek.
Automotive purchases aren’t just dwindling in the United States. Sales in Europe fell 8 percent in 2018; China experienced a 6 percent drop. According to Bloomberg, many analysts think the industry may never again reach record heights. The authors go on to say that “peak car” is a reflection that reurbanization and the widespread adoption of ride-sharing apps will lessen the need for many of the 1.3 billion vehicles now on the road: “With new cars increasingly expensive, but mostly used just a few hours a day, the financial case for alternatives is growing stronger.”
Indeed, vehicle expenses are the second-largest outlay for Americans, yet most cars are parked more than 90 percent of the time.
But car manufacturers are not losing hope. Instead, they are choosing to put more time and effort into disruptive services, such as autonomous vehicles (AVs) in the form of robo-taxis and other self-driving cars — and even forming some unlikely partnerships between “frenemies” along the way.
Other companies are partnering with ride-hailing businesses, focusing on both AVs and new vehicle types. As Uber-style services increase the total proportion of all trips taken in a car, manufacturers will need to meet demand for more vehicles that are that are clean, safe, reliable and comfortable for passengers.
Hit the road
Keeping up with complex and rapidly changing market dynamics will require considerable investments and unprecedented agility. Best-in-class sales and operations planning (S&OP) is a proven tool that today’s automotive manufacturers can use to enable greater collaboration, synchronize product unveilings and coordinate a successful response.
Now in its 12th year, the Best of the Best S&OP Conference this June in Chicago will be a global gathering of the brightest minds in the industry. Presented by ASCM and the Institute of Business Forecasting and Planning, educational sessions feature integrated-business-planning techniques; proven tools to manage and mitigate risk; and strategies for using S&OP to enhance new product launches. Whether you’ll be taking your own wheels or someone else’s, this event is well worth the trip.