RSM Ebner Stolz Automotive Study 2024: Automotive Industry in Crisis Mode

The automotive industry is facing significant upheavals and challenges. The stalled transformation towards electromobility, the intensified competitive situation in the global automotive market, and the deterioration of basic conditions in Germany have put the industry into crisis mode. The “Automotive Study 2024” by RSM Ebner Stolz offers a comprehensive analysis of the current situation and future prospects.

Electromobility: Broken Trend

In our 2022 study (“Zeitenwende”), we pointed out that the technological shift towards electric cars is “not customer-driven but politically driven”, and that there is a risk that the growth expectations for this market segment might not be met due to a lack of customer acceptance. This scenario has now materialized: In Germany and Europe, the steep rise in sales figures for electric cars has stalled.

In the U.S., electric cars continue to play a marginal role. Only China remains on track: The electric car continues to gain ground there, but it will be interesting to see how the sales figures develop when financial support for electric vehicles is reduced in 2025.

Unlocking Technological Potential

The study criticizes the political pressure and unrealistic time targets that have led to suboptimal solutions in the raw material and production chain. With a long-term transformation, companies could adapt their industrial structures and supply chains more efficiently and find optimal solutions for many unanswered questions. This includes, for example, a forward-looking battery technology (keyword: solid-state batteries) and new forms of charging technology (keyword: inductive charging).

Projection Into the Future: The 2030 Powertrain Mix

The study assumes that in 2030, one-third of the vehicles sold in the global automotive market will be electric cars, one-third hybrids, and one-third internal combustion engines. Also in Europe, the authors expect that around two-thirds of the vehicles will still have an internal combustion engine (pure combustion plus hybrids). The goal of having 15 million electric cars on the road in Germany by 2030 will not be achieved.

It is clear: Even to achieve these reduced targets, the electric car market needs new impulses – technological, financial, and psychological ones!

Chinese Manufacturers on a Path to Growth

The Chinese government’s plan to build the automotive industry around electromobility into a cornerstone of the Chinese economy has succeeded. Especially in the mass market, Chinese manufacturers have gradually displaced Western competitors and are now pursuing a clear internationalization strategy.

The expansion of Chinese car brands over the past few years has indeed been remarkable: Since 2020, the market share of Chinese manufacturers in the market for battery electric vehicles (BEVs) has risen from 2.9 to 21.7 percent – accompanied by a disproportionate growth of this market segment. In total, China exported slightly more than 700,000 vehicles (passenger cars) to the EU in 2023, being particularly successful in markets without their own automotive industry and with a high share of BEVs in their overall passenger car market.

Market Penetration, but No Market Domination

Despite their undeniable success in some European markets, the Chinese should not be overestimated. They are still facing significant challenges in permanently establishing themselves in the European automotive market. This primarily concerns the development and expansion of effective sales and service networks. Additionally, many Chinese brands still need to invest in their recognition and image. For other manufacturers, this presents a chance to align their competitive strategies with the Chinese brands.

The Chinese Challenge: Threat and Opportunity!

The surge of Chinese automotive manufacturers is not only a threat but also an opportunity for established manufacturers. They must use the challenge to review not only their strategies and business models but also their structures and processes.

Customs barriers will not help, because the Chinese will – as the Japanese and Koreans did before – build transplants in Europe, which will increase the capacity pressure.

A New Lean Management is Needed!

The market entry of the Chinese will rebalance the pricing structure in the European automotive market. This affects both volume brands and premium brands. Especially the German premium brands must be careful not to price themselves out of the market.

Customer expectations will continue to rise in the future, and from a customer perspective, premium prices must be justified by the technology and features of the vehicles. Advanced technologies and additional features, however, require new models to be developed and produced more cost-effectively. More than in recent years, companies’ competitiveness will not depend solely on image and design but rather on the substance of their products and appropriate pricing.

A new phase of lean management is called for!

Four Key Areas of Action

The recalibration of price points poses a challenge for both OEMs and suppliers to put customer-oriented value creation at the center of their corporate policy.

Specifically, the study identifies the following four key areas of action: (1) Adjustment of the technology and product portfolio, (2) Capacity and location policy, (3) Rationalization and automation, (4) Revitalization of the performance culture. In all these areas of action, there must be one guiding principle: What are the – from a customer perspective – value-adding processes, and how can these be “streamlined”?

Giving Priority to Rationalization!

Production capacities in many Western European countries are not fully utilized, with overcapacities either in sight or already a reality for some manufacturers, which means that OEMs will likely adjust their capacities in the coming years. Therefore, medium-sized automotive suppliers urgently need to prepare for a scenario of competitive displacement.

Given the shortage of skilled labor, many medium-sized suppliers have been drawn into an “inflation” of social benefits, driven by large corporates. This cannot be sustainable: An effective strategy against the shortage of skilled labor is accelerating the rationalization and automation of labor-intensive processes.

Encouraging Willingness to Perform Instead of Blocking It

All companies in the automotive industry face the challenge of reviewing their human resource (HR) policies, corporate social regulations, and bonus systems to see whether they weaken or promote the performance and willingness to perform of their employees. This process must begin with recruitment and extend through HR management to HR development.

Conclusion: Focus on Value Creation and Costs!

In the current situation faced by the German automotive industry, increased emphasis must be placed on consistent cost management. This is primarily about scrutinizing all activities that do not directly add value. Special attention should be paid to the possibilities emerging from artificial intelligence, through which administrative, planning, and scheduling processes can be optimized.

The authors of the study are convinced: The automotive industry needs to streamline structures and processes. Only in this way will they be able to leave the crisis mode behind and switch back to a mode of accelerated growth!