Automotive Sector: Rethinking Organizational Structures and Operations

Focusing drastically on digital channels, transitioning to recurring income sources, optimizing asset deployment, embracing zero-based budgeting, and developing a resilient supply chain are five steps automotive leaders may take to help them through this process.

FREMONT, CA: Before the COVID-19 crisis, the auto sector faced huge challenges such as electric mobility, driverless cars, automated factories, and ridesharing. With travel severely hampered by the pandemic and global manufacturing closures, plummeting car sales, and significant layoffs, it is natural to ask what the auto industry’s new normal will look like. The first signs of this automotive future have emerged in recent months, with the most significant industry changes yet to come.

The COVID-19 situation has forced nearly all automotive-related companies to place their employees on short-term work during the lockdown, a plan in which employees are temporarily laid off and receive a significant portion of their income through the government. The COVID-19 condition has had enormous and unprecedented global ramifications. Many auto-retail establishments were shut for a month or more. According to estimates, the profits at the top 20 global automakers were likely to fall by 100 billion dollars in 2020, a six-percentage-point drop from just two years ago. It could take years for the company to recover from this drop in profits.

On a practical level, the pandemic has hastened advances in the car industry that had been underway for several years. Many of these developments are primarily positive, such as the increase in web traffic and OEMs’ (Original Equipment Manufacturer) increased readiness to work with automotive and non—automotive partners to solve problems. But, on the other hand, others can have negative consequences, like a tendency to focus on core pursuits rather than branching out. Thus, while OEMs may be focusing on the core right now to keep the lights on, failing to look at other possibilities could damage them in the long run.

Automotive executives can gain an advantage by rethinking their organizational structures and operations as they manage this crisis. Focusing drastically on digital channels, transitioning to recurring income sources, optimizing asset deployment, embracing zero-based budgeting, and developing a resilient supply chain are five steps they may take to help them through this process. One guiding element will also be beneficial: the necessity to build a strong decision-making tempo. The window of opportunity for implementing these adjustments may close permanently, which means that now is the only time to act.

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