According to a new study conducted by Wards Intelligence for Hexagon's Manufacturing Intelligence Division, traditional vehicle manufacturers are not prioritizing the transition to Industry 4.0 processes and are at risk of being overtaken by new market entrants.
Large technology companies and so-called unicorn start-ups from Silicon Valley, the UK and China are disrupting the EV market with cutting-edge digitalization and automation, shortening time-to-market from several years to just three months. Global sales in the e-vehicle market could rise to 34.7 million by 2030. To maintain their market position, OEMs must keep up with the pace of innovation of their competitors. Despite this, only 48% of manufacturers in the automotive sector are planning to invest more in the smart manufacturing strategies used by their competitors, while 25% have no such plans.
One advantage for the new entrants is the low volume of orders for EVs, which is helping production speed replace high volume as a key factor in the automotive industry. This means that traditional car manufacturers are inferior to electronics companies such as Foxconn and Huawei. These companies are familiar with fast innovation cycles and have fewer hurdles to overcome as consumers expect them to deliver digital technologies with a higher level of integration. In addition, new vehicle designs make up to 90% of car parts of existing internal combustion engine vehicles obsolete and their strategies are less dependent on current supply chains and mass production facilities. Based on the study results, only 8% of automakers consider new EV manufacturers a threat, even though Tesla is already the market leader in battery electric (BEV) vehicles, and companies like Lucid are rapidly scaling up with vertically integrated EV manufacturing.
In contrast, the data reveals a disconnect among the larger OEMs in terms of the corresponding move towards digital transformation. While interest in smart manufacturing has definitely increased in the automotive industry, it shows how the recognition of its value has not been matched by its implementation. According to the study, the most critical factors for the success of e-vehicle supply chains for the industry are sourcing the required volumes of parts and the lack of economies of scale.
Paolo Guglielmini, President of Hexagon's Manufacturing Intelligence Division, explains: "Our study reveals that the challenges for vehicle manufacturers seeking a firm foothold in the EV market are both internal and external. With the need to offer a wider range of affordable electric vehicles or even 'made-to-order' vehicles at current order volumes, traditional high-volume production lines need to be replaced by more agile manufacturing geared towards speed to market, leaving the just-in-time model behind for good. The challenge for established companies is to achieve this while maintaining the necessary profit margins. This can only be achieved by vertically integrating development and manufacturing processes, but this is not easy and requires a cultural change that goes hand in hand with technological investment.
"The current transformation of traditional business models in automotive manufacturing prioritizes flexibility over processes. It supports skilled workers through integrated processes and greater automation. Digital design and manufacturing approaches are key to agility and a major reason why digital natives are causing a stir in the market. The major OEMs are not standing still - we are seeing incredible innovation from companies that are rapidly reorganizing their global operations. However, they need to target continuous optimization processes and rethink the scope and nature of collaboration with their suppliers to ensure the e-transition in the automotive industry.
Overall, the data shows a growing interest in smart manufacturing approaches that leverage extensive connectivity, cloud and edge computing in data analytics, AI and robotics. The industry is on the cusp of unprecedented change, with very different perceptions and stages of development on its journey towards Industry 4.0. The convergence of these additional technologies will drive adoption and implementation. OEMs and their supply chains will seek to adapt to these changes as they evolve with the market.
Wards Intelligence's white paper for Hexagon, THE ELECTRIC VEHICLE PIVOT, provides insights and analysis based on research and survey data on the evolving automotive supply chain and the emergence of smart manufacturing processes in the context of the increased shift to the electric vehicle (EV).
