Future automotive industry value chain: after 2025

In recent years, the topic of disruptive changes in the automotive ecosystem has dominated the relevant industry discussions, and a fundamental restructuring of the entire automotive value chain seems inevitable. However, many developments are still speculative and the future path is still unknown.

Deloitte has launched the report "Future Automotive Industry Value Chain - 2025 and Beyond", which explores the most important driving factors for the development of the future value chain in today's uncertain times, and how automotive industry leaders should make investment decisions so that they can have corresponding professional technology, production capacity and stable supply chain when market demand emerges. Through scenario-based business modeling, this report identifies four reasonable settings that the value chain of vehicle companies may have in 2025, helping automotive industry decision makers to systematically verify their own forecasts and strategic plans.

Key points/main results of Future Automotive Industry Value Chain - Beyond 2025:

• The automotive industry is in the midst of a historic transformation. Market changes, new business models, and new value chains are emerging one after another. Monitoring the signs of development and quantifying the impact using an integrated financial model will help understand the key steps of change.
• Drivers Affecting the Automotive Industry Value Chain. The automotive industry value chain in 2025 will be driven by a number of powerful factors, which fall into the categories of social change (S), technological progress (T), economic transformation (E), environmental trends (E) and political development (P). The drivers with the greatest impact and the highest uncertainty are the key to predicting plausible scenarios for the automotive industry in 2025.
• Based on the known important trends and drivers in the automotive value chain, we have selected six strategic areas:
  This is the question that all decision makers in the automotive industry will most likely face in 2025:
• E-mobility: Develop and pursue an electric product portfolio. Between 18% and 36% of vehicles sold in the market have alternative powertrains, either at the request of consumers or regulators.
• Autonomous driving: Focus on the research and development of autonomous vehicles. Provide top-quality services and ensure clear responsibilities through alliances and lobbying, while fully embracing and advocating technological innovation in the market.
• Sharing economy: Adjust the value chain with car sharing as the orientation. It is only recommended to set up exclusive services when the vehicle companies still dominate the value chain.
• Digital business model: Creating a profit pool based on data and media. Infotainment and mobile travel services account for 20% of total revenue and 19% of EBITDA of vehicle companies.
• Industry 4.0: Building smart factories and management models. With the improvement of factory and back-end efficiency, the EBITDA of vehicle companies will increase by 20%, which is a necessary condition for making profits in the future.
• Workforce transformation: Prepare for structural adjustments. By 2025, half of the production jobs of vehicle manufacturers will be at risk, and the demand for IT talents will reach 13,000.

Based on the survey results, this study made the following four predictions on the future development of vehicle manufacturers:

• Invest heavily in new business models, build strong brands and become a technology leader.
• Cooperate and form alliances with other vehicle manufacturers, protect existing technologies and capabilities, compete with emerging information technology giants, and maintain existing market positions for a certain period of time.
• Focus on efficiency improvement, focus on niche markets and company vehicle business, and win a place in the tough market environment against well-funded competitors.
• Establish strategic partnerships with IT giants. Produce high-quality, cost-effective vehicle platforms while building a strong brand image to provide mobility services and lead the white-label vehicle market.

From various scenarios, automotive companies should actively invest in electric mobility, autonomous driving and Industry 4.0. OEMs need to evaluate various driving factors based on internal and external environments to be fully prepared to cope with future challenges and continue to occupy an important position in the market after 2025.

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