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Emerge from the Automotive Downturn Stronger Than Before

BCG’s modeling projects a downturn that will disrupt the historic growth run of the automotive industry—the only questions are when and how hard will it hit? While downturns are a time of uncertainty and challenge, this is not the time to retrench or hide. Companies that take strong, bold, proactive steps—far beyond cutting costs—will emerge from the downturn stronger than before.

The Impending Downturn

Currently in its ninth straight year of growth, the automotive industry has been enjoying one of the longest expansions of automotive manufacturing in history. But the telltale signs of an impending economic downturn are emerging, among them: weakening GDP growth, stalling global trade, declines in consumer sentiment, an increase in vehicle incentives, and an increasing number of auto loans in delinquency. 

In combination, these trends will put the brakes on the momentum that has fueled growth in the automotive industry.

Why It’s Different This Time

Automotive industry leaders might think that they have already learned the lessons they’ll need to get through the impending downturn by having survived the last one, The Great Recession. But BCG doesn’t expect the moves that helped in the slowdown that began in 2007 to be very useful this time. The coming downturn will differ fundamentally from the previous one because the forces at work are entirely different than those we witnessed in the past decade.

2007

  • Massive overcapacity throughout network
  • Incremental innovation on ICE (internal-combustion engine) products
  • Ride sharing options were limited to taxis & car rentals
  • Digital and AV (autonomous vehicle) concepts were in an experimental stage
  • Efficiency gains were driven by traditional lean levers

Now

  • Misaligned capacity with market demand
  • Managing two footprints in parallel, EV (electric vehicle) and ICE
  • Mobility has been irreversibly changed, and ride-sharing is ubiquitous
  • Major original equipment manufacturers (OEM) and tech players are investing billions in digital and AV
  • Tech & Digital levers drive efficiency gains


We must prepare now for the likelihood of a recession

Lawrence H. Summers, former U.S. Treasury Secretary (Financial Times, Jan. 7, 2019)

Downturns Are Not a Time to Focus Only on Survival

The industrywide shake-ups that result can persist for decades—presenting opportunities for organizations prepared to think and move in new ways. Thriving in a downturn requires far more than cutting cost. It demands that companies free up resources to make select investments while protecting critical bets to win in a new era of mobility.

The Time to Act Is Now

Planning now for the coming reality can unlock meaningful value creation. We help our clients in the automotive industry achieve downturn readiness and resilience by engaging them in a three-phase effort:

Meet the Experts

Automotive & Mobility

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