"Many industry forecasts have suggested that the efficiency gains achievable through electronic commerce will reduce the cost of a car by several thousand dollars. But estimates of this magnitude understate the challenges that automakers and suppliers face in implementing the necessary channel changes," said Michael Heidingsfelder, a Partner at Roland Berger. "The objective of our study is to cut through the hype by presenting a realistic assessment of the impact of B2B initiatives on the auto industry. We have also identified the key factors that will separate the winners from the losers within the automotive value chain."
Heidingsfelder was speaking from Boston, where the results of the study were announced to a gathering of industry thought leaders brought together to discuss how business-to-business e-commerce will evolve in the auto industry over the next five years. The study itself was built on interviews with 150 leading players in various elements of the automotive sector, including manufacturers and suppliers and the technology companies servicing their initiatives. The study was conducted in the U.S., Europe and Japan.
According to Heidingsfelder, the firm's research suggests a more modest level of e-commerce-related cost savings than other expert sources have predicted - and the growth will be more of an evolution than revolution. The survey's estimate of roughly $1,200 in savings per vehicle for the North American industry within the next 5-years compares with estimates of several thousand dollars per vehicle in many other industry forecasts. The survey dollar figure represents 4.9% of the $24,500 average price of a car in North America.
The estimates are even lower for European and Japanese manufacturers. The study's "eSave model" projects savings will be approximately $639 per vehicle for the European auto industry, or 3.4% of the $18,600 average price of a car there. For Japan the figure is $540, or 3.9% of the $13,750 average vehicle purchase price.
The savings forecast includes estimates for potential cost reduction at all levels of the automotive value chain, added Eric Kintz, Associate Partner and head of Roland Berger's e-commerce practice in the United States. Of the $1,200 per vehicle that can be cut out of the North American auto industry cost structure, he explained, only a fraction will be retained at each level of the supply chain.
"We expect most of the industry's cost savings to be passed downstream from the supplier to the manufacturer and from the manufacturer to the consumer," said Heidingsfelder. Out of the $1,200 cost savings, the consumer will get almost $900. "And we believe the pass through for an automaker is predicated by industry overcapacity; that is to say, it will be greater for mass-market vehicles and smaller for luxury vehicles. The same factors will determine the pass through/retention of cost savings for suppliers."
Among the survey's other notable findings:
Though the Roland Berger/Deutsche Bank study focused on the auto industry, "it has practical implications for old economy companies in the Internet world," said Kintz. "Companies could, and should, spin off businesses that do not provide a competitive advantage because Internet technology takes away some of the disadvantages of doing this.
Also, mergers and acquisitions are no longer necessary to achieve traditional synergies; instead, strategic alliances will grow in popularity," adds Heidingsfelder. Furthermore, he noted, product integration, engineering, technology and knowledge will become increasingly important over the next few years, and tangible assets will become less valuable.