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Quo Vadis, Chinese OEMs in Europe? Part 1

Munich, August 2022

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Quo Vadis, Chinese OEMs in Europe?

Munich, August 2022
T

his is the first in a new short series that will focus on the performance of Chinese OEMs (old and new) in Europe. In this introductory article, we take a hard look at Chinese entrants’ achievements so far. Continue reading in the upcoming weeks for further insights.

Executive summary

  • China’s automotive exports are steadily increasing; however, this growth is mainly driven by exports to developing countries, where Chinese brands have built a large fan base
  • In an attempt to replicate this success in Western Europe, Chinese OEMs are targeting the premium segment; interestingly, only two of the many Chinese market entrants have achieved an initial degree of success: Polestar and MG (both originally European brands)
  • The majority of Chinese OEMs in Western Europe are not leveraging their biggest strength: customer-centricity
  • Instead, they are leaving large potentials untapped (similar to Western OEMs in China) by underutilizing strong product substance with targeted tailoring to local customer tastes
Authors
Dr. Jan Burgard

Berylls Group CEO

Willy Wang

Managing Director China

Hongtao Wei

Associate Partner

Lois Yang

Lead Analyst

Soleiman Mansouri

Associate Partner

The export giant is now also shipping cars

Since 2009, China has topped the ranking of global export champions. For several years, the top three categories have been: (1) electronic devices and equipment; (2) machinery; and (3) apparel and textiles. Although China is a trade colossus, it is not famous for automobile exports. But these have been growing in value consistently since 2018, even through the Covid-19 pandemic.

China’s automotive exports hit a new record last year, with statistics from China Association of Automobile Manufacturers (CAAM) showing that they had doubled in a year and exceeded 2mn units for the first time. Exports accounted for 7.7% of total revenues in the auto industry – an increase of 3.7% over the previous year.

This performance has made China the third-largest auto exporter in the world, catching up with traditional auto powerhouses such as the United States, France, and Italy. However, the export volume is still not as high as those of Germany and Japan, with approximately 2.2mn units and 3.4mn units respectively.

China – the eternal workbench for low-price, low-quality products?

Major Chinese OEMs are actively engaged in markets abroad. Traditional Chinese carmakers typically enter developing countries such as Russia and South Africa, and Middle Eastern and Eastern European countries with mostly budget/value-for-money products. But Chinese OEMs also hope to win a share of the premium segments in mature Western European markets with advanced NEVs as well. NIO and Polestar are widely considered premium brands, for example. MG prices can reach more than £31k (in the UK) and ZEEKR as much as €50k, while prices for the upcoming HiPhi X are expected to match those of a Porsche Taycan.

Currently, the main export markets for Chinese automotive brands are South-east Asia, Central and Eastern Europe and Latin America, with Chinese OEMs performing quite well in these countries and regions.

Let’s look at some examples:

Chery is selling its models in more than 80 countries and regions around the world, mainly focused on emerging markets such as Russia, Brazil, and Saudi Arabia. In 2021, Chery exported 269k vehicles, with a year-on-year (YoY) increase of 136%, making it the fastest-growing Chinese auto brand abroad.

SAIC has been the leading Chinese brand abroad since 2019. In 2021, it sold a total of 697k vehicles abroad, a YoY increase of 78.9%. SAIC’s sales performance in emerging markets including the Middle East, Egypt, and Mexico has been good. In Mexico, for instance, SAIC sold 3.5k cars in April this year and enjoyed continuous sales growth for the first four months of 2022. In the Middle East and Egyptian markets, SAIC sold 5.5k and 2.9k vehicles in April respectively, also setting new records.

SAIC’s strong sales were also achieved thanks to the MG brand, with its British heritage. MG enjoys strong recognition and acceptance in mature auto markets such as Western Europe, Australia, and New Zealand, ranking 26th in the European Automobile Association’s list of top car brands by sales in Europe in Q1 2022. MG sold 21k vehicles in the first quarter of this year, nearly three times more against the same period in 2021. This gave SAIC a 0.76% share of the market in Europe, and the company surpassed the growth rate of brands including Land Rover and Honda to set the best record of Chinese OEMs in the European market. SAIC now ranks as one of the top 10 brands in 17 countries around the world.

However, not every Chinese player is doing as well as SAIC in targeting the premium segment in mature automotive markets in Western Europe.

Without heritage, you are going nowhere

Traditional Chinese OEMs have built a large fan base in the volume segment and acquired considerable expertise in entering developing countries. But this is unlikely to satisfy Chinese OEMs, which have their eye on the highly prestigious Western European market. The “if-you-can-make-it-here-you-can-make-it-anywhere” story is simply too sweet to tell at home (in China) and not give Western Europe a serious try at least.

To do so, Chinese OEMs typically target the premium segment: they all want to become premium or at least more upscale and shed their budget/value-for-money image. Preferably, they would like to make their mark with NEVs, where Chinese players believe they have strong products and technology, a solid reputation in their home market, and a legacy-free perception in Western Europe.

However, using NEVs to open the door to Western Europe, particularly in the premium segment, is not an automatic win for all Chinese OEMs.

To date, more than 10 Chinese OEMs have launched, or are about to launch, NEVs in Europe. Among them are some of the most illustrious and well-known OEMs, new players and established ones alike, including NIO, Xpeng, BYD, and Great Wall.
However, only two have achieved initial success: Polestar (originally Swedish) and MG (originally British). Both are among the top 20 best-selling NEVs in Europe. By contrast, other Chinese OEMs have barely made an impression in Europe.

Chinese OEM sales in Europe 2021 (vehicle units)

It is no coincidence that the two most successful brands are of Western European origin. Technically, they are not pure Chinese brands, and it is true that their starting point (in terms of branding) is far ahead of traditional Chinese OEMs. Polestar and MG seem to owe a lot to their inherited European brand ‘halo’ giving them a solid, existing brand awareness and image in Europe. Xpeng, NIO, and other Chinese brands that have just entered Europe still have some distance to go to win over European customers, especially those in Western Europe. (Sneak peek: We do believe that, in theory, “dinner is served” for Chinese OEMs – traditional and new – and the starting position for traditional Chinese carmakers could be a lot worse, as we will describe in the next article in this short series.)

Ready to compete

Operating in Europe is very different from operating in a market where brand loyalty is low and Chinese NEV players are considered to be the avantgarde. In Europe, traditional brands still hold a strong position and new players, in particular from the US, implement quick go-to-market approaches. Thus, Chinese players will have to go the extra mile to succeed.

In terms of product spec, for example, Chinese NEVs are highly competitive, particularly in new areas such as NEV range, digital functions, connectivity, ADAS and AD. We are convinced that both the product and portfolio of the NEV players pose a big threat for traditional European OEMs. Combined with aggressive pricing levels and digital/mobility functions (in particular wallbox, mobility services/charging network access, mobility guarantees etc.), the offering should be more than competitive.

However, several key issues remain. Firstly, Chinese OEMs (like any other OEM) need to find the right partners to make the ecosystem described above work, starting from the basics including sales, aftersales and call centers. Another critical task is branding. The key question for Chinese OEMs is how to promote themselves to European customers and create trustworthy brands in Europe. The timing could not be better to introduce their cars to Western Europe as public interest for electric cars is steadily increasing plus current challenges of Western OEMs to supply cars for their customers. But in the light of past failures – for example, the infamous Brilliance Euro NCAP flop in 2009 – every move this time must be flawless.

About unleveraged strengths

To this end, Chinese OEMs should lead on their biggest strength: customer-centricity. They must understand European customers, how they differ from Chinese customers, and most importantly, how European customers differ among themselves. Based on these customer insights, targeted promotion programs need to be developed along with a pan-European roll-out plan. In parallel, points of sale and the entire ecosystem need to be established, so hard-earned buzz and leads get picked up in the transition from digital to physical sales efforts.

That being said, we appreciate this is easier said than done. Chinese OEMs typically send whatever they have available in China to Europe, without adaptions. So, whether it’s product spec, sales model, apps or customer experience, Chinese OEMs tend to provide the same range of solutions in Europe as they do back home. This again neglects their core strength in customer-centric product and solution design.

For example, OEM-led customer communities work well in China, as seen in the case of all new players. It is assumed that they will work well in Europe, too. But OEM-community activities in China are a mixture of auto and non-auto events, while traditional grassroots communities in Europe are mostly fully auto-focused. Although there is nothing wrong with community building, the purpose and content must be adapted toward European customers’ preferences and expectations.

Interestingly, what we are seeing in Europe is now also happening in China – but to Western OEMs. Many of those have a long success story in China, but they are facing trouble with their EV portfolios. While domestic brands including Xpeng or GAC Aion are enjoying strong sales, this is not the case for Western marques. What is missing is the tailoring of design, digital services and other features to suit Chinese tastes. The one-size-fits-everywhere concept – selling the same models to the entire world – doesn’t work anymore. It doesn’t work in China for Western OEMs and doesn’t work in Europe for Chinese OEMs.

So despite the fanfare that has accompanied the entry of Chinese players into Europe, they have relatively little to show for it so far. What are reasons for this discrepancy? Is it only cultural, or are there more significant reasons, such as a lack of understanding of European business practices, and how different markets and customers behave? What are the real challenges for Chinese OEMs?

In the weeks to come, we will dig deeper into these issues and discuss possible ways for Chinese OEMs to succeed in Europe. 

This is the first in a new short series on Chinese OEMs’ performance in Europe. Stay tuned in the upcoming weeks for further insights. Up next: Dinner is served – why the new market entrants from China have only themselves to beat.

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Career
Dr. Jan Burgard

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer. In October 2011, he became a founding partner of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

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Willy Wang

Willy Lu Wang (1981) joined Berylls Strategy Advisors in 2017. He started his career participating in the graduate program of Audi focusing on production planning. After stations at another strategy consultancy as well as being the strategy director for a German Tier-1 supplier, he is now responsible for the China business at Berylls.

He has a broad consulting focus working for all clients in China, whether they are JVs, WOFEs or pure local players. He is also responsible for the development of AI and Big Data products dedicated towards the Chinese market further strengthening the Berylls End-to-End strategy and product development capabilities.

Wang studied Electronics & Information Technology with focus on Systems and Software Engineering and Control Theory at Karlsruhe Institute of Technology.

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Hongtao Wei

Hongtao Wei (1988), Associate Partner, joined Berylls Strategy Advisors in 2015, an international strategy consultancy specializing in the automotive industry, where he focuses on all issues related to the Chinese automotive market. In addition to Western manufacturers in China, his clients also include Chinese OEMs, investors, provincial governments, and state-owned enterprises.

He has profound expert knowledge in the areas of sales and aftersales. His other areas of expertise include digitalization, connectivity, and turnaround management.

He studied Sinology, Economics and Statistics at the Ludwig-Maximilians-Universität in Munich.

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Soleiman Mansouri

Soleiman joined the Berylls Group in March 2022. He has set his focus on customer-centrist solutions, gaining experience in Product- and Corporate Strategy, Consulting with the focus on the OEM business. His Automotive career started with digitalization of the Aftersales of an US OEM in Europe and took him to China to the leading German OEM group, heading the Product and Portfolio department. He gained intensive consulting experience with one of the top management consulting firms and as a freelance consultant. Before joining Berylls, he was the Director Go-to-Market of one of the top Chinese OEMs supporting their entrance into the EU market. Soleiman is a graduated M.A./MBA in International Business from the University of Hamburg and ECUST/Shanghai.

Soleiman joined the Berylls Group in March 2022 and is part of the Asia-team, responsible for supporting all players in a successful market entrance. Also, provides profound expertise of customer-centric Product Marketing and Portfolio Strategy approaches to our clients.

Soleiman is expert in customer-centric Product-/Portfolio Strategy, Go-To-Market, Corporate Strategy and Entrepreneurship.

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Autonomous Trucking: How disruptive technology will redistribute value pools

Munich, August 2022

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AUTONOMOUS TRUCKING: HOW DISRUPTIVE TECHNOLOGY WILL REDISTRIBUTE VALUE POOLS

Munich, August 2022
C

limate change requires turning away from fossil fuels, with the need to switchto zero-emission powertrains as quickly as possible. Connectivity and digitalization, which have been taken on rather slowly by the logistics sector, now enablea variety of new players and new business models to challenge the position ofthe incumbents.

Driverless operation is the most disruptive piece of this industry transformation. Autonomous trucking has long been a secondary field of action for carfocused tech players like Waymo and Aurora. In the meantime it has become
common sense that autonomous trucking provides a more than tenfold opportunity compared to passenger mobility. It is the killer application of autonomous driving technology and the ultimate game changer for the whole trucking industry.

Berylls Insight
AUTONOMOUS TRUCKING: HOW DISRUPTIVE TECHNOLOGY WILL REDISTRIBUTE VALUE POOLS.
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Authors
Steffen Stumpp

Associate Partner

Lukas Auchter

Consultant

Steffen Stumpp

Steffen Stumpp (1970) joined the Berylls Group in October 2020 as Head of Business Unit Commercial Vehicles. At this point, he already looked back on extensive professional and leadership experience in the commercial vehicle industry. Stumpp started his career in an OEM and went through different roles in research, marketing, product planning and after-sales service. When he switched to the automotive supplier industry, he took over the responsibility for worldwide sales and marketing of a medium-sized tier 1 supplier. After another step as head of sales he decided to join Berylls, where he is now responsible for the commercial vehicle business.

Stumpp is a graduate engineer and has studied industrial engineering at the KIT in Karlsruhe and the Technical University of Berlin with focus on logistics.

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Three luxury car myths exposed: For the most prestigious marques, in-person still matters

Munich, August 2022

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Three luxury car myths exposed: For the most prestigious marques, in-person still matters

Munich, August 2022
D

igital experiences have a role to play, but it is the combination with a personalized service that makes sales happen.

The luxury goods industry has shown remarkable resilience in recent years, enjoying global sales of €283 billion last year – that was 29% higher than in 2020 and 1% higher than pre-pandemic. A major part of the industry’s success is down to digital sales channels such as Farfetch and the online divisions of luxury goods giants including LVMH.

This success is often used to draw conclusions about how the high-end automotive industry should transform itself to keep up with changing customer demands. Yet the luxury car market – by which we mean brands at the very top of the price and exclusivity range including Bentley, Bugatti, Rolls-Royce, Ferrari and Lamborghini – still operates by its own rules. The decision to buy a luxury car is often made out of a strong emotional attachment to the brand and every customer will have different, and nuanced, reasons for spending their money to go beyond the mainstream. So what do we know about these customers and what they want when it comes to customer service?

They are high and ultra high net worth individuals (UHNWIs), the latter defined as those with a personal fortune of more than $30 million. The group is growing worldwide, but particularly in Asia, where 24% of UHNWIs will live by 2025 (see map below). However, there are also notable differences between customers in this group. There are contrasts between “old money” and successful newcomers, for example, and people who seek out conspicious symbols of wealth compared with those who value privacy above all else.

Despite these differences, our work with luxury carmakers has shown that, while digital channels are undoubtedly a key part of the brand’s presentation, physical touchpoints continue to be essential in the luxury segment. Opportunities to see, touch and drive the cars, and build relationships with trusted staff, remain the most important success factors when it comes to this group of customers

Authors
DR. JAN BURGARD

Berylls Group CEO

Theresa Johl

Project Manager

Christina Eisenschmid

Managing Director at Psyma

Below we expose three myths about how the lessons of luxury retail should apply to the digital transformation of the high-end car market – and set out what customers really want instead.

Myth 1: Luxury customers want to choose their car online

Consumers are used to the convenience of booking or buying almost everything online, and using digital tools to configure how a new sofa or paint color will look in their own home. The auto industry has been forced to keep up, and OEMs are driving digitization forward in all strands of their marketing for the volume and premium segments.

Yet for now, configuring the perfect car online still requires a great deal of self-study on the part of the customer – they are offered the same complex selection of specifications and packages that they were previously guided through by dealers, and they have to decipher the industry terminology on their own. Put simply, luxury car customers – used to seamless service and pain-free buying experiences in every other area of their lives – do not want to do this.

Asking them to use standard online configurators also overlooks the huge range of motivations among customers in the luxury segment. At one end of the spectrum are the car enthusiasts and collectors, who likely have a garage full of unique luxury models. Online configurators and standard information strike entirely the wrong note with this customer. Instead, individual, personal advice and working with a trusted dealer, who is also a fellow enthusiast, plays a very important role in their decision to buy.

At the opposite end, there are luxury buyers who have no involvement or interest in the ordering process and hand it all over to an assistant or driver. Doing the work online themselves is also seriously off-putting for these potential customers. Those in between need a digital experience that excites, that makes them want to buy the vehicle right away without cutting corners – with outstanding UX/UI, high-quality 3D model views and the easiest click path.

Myth 2: The role of the dealer is becoming less important and customer service for UHNWIs can be shifted online

It is a long-standing cliché that inviting luxury customers to champagne receptions and exclusive events such as polo matches will persuade them to buy a new car. This may be true in some cases, and many customers undoubtedly enjoy these types of exclusive perks for owners. However, what luxury customers really respond to is personalized communication from a relationship manager they have dealt with before, who knows their specific interests.

One example is for the relationship manager to call their sports car enthusiast customer to make them aware of a new limited edition model before it is publicly announced. This is combined with the chance to pre-order it or to be placed high on the waiting list. In this situation, the dealer is the source of access to limited edition vehicles, but also a fellow aficionado with whom the customer can enjoy discussing all things car and brand-related.

For other customers, what matters is a flexible pick-up and drop-off service, an invitation to meet the chief designer at the OEM, and yes, champagne receptions.

In each case, the relationship with the dealer is uncomplicated, consistent and flexible. Using a standardized online booking tool to arrange a test drive does not excite the luxury customer, whereas a proactive phone call from a relationship manager to suggest a test drive at a location of the customer’s choice does.

In this context, the dealer network of established OEMs, built up over years, is a huge asset that many new players would love to recreate.

Myth 3: Luxury customers are enthusiastic about electric cars

Electric vehicles (EVs) dominate the future plans of the car industry and the positive environmental impact is not in question. However, when it comes to buying an EV, luxury customers take a range of views.

First Group

The first group are technology and innovation enthusiasts, who always have the latest phone, smart home equipment, and now an electric car. This positive view is most common among younger UHNWIs, who are engaged with sustainability issues.

Second Group

The second group do not own an EV themselves, but are neutral toward the engine technology and accept the growing trend away from carbon-emitting cars.

Third Group

The third group are the rebels, who enjoy the performance, acceleration and sound of conventional engines, and also enjoy being part of an increasingly exclusive club of prestigious combustion-engine vehicle owners. A sense of freedom is important to these customers.

Final Group

The final group are prominent public figures balancing two identities – in the public sphere they use premium EVs as part of their carefully curated image, but with their inner circle, they favor the most prestigious luxury marques and the excitement of powerful petrol engines. These parallel worlds are meticulously managed.

Each luxury carmaker and each customer must of course be treated individually, but from our experience with clients, focusing on the emotional, physical contact points along the entire customer journey, rather than non-emotional digital experiences, is the more promising strategy. The digital customer journey does also matter in the top luxury segment but is only a differentiator if the experience relates to its luxury customers, and a natural rapport with the relationship manager plays a more important role the higher up the scale of wealth you go.

In this context, OEMs need to ask themselves how their physical retail channels may have to change to meet the demands of current and future luxury buyers. They should also consider how the level of service described here could be scaled and communicated to their dealer network, so that every relationship manager is performing at the required level.

Dr. Jan Burgard

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer. In October 2011, he became a founding partner of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

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Theresa Stütz

Theresa Stütz (1991) joined Berylls Strategy Advisors in December 2017. Meanwhile she is associate partner and automotive downstream expert.

She has been advising automotive manufacturers in a global context both in the luxury and premium segment. She has in-depth expert knowledge in the areas of sales and marketing, particularly in the context of customer experience strategies. Other areas of expertise include strategy development processes, Go-to-market strategies and transformation management.

Theresa received both Bachelor and Master of Science in Management and Technology (Mechanical Engineering) at Technical University of Munich.

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Christina Eisenschmid

Christina joined Psyma in 2002 as managing director and is responsible for the business sectors automotive and finance. She started her career in a management consulting company, followed by various positions in one of the top 3 international research agencies.

Christina and her team are in close contact with (U)HNWIs by realizing continuously projects for premium and luxury manufacturers covering all topics of integrated marketing such as innovation in early stages, customer segmentation, product & marketing clinics, UX research, customer journey & touchpoint optimization, alternative drive trains and brand architecture.

Christina is a graduate psychologist and has studied business psychology at the Ludwig Maximilian University in Munich with focus on marketing and communication.

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WHICH OEMS ARE SETTING THE PACE ON FIELD DATA?

Munich, July 2022

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WHICH OEMS ARE SETTING THE PACE ON FIELD DATA?

Munich, July 2022

O

EMs are collecting a lot of data from vehicles in the field. But are they making the best use of it?

We have analyzed OEMs’ capabilities around making use of field data within four different categories and ranked them. In our analysis we looked at the data available for analysis, the data volume collected in the cars as well as the frequency of data transfer and finally the data usage, once the data has reached the OEM. Each OEM has a slightly different approach to data gathered in the field. To find out more, download our detailed report.
Berylls Insight
WHICH OEMS ARE SETTING THE PACE ON FIELD DATA?
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Authors
Heiko Weber

Partner

Dr. Matthias Kempf

Partner

Timo Kronen

Partner

Philipp Stütz

Principal

Dr. David Gutjahr

Project Manager

About the authors
Dr. Matthias Kempf

Dr. Matthias Kempf (1974) was one of the founding partners of Berylls Strategy Advisors in August 2011. He began his career with Mercer Management Consulting in Munich, Germany, in 2000. After earning his doctorate degree and further consulting work at Oliver Wyman (formerly Mercer Management Consulting), he joined the management of Hilti Germany in 2008. At Berylls, his area of expertise is new mobility services and traffic concepts. In addition, he is an expert in developing and implementing new digital business models, and in the digitalization of sales and after sales.

Industrial engineering and management studies at the University of Karlsruhe, Germany, doctorate degree at Ludwig Maximilian University, Munich, Germany.

Philipp M. Stütz

Philipp M. Stuetz (1981) joined Berylls at the beginning of 2021. He has over fifteen years of experience in the automotive industry. Thereof he spent seven years at an international automotive supplier with assignments in Spain, the USA and Mexico and over eight years in consulting. His focus is in operations excellence, especially in large transformation programs, process optimizations and efficiency improvements in administrative functions and indirect operations areas. He counts suppliers and OEMs to his clients alike.

Philipp M. Stuetz graduated in business administration from the universities of Stuttgart and Strasbourg.

Heiko Weber

Heiko Weber (1972), Partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), is an automotive expert in operations.

He started his career at the former DaimlerChrysler AG, where he worked for seven years and was most recently responsible for quality assurance and production of an engine line. Since moving to Management Engineers in 2006, he has been contributing his experience and expertise to projects for automotive manufacturers as well as suppliers in development, purchasing, production and supply chain. Heiko Weber has extensive experience in the development of functional strategies in these areas and also possesses the operational management expertise to promptly catch critical situations in the supply chain through task force operations or to prevent them from occurring in the first place.

As a partner of Management Engineers, he accompanied the firm’s integration first into Booz & Co. and later into PwC Strategy&, where he was most recently responsible for the European automotive business until 2020.

Weber holds a degree in industrial engineering from the Technical University of Berlin and completed semesters abroad at Dublin City University in Marketing and Languages.

Timo Kronen

Timo Kronen (1979) is partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors) with focus on operations. He brings 19 years of industry and consulting experience in the automotive industry. His focus is on production, development and purchasing as well as supplier management. Some of his recent projects include:
• Restructuring of the Procurement Function (German Sports Car OEM)
• Supplier Task Force for a HV battery cell (German Premium OEM)
• Strategy Development for the Component Production (German Premium OEM)
Before joining Berylls, Timo Kronen worked at PwC Strategy&, Porsche Consulting Group and Dr. Ing. h.c. F. Porsche AG. He holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT).

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Quo Vadis, China: The renaissance of Physical Retail in Automotive?

Munich, July 2022

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Quo Vadis, China: The renaissance of Physical Retail in Automotive?

Munich, July 2022
W

hy ironically NEV players restore the importance of Physical Automotive Retail in China.

Almost precisely two years ago, we at Berylls China took a close look on how ‘Physical Automotive Retail’ would need to change in order to defy the ‘Retail Apocalypse’. We recommended an approach based on flexibility, moving on from all-in-one-formats. We showed new ways to get it right: enhance customer experience, increase market exploitation, and as a bonus, keep facility costs manageable.

So, a swift reaction by German OEMs should be top of their CEOs’ agendas, in order to win back customer approval for their electric models and compete more effectively with China’s NEV start-ups. The following sales numbers in 2021 show the dramatically changing composition of China’s NEV market:

COVID – The Digital Accelerator

But then COVID came. And it came to stay. And while it stayed, it changed, without mercy, all aspects of both our personal and professional lifestyles. As we all know, this was the era of any technology serving remote interactions and there was no exception for Automotive Retail. For instance, during the first lockdowns in China, Automotive retailers quickly established virtual showroom tours and virtual ‘on-demand’ test drives using short video snippets to introduce their cars while customers could not actually pay them a physical visit.

Of course, it is not all COVID, and people’s lifestyles were anyways changing in an increasingly digitalized world. Convenience and flexibility became top issues for consumers. Many OEMs had recognized this already ahead of the pandemic and proclaimed that the digital channel/online domain will become the primary customer journey channel, triggering any interaction between OEM and customers. Also, digitalization of the entire customer journey plays an essential part on most OEMs’ journey towards direct sales.

So, it seemed to be all set, that the once primary physical channel will (finally) lose its importance and become only a supporting channel of the digital domain, reduced to pure fulfillment purposes (e.g., payment is still done at dealerships in China).

Not surprisingly, this narrative has its followers, and we see that OEMs globally (not only in China) try to focus on the digital part. As a side effect they are forgetting to exploit the potential which the physical domain still offers with its emotionalizing and differentiating unique customer experiences. OEMs start huge transformation programs towards digitalization and dedicate large resources for online campaign management, performance marketing, lead flow management. It seems to be all about pushing the right content, online (!), to the right person, online (!), and expecting this to be exciting enough to create a strong enough interest to lead to a test drive.

Authors
Dr. Jan Burgard

Berylls Group CEO

Willy Wang

Managing Director China

Hongtao Wei

Associate Partner

Soleiman Mansouri

Associate Partner

Lois Yang

Lead Analyst

The better half

From our perspective, this is quite a loss as the physical channel still offers substantial power for business development, lead generation, and ultimately sales conversion. A recent Berylls analysis of customer data revealed that more than 50% of qualified leads are still generated during showroom visits. In other words, more than 50% of leads are in risk to be lost if the physical touchpoint is forgotten.

Now, people tend to argue that successful new EV players are ‘changing the game’ by fully focusing on digital channels and direct sales. We would beg to differ. Matter of fact, successful NEV players in China are very fast and eager to create physical outlets in order to drive their sales (as seen in the examples of NIO and Xpeng). These players are rapidly increasing their physical footprint. And they do this not only in big cities, but also in lower-tiered smaller cities. In particular for NIO, setting up a strong physical presence is an integral part of its strategy of creating customer stickiness throughout the entire journey.

Even Tesla relies heavily on physical presence. The brand operates 49 Tesla stores in Greater China. However, it has another regional footprint, focusing heavily on Yangtze Delta (Shanghai, Jiangsu, and Zhejiang Province) and Pearl Delta (Guangdong Province).

Thus, it’s absolutely wrong to say that NEV buyers are ‘digital only’ and don’t care about a physical retail experience. Actually, they do care a lot.

Nonetheless, in the advent of increasing digitalization and with the agent model on the horizon, traditional physical retail will no longer suffice as the point of sale, as we said already two years ago. It is not about building more 4S dealerships. For the physical domain to bloom and successfully co-exist with the online channel, it must change substantially.

And the change is here already

Of course, incumbents have not stood still and done nothing – quite the opposite is true. First, most OEMs are adjusting and upgrading their current network landscape. For instance, they started to introduce different formats, they are making their retail outlets more attractive and luxurious, and put product experience at the forefront. This is a good first step as different formats allow outlet deployment in different geographic situations, but many more have to follow.

Looking at the aforementioned dominance of the digital domain, it’s clear that physical retail needs to provide full online-to-offline integration on an operational level. Currently, the digital and the physical domain are still too decoupled. Physical retail is understood as an extension of the digitalized journey to provide brand experience and emotionalization – and this is how it should act.

Overcoming the decoupling

Here are few very operational examples and thoughts that support our opinion. Customers should always have the opportunity to download the APP in the retail store and store personnel should advise customer to download the APP, e.g., for more personalized experience and information. Customers should always be encouraged to check-in at the retail store via the APP upon entry. Customers should have the possibility not only to book test drives, but also have access to in-depth product and technology information and be alerted when certain models are available for experience and testing. APP information and retail store backends should be fully integrated, so that seamless experience and personalized recommendations can be provided as all customer data (incl. online and store visit history, product preferences etc.) are stored centrally and are accessible to all retail outlets. And finally, as customers nowadays don’t only buy into a product, but more into a lifestyle (or often more accurately, a desirable representation of a lifestyle), retail outlets can become “community centers” and “owners’ clubs” offering dedicated and relevant experiences for customers and their affiliates.

Culture also eats retail strategy for breakfast

And finally, no technological transformation of the point-of-sale is worth the effort, if one doesn’t close the loop on the human and cultural level. This requires a change of mindset of the dealer personnel to, well, ‘retail’. Instead of applying the traditional sales-driven mindset, the new mindset needs to be service-oriented and customer-centric; it can no longer push products, it must include listening to and understanding customer needs and be at the side of the customer for the entire lifetime. Only with such a mindset change, a true transformation of physical retail operations can happen.

Of course, such a change cannot happen overnight, and the targeted new reality of ‘Automotive Retail’ needs to be supported by, just to name a few

  • a different KPI set, where sales performance is a result and not the purpose, and where customer satisfaction is the single most important KPI,
  • a modified incentive system, driven by new lead generation and customer satisfaction
  • a new governance structure, where each customer visiting the store gets an online questionnaire with regard to customer satisfaction after the visit, every time.

COVID – The Physical Accelerator

It’s probably good news that COVID was not able to change it all – or maybe it made it even clearer that a virtual test drive can’t replace the thrill of an actual, real-world vehicle experience and that no video explanation can replace touching, feeling, and smelling a brand-new car.

Brick-and-mortar dealerships remain important as they are going through strategic, operational, and cultural transformations to stay relevant. This is the Physical Automotive Retail Renaissance.

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About the authors
Dr. Jan Burgard

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer. In October 2011, he became a founding partner of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

Willy Wang

Willy Lu Wang (1981) joined Berylls Strategy Advisors in 2017. He started his career participating in the graduate program of Audi focusing on production planning. After stations at another strategy consultancy as well as being the strategy director for a German Tier-1 supplier, he is now responsible for the China business at Berylls.

He has a broad consulting focus working for all clients in China, whether they are JVs, WOFEs or pure local players. He is also responsible for the development of AI and Big Data products dedicated towards the Chinese market further strengthening the Berylls End-to-End strategy and product development capabilities.

Wang studied Electronics & Information Technology with focus on Systems and Software Engineering and Control Theory at Karlsruhe Institute of Technology.

Hongtao Wei

Hongtao Wei (1988), Associate Partner, joined Berylls Strategy Advisors in 2015, an international strategy consultancy specializing in the automotive industry, where he focuses on all issues related to the Chinese automotive market. In addition to Western manufacturers in China, his clients also include Chinese OEMs, investors, provincial governments, and state-owned enterprises.

He has profound expert knowledge in the areas of sales and aftersales. His other areas of expertise include digitalization, connectivity, and turnaround management.

He studied Sinology, Economics and Statistics at the Ludwig-Maximilians-Universität in Munich.

Soleiman Mansouri

Soleiman joined the Berylls Group in March 2022. He has set his focus on customer-centrist solutions, gaining experience in Product- and Corporate Strategy, Consulting with the focus on the OEM business. His Automotive career started with digitalization of the Aftersales of an US OEM in Europe and took him to China to the leading German OEM group, heading the Product and Portfolio department. He gained intensive consulting experience with one of the top management consulting firms and as a freelance consultant. Before joining Berylls, he was the Director Go-to-Market of one of the top Chinese OEMs supporting their entrance into the EU market. Soleiman is a graduated M.A./MBA in International Business from the University of Hamburg and ECUST/Shanghai.

Soleiman joined the Berylls Group in March 2022 and is part of the Asia-team, responsible for supporting all players in a successful market entrance. Also, provides profound expertise of customer-centric Product Marketing and Portfolio Strategy approaches to our clients.

Soleiman is expert in customer-centric Product-/Portfolio Strategy, Go-To-Market, Corporate Strategy and Entrepreneurship.

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LONDON MOVE 2022 – A BERYLLS RETROSPECTIVE

London, June 2022
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ovid is clearly over in the UK - and people are eager to meet in person again. So after two troubled years MOVE LONDON was back in full swing over two days last week.

Over 600 speakers had signed up and 350 exhibitors bought space on the vast floor of the ExCel centre. And thousands of delegates crowded the space and made this one of the biggest ‘future mobility’-themed gatherings.

With numerous presentations throughout the day happening in parallel on multiple stages it is impossible to provide a comprehensive summary – therefore please take the following as my subjective ‘personal notes’ with no claim to completeness.

BEVs ARE HERE…

… and will continue to take over much faster from ICE than expected only a couple of years ago – that seemed to be a general consensus across the event. And certainly, recent registration figures in many markets confirm that. But then, looking behind the façade, are we seeing a sustainable trend?

Author
Arthur Kipferler

Partner & MD (UK)

One data point at MOVE caused second thoughts at least in my mind: CARWOW, the new car buying platform, said that after seeing 37% of their users considering a BEV in 2019, this number has grown to 49% in 2022. Keep in mind that in 2019 those 37% ‘BEV considerers’ bought only 1.7% of new cars. In 2022 the 49% considerers are buying the now almost 15% BEVs among all new cars in the UK. I couldn’t help seeing a rapid running out of BEV-ready car buyers in these numbers. Combine that with the pull back of government incentives and the BEV revolution might run out of momentum soon.

Not least because of … charging, which is certainly on top of the list for all BEV hesitators (and, knowing from my own experience, unfortunately also for us BEV drivers). And despite a lot of proposals and intensive discussions it will remain the main challenge for wide-spread BEV adoption. A few key themes discussed at MOVE:

  • Faster charging is much more helpful than bigger batteries. 
  • Confirmed by BEV driver behaviour: they do prefer high power charging by far, with the faster 20% of chargers delivering 80% of the energy and charging times trending downwards to between ten and fifteen minutes – not too different from an ICE fuel station stop. 
  • New solutions are developed and (hopefully) rolled out: high power chargers with built-in battery storage – allowing true fast charging in locations with limited electricity supply (at least for the first one arriving at that charger…).  
  • Plug & Charge will help this further, eliminating the search for the right app and the matching password. The UK government also will make the acceptance of contactless payments mandatory, bringing the times to an end where every charger network requires a different app. 
  • The Start-up dockChain provides a cost-efficient solution that allows sequential charging of several BEVs plugged into one high power charger – without the necessity to move the vehicles after each charge at normal ‘one plug’ HP chargers. Ideal for BEV fleets, work places, hotels, and airports.  
  • And for a completely different approach: NIO Europe pledged to build 1,000 battery swap stations outside China by 2025. Another proprietary network built at high expense only to face dismal utilisation? And with a maximum of 13 batteries in each swapping stations this solution is hardly fit for the summer holiday rush to the beaches. 

On the downside I could not fight of the impression that there is going to be a large problem with charging, at least in the short and medium term:  

  • Wejo, sitting on rich data from over 10 million connected cars, is estimating that the demand for charging infrastructure will not be met if current supply & demand trends continue. 
  • National Highways says that 95% of the UK highway network is already within 20 miles of an electric charge point today. While this sounds good at first glance, this statistic certainly includes every 3.6kWh charger – hardly what you need to keep you going on a longer distance trip. And it doesn’t subtract all the ones that happen to be out of order just when you need them. 
  • The UK government’s ‘Project Rapid’ which will deliver £950 million of charging infrastructure at motorway service areas. Again, sounds great – but this includes the rollout of 6,000 rapid chargers by 2035, not exactly ‘soon’.   
  • A lot of AI, bi-directional infrastructure and ‘management’ was quoted to assist meeting the challenge. Sounds like we won’t be free to charge our BEVs where and when we need or want, but when the grid allows.  
  • Furthermore, the government stated that now was the time for multiple players to collaborate to solve the problem – something that usually doesn’t happen easily.  

Over the last three years I often could not avoid the impression that for some experts and activists BEVs have become a purpose in themselves. MOVE, however, left no doubt that protecting the environment was the main reason to start the electrification of mobility – and Northern Europe was at the forefront: 

  • Stora Enso presented their battery anodes made from sustainably farmed trees  
  • Volvo (Cars) presented their objectives to sell 50% of their 2025 volume with a BEV drivetrain and a number of targets to become more ‘circular’. Is it coincidence that targets like these always sound so ‘appropriate’: 25% recycled plastic and steel by 2025…  
  • Polestar announced to make their cars more sustainable by designing them for ‘peak’ instead of ‘permanent’ performance. Sounds very reasonable – they just must avoid selling to the 0.5% customer who does actually pull a heavy trailer up a steep hill the whole day (and other outlier users which too often dictate the attribute performance targets of a vehicle). This focus on ‘normal’ customer needs should help to enable the ‘net zero car’ (cradle to grave!) they target by 2023. 
MicrosoftTeams-image (27)

HOW TO GET THERE?

Facing and exploiting a new reality is too often easier for players with no legacy to protect. A case in point: While incumbents are devising strategies to keep BEVs coming to the franchised service network, new brands can turn the lack of parts to maintain and exchange into an advantage: Aiways is launching in Europe with service intervals of 100,000km – so that many first owners of an Aiways will NEVER see a workshop (assuming, that is, the ever more needed software updates come without problems ‘over the air’).

SHARED MOBILITY…

… was another big topic, even if many of the initial concepts have proven unviable. MyBee & City Bee seemed to confirm that some of these ‘shared mobility’ business models have a better chance of survival when they are combined. The Baltic car sharing car company successfully added car subscriptions to their platform – and now enjoys a higher fleet utilisation (but it remained unclear if that is already enough for a path to profitability). And then there was good advice from several presenters: walking and cycling are a much better substitutes for many car trips. I guess we all can start right here and now. I am just wondering if this trend can take off fast enough to keep so many different (new) providers of electric bikes and scooters and the related service profitable. It seems proliferation is still continuing for now, before the inevitable consolidation.
About the Author
Arthur Kipferler

Arthur Kipferler (1963) started his career in 1989 at the Boston Consulting Group, where he consulted for 13 years in the automotive industry. After consulting, Arthur Kipferler held senior management positions at Toyota in Europe and the U.S. From 2013 to 2014, he was global head of the BMW Group’s Future Retail program. Subsequently, he had leading roles in strategy, corporate planning and transformation management at Jaguar Land Rover in Coventry, UK. Arthur Kipferler complements the expertise of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.
Mechanical engineering, production engineering, at the Technical University of Munich (TUM); MBA in Strategy, Marketing and Organizational Behavior at INSEAD Business School, France.

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THE BERYLLS TOP 100 SUPPLIER STUDY 2022

München, Juni 2022

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Die Berylls Top 100-Zuliefererstudie 2022

München, Juni 2022
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HINESISCHE ZULIEFERER GEWINNEN AN BEDEUTUNG, ZU UNGUSTEN DER DEUTSCHEN UND JAPANER

  • Berylls Im Jahr 2021 war die Geschäftsentwicklung der Zuliefererindustrie wieder positiv. So hat sich die durchschnittliche Profitabilität von 2,6 auf 6,3 Prozent mehr als verdoppelt.
  • Chinesische Unternehmen konnten mit 40 Prozent die größten Umsatzgewinne verzeichnen, gefolgt von den amerikanischen und deutschen Lieferanten.
  • Bezogen auf ihre internationale Umsatzentwicklung, verlieren die Gruppen der deutschen und japanischen Zulieferer an Bedeutung, während die Chinesen zulegen.
  • Elf Jahre Berylls Top 100-Zuliefererstudie: Ein Blick zeigt viel Bewegung. Nach dem Rekordjahr 2019 (917 Milliarden Euro Umsatz) liegen die Umsätze im Jahr 2021 mit knapp 900 Milliarden Euro nur rund zwei Prozent hinter dem Allzeithoch zurück und mehr als deutlich über dem Niveau von 2011 (663 Milliarden Euro). Schafften es 2011 noch Unternehmen mit einem Jahresumsatz von 1,6 Milliarden Euro in das Ranking, waren 2021 mindestens 2,5 Milliarden Euro nötig.

 

München, 08. Juni 2022 Im Rahmen der großen Top 100-Zuliefererstudie hat Berylls Strategy Advisors die 100 weltweit größten Automobilzulieferer bereits im elften Jahr in Folge analysiert. Nicht anders als 2020, das durch den Sondereffekt Corona seinen Stempel aufgedrückt bekam, wurde auch 2021 durch die anhaltende Pandemie, durch die Chipkrise und durch die verschärfte Situation auf den Rohstoffmärkten massiv beeinflusst. Dennoch können viele Zulieferer im Geschäftsjahr 2021 wieder deutliche Umsatz- und Profitsteigerungen ausweisen. Sie nähern sich Schritt für Schritt dem Vorpandemie-Niveau an. Groß angelegte Restrukturierungsmaßnahmen tragen ihren Teil dazu bei. So liegen die Umsätze der 100 weltweit größten Automobilzulieferer im Jahr 2021 mit 899 Milliarden Euro (+13,4 Prozent gegenüber 2020) deutlich über dem Niveau des von Covid-19 geprägten Vorjahres, allerdings nur knapp zwei Prozent unter dem bis dato stärksten Jahr 2019. Auch die durchschnittliche Profitabilität kann mit 6,3 Prozent wieder deutlich gesteigert werden und liegt damit auf dem Niveau der Jahre 2018/2019. An dieser positiven Entwicklung nimmt auch die Gruppe der deutschen Zulieferer teil, allerdings weniger stark als die chinesischen Konkurrenten.

KAUM BEWEGUNG IN DEN TOP TEN, WICHTIGSTER AUFSTEIGER IN DIE SPITZENGRUPPE IST CATL

Bosch verteidigt im siebten Jahr in Folge den ersten Platz in der weltweiten Aufstellung der 100 größten Automobilzulieferer, insgesamt bewegt sich unter den Top 5 nichts. Wie im Vorjahr liegen zwei weitere deutsche Unternehmen auf den Plätzen 3 (Continental) und 4 (ZF Friedrichshafen). Magna behauptet sich auf Platz 5. Auch für die Reifenhersteller Michelin und Bridgestone lief das Jahr 2021 gut, sie behalten ihre Platzierungen und damit die Plätze 8 und 9.

2020 sorgte Weichai Power für eine echte Sensation. Denn Weichai Power war der erste chinesischer Zulieferer überhaupt, der in die Phalanx der Top 10 vordringen konnte. Das Unternehmen, entstanden aus einem Hersteller für Dieselmotoren und heute im Segment der Software für Lkw und Pkw tätig, kann sich im Topsegement aber nicht halten, rutscht in 2021 auf den immer noch sehr respektablen Platz 12 ab.

Dennoch ist mit CATL weiterhin ein chinesisches Unternehmen in den Top 10 vertreten. Der Akkuhersteller springt, mit einem Umsatzwachstum von 184 Prozent im Vergleich zum Vorjahr, erstmals in die Spitzengruppe und schreibt damit innerhalb der Top 50 eine einmalige Erfolgsgeschichte. Berylls Partner und Zuliefererexperte Alexander Timmer: „Das ein Batterieproduzent in die Top 10 aufrücken würde, ist wenig überraschend. Denn die Nachfrage nach Akkus war selbst im schwierigen Jahr 2021 so groß, dass CATL in der logischen Folge zu den ganz großen Gewinnern zählt. Ohnehin ist der chinesische Konzern ein guter Bekannter innerhalb der Top 100. Im Ranking für das Jahr 2018 lag CATL noch auf Platz 71, hat allerdings seither eine beeindruckende Entwicklung gezeigt.“

CHINAS ZULIEFERER WACHSEN WEITER, ZWAR NICHT AN ZAHL IN DEN TOP 100, DAFÜR AN UMSATZ

Aber Chinas Zulieferer sind nicht nur im Bereich der neuen Antriebstechnologien stark, wie das Abschneiden von Citic Dicastal belegt. Das Unternehmen, dessen Kernprodukte Leichtmetallfelgen für Pkw und Lkw sind, schoss im Top 100-Ranking um beeindruckende 26 Positionen nach oben und findet sich in der diesjährigen Übersicht auf einem starken 62. Platz. Insgesamt haben es neun chinesische Zulieferer in die Top 100 geschafft. Das Cluster der chinesischen Zulieferer kann sehr stark von der lokalen und nationalen Industriepolitik profitieren, die einerseits den chinesischen Binnenmarkt stärken soll und andererseits eine Expansion in internationale Leitmärkte befeuert.

So wächst der Beitrag der chinesischen Zulieferer an der internationalen Umsatzentwicklung stetig. Im Jahr 2018 lag er noch bei fünf Prozent, 2021 können die Chinesen bereits einen neunprozentigen Anteil für sich verbuchen. Der Zuwachs geht zu Lasten der deutschen und japanischen Zulieferer. Deutschland war am Gesamtumsatz 2018 mit stolzen 23 Prozent beteiligt, Japan steuerte 27 Prozent bei. Beide Nationen verzeichnen seither schmerzhafte Rückgänge. Die deutschen Zulieferer tragen nur noch 21 Prozent zum globalen Gesamtumsatz der Branche bei, die Japaner 24 Prozent. Schreiben die Chinesen ihre Erfolgsgeschichte konsequent fort, werden sie im Jahr 2028 die Vorreiterrolle im weltweiten Zulieferer-Ranking einnehmen und die deutsche Konkurrenz aus der Spitzengruppe verdrängen.

ERHOLUNG VOM COVID-LOCKDOWN

Im Covid-Lockdown-Jahr 2020 mussten Zulieferer und OEMs harte Umsatz- und Profitabilitätseinbrüche hinnehmen. So konnten nicht mehr als acht der in der Top 100 Übersicht gelisteten Unternehmen 2020 gegenüber 2019 überhaupt ein Umsatzwachstum aufweisen. Im vergangenen Jahr hat sich das Bild praktisch komplett gedreht. Lediglich zehn der 100 weltweit größten Zulieferer waren nicht in der Lage ihren Umsatz zu steigern. Zu diesen Low-Performern gehören: Yazaki, Panasonic, Mitsubishi Electric, GKN, Thyssen Krupp Automotive, NSK Group, NHK Spring, NGK Spark Plug und TS-Tech. Sieben von ihnen gehören zum japanischen Zulieferer-Cluster.

Dass 2021 ein erfolgreiches Jahr für die Branche war, zeigt sich auch darin, dass 58 Zulieferer 2021 bereits wieder höhere Umsätze als vor dem Ausbruch der Pandemie erwirtschaften. Im Vergleich zu 2020 hat sich die durchschnittliche Profitabilität von 2,6 auf 6,3 Prozent mehr als verdoppelt.

Allerdings ist der Erfolg nicht gleichermaßen auf die Branche verteilt. Er betrifft vor allem Firmen im Bereich der Halbleiterindustrie. Denn so paradox es klingen mag, an der positiven Gesamtmarkt-Entwicklung hat die Halbleiter-Knappheit einen großen Anteil. Was bei den OEMs zu einer Drosselung der Produktion und vollgeparkte Logistikflächen mit unfertigen Fahrzeugen führte, ermöglichte bei den Chip-Lieferanten 2021 Absatz-, Umsatz- und Profitrekorde. So konnten die Halbleiter-Hersteller ihre Automotive-Umsätze überproportional um durchschnittlich 34 Prozent steigern. Sie erzielten Margen von 19 Prozent, während der Top 100-Durchschnitt bei eher mageren 6,3 Prozent lag und damit sogar unter dem der OEMs, die mit ihrer Ausrichtung auf das Premiumsegment einen Zehnjahreshöchstwert von 7,4 Prozent erzielen konnten.

TEURE ROHSTOFFE DRÜCKEN DIE PROFITABILITÄT

Mit dem Ende der weltweiten Lockdowns erholte sich die Wirtschaft rasch und entwickelte einen nie dagewesenen Hunger auf Rohstoffe. Die Preise für verschiedene Metalle und Kunststoffe erreichten deshalb 2021 Rekordhöhen und vermiesten der Industrie das Geschäft. Betroffen waren nicht nur die für die Batterie- und Elektrofahrzeug-Produktion wichtigen Metalle wie Nickel, Kobalt und Lithium. Auch die Preise gängiger Industriemetalle und Kunststoffe stiegen von 2020 auf 2021 signifikant: Kupfer +23,5 Prozent, Stahl +66,7 Prozent, Aluminium +37,8 Prozent, Magnesium +130,5 Prozent, Messing +34,3 Prozent und Polypropylen +94,4 Prozent. Die hohen Rohstoffpreise trafen die Zulieferer deswegen so hart, weil sie sie überwiegend nicht an ihre Kunden weitergeben konnten. Eine kurzfristige Änderung der Situation ist nicht zu erwarten, im Gegenteil, es ist mit einem weiteren Steigen der Preise zu rechnen, auch bedingt, durch den Krieg in der Ukraine. Das Embargo gegen Russland schneidet die Industrie von ihrem wichtigsten Lieferanten für Palladium und Nickel ab, gleichzeitig fällt die Ukraine zumindest teilweise als Lieferant für das Edelgas Neon aus, es ist ein wichtiger Bestandteil der Halbleiterproduktion.

WACHSTUMSMOTOR E-MOBILITÄT

Die E-Mobilität beschäftig die Branche mittlerweile vollumfänglich. Die Aktivitäten von Bosch in diesem Bereich beispielsweise, sollen bis zum Jahr 2025 um 500 Prozent wachsen. Aktuell gibt der weltgrößte Zulieferer an, im vergangenen Jahr in diesem Sektor eine Milliarde Euro Umsatz erwirtschaftet zu haben. ZF kann sich im Jahr 2021 ein Auftragsvolumen in Höhe von 14 Milliarden Euro sichern und baut damit seine Position bei elektrischen Komponenten weiter aus. Viele bedeutende Lieferanten für Komponenten des elektrischen Antriebsstrangs und des autonomen Fahrens kommen aus Deutschland. Neben den genannten Firmen Bosch und ZF, können auch Continental, Dräxlmaier und Leoni ihre Positionen im internationalen Vergleich verbessern und durchschnittliche Umsatzsteigerungen im zweistelligen Prozentbereich gegenüber dem Vorjahr realisieren. Dass die E-Mobilität, aber auch das autonome Fahren und die ADAS-Systeme Wachstumsmotoren sind, zeigt sich im Vergleich zum Branchendurchschnitt: Hersteller aus diesen Segmenten fahren im Durchschnitt eine zwölfprozentige Umsatzsteigerung ein. Aber der Weg zum Erfolg bleibt steinig, denn gleichzeitig fordert die Transformation hohe Entwicklungsausgaben mit mehrjährigen Amortisationsdauern. Das drückt die Profitabilität in den Anfangsjahren mit geringen Produktionsvolumina; sie liegt 2021 bei unterdurchschnittlichen sechs Prozent.

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How some OEMs can exploit the opportunities in metaverse marketing and sales – and why they are not for everyone

Munich, May 2022

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How some OEMs can exploit the opportunities in metaverse marketing and sales – and why they are not for everyone

Munich, May 2022
I

n the first article in this series, we argued that investing in the metaverse is a high-risk, high-reward opportunity. In this post, we focus on the downstream opportunities to win the attention of future car buyers – but caution that they don’t apply to every OEM.

The metaverse is not a single entity, but a network of open virtual worlds with immersive 3D graphics, where users can interact with each other. Each layer of its architecture and each individual world has widely varying specifications, from the network or computing platform it is based on, through the type of virtual world and the virtual tools and content that are available there, to its transactional infrastructure, human machine interface (HMI) and overall customer experience.

Authors
Dr. Jan Burgard

Berylls Group CEO

Matthias Kempf

Partner

This variety coupled with the potential to freely determine own access, membership, and monetization rights creates a plethora of potential entry points and business models for automotive OEMs that want to stake a claim in the metaverse. (Exhibit 1)

Figure 1: Exemplary metaverse architecture by layer and business model  

Folie1

In the first blog in this series, we argued that investing in the metaverse is a high-risk, high-reward opportunity for carmakers. Sales and marketing – the subject of this post – illustrate the point. OEMs need to select the right approach for their business model to avoid the potential hazards. In some cases, they may even decide that the metaverse has nothing to offer their target customers or that the risks are too great to justify any downstream investment. 

More opportunities will emerge as metaverse technologies advance

Existing approaches by carmakers to leveraging the metaverse range from transposing physical sales experiences to virtual worlds to augmenting physical sales channels with metaverse-derived elements and technologies.  Many OEMs and even Tier 1 suppliers have already introduced metaverse features in marketing and sales to enable customers to experience a car in an immersive way without leaving their own home, for example, via gaming platforms. Some OEMs such as Honda even allow customers to purchase a car via the metaverse, and Hyundai and others are likely to follow soon.

We see three distinct segments emerging as more carmakers include metaverse elements and technologies in their marketing and sales activities.

  • Emerging metaverses: Hyundai, Tech Mahindra, Honda and to some extent Ferrari are leading the way in using newly created or existing virtual worlds to duplicate or enhance the product and shopping experience via virtual dealerships, test drives and virtual assistance.
  • Augmented and virtual reality hybrid installations: AR and VR elements enhance the real-world experience and expand product exploration possibilities.
  • In-car metaverse applications: Nissan and Audi are leading the charge in the opposite direction by trying to bring the virtual world into the car. We will discuss their initiatives in a later blog.

More segments may emerge as metaverse technologies advance, creating further downstream opportunities for OEMs to explore. For example, Honda has demonstrated that digital non-fungible tokens (NFTs) make it feasible to introduce exclusiveness into the virtual world by marketing and selling digital “limited editions” of vehicles. When a virtual car buyer purchases one of Honda’s NFTs, they acquire a unique token on the blockchain ledger that proves they uniquely own the digital asset. In March of this year, Honda’s Acura brand began offering NFTs to the first 500 people to pre-order its 2023 Integra model, which is being marketed using metaverse tools and technologies.  (Figure 2)

Figure 2: Carmakers and suppliers’ metaverse activities

The sales and marketing metaverse is not for everyone

The sheer variety of existing downstream approaches to using the metaverse shows that the automotive industry is just at the beginning of a journey. Even Facebook’s parent company, Meta, does not expect the metaverse to realise its full potential for another ten years. With this in mind, we believe that OEMs should adopt the following medium-to-long term metaverse marketing and sales strategies, depending on their business model and target customers: 

  • Keep it real: The metaverse may not be suitable when targeting the many customers with traditional buying behavior who are not intrigued by new digital technology. For them, web and online applications are probably sufficient.
  • Virtual experience enhancement: Firstly, upgrade and extend the customer journey in a metaverse setting which includes a “dealership digital twin”; next, integrate metaverse blockchain applications; lastly, launch marketing tools in the metaverse for potential customers who enter from the “real world”.
  • AR/VR upgrading: Augmented reality (AR) is already playing a major role in product visualization and exploration, customization of options and enhancing the real world product experience.
  • Virtual replication: Integration of the metaverse and the real world that covers the customer experience, user interaction, transactions and product portfolios. Hyundai is taking the lead in using robotics to bridge the “digital divide” for customers with traditional real-world behaviours.

Around the world, automobile customers display widely differing levels of digital literacy. OEMs therefore need to find a tailored approach when using the metaverse in sales and marketing, depending on which customer segments and specific customer behaviors they are trying to target.  In this context, it is important to bear in mind that the metaverse will not be suitable for every OEM or a necessity for all brands. Every carmaker should start their metaverse journey by first answering the question: is this really for us?   

Over the next decade, the metaverse’s expected evolution will influence the downstream strategies of OEMs – in particular, how virtual cultures develop and worlds are regulated in different countries and regions.  For example, it is already evident that regional variations in data protection regulation will have a critical bearing on future models for virtual worlds. It is even conceivable that the dominant model will be a replica of the real world that exists in one or several virtual worlds, with the same spatial and temporal dimensions. In this virtual replica, OEMs will compete for prime retail locations and stores that sell at the same price per square meter as in the real world.

What will not change, however, is the sheer range and diversity of automobile customer preferences and priorities around the world (Figure 3).

Figure 3: No one-size-fits-all – Car buyers in the metaverse are the same as in real life

The road ahead for metaverse marketing and sales offerings

Berylls Digital Ventures (BDV) has identified five factors which characterize successful downstream strategies in the metaverse. OEMs should:

  • Seek partnerships to understand the metaverse technology landscape and explore business opportunities with promising start-ups.
  • Build capabilities with teams of external experts in fields such as online gaming, to master metaverse technology and product development, marketing, and interaction strategy.
  • Explore technology and customer behavior to understand better the metaverse’s potential and limitations and avoid the possibly substantial cost of doing nothing.
  • Adopt an integrated multi-channel approach as crucial for survival amid the metaverse’s disruption of traditional marketing and sales models. The traditional three-step sales approach or a dealer-agent model is unlikely to be able to cope with the upheaval.
  • Exploit untapped metaverse opportunities in areas such as maintenance, servicing, accidents and breakdowns, especially when using AR and VR applications in real world settings.

 

The surest route to failure is a one-size-fits-all approach, given the complexity and variety of metaverse applications that are already available to marketing and sales teams.  OEMs need to understand where their customers are going and which metaverse activities by which start-ups are the most relevant before venturing into this space. As in the real world, so in the metaverse – the customer always comes first.

ABOUT THE AUTHOR

Dr. Jan Burgard (1973) is CEO of Berylls Group, an international group of companies providing professional services to the automotive industry.

His responsibilities include accelerating the transformation of luxury and premium OEMs, with a particular focus on digitalization, big data, connectivity and artificial intelligence. Dr. Jan Burgard is also responsible for the implementation of digital products at Berylls and is a proven expert for the Chinese market.

Dr. Jan Burgard started his career at the investment bank MAN GROUP in New York. He developed a passion for the automotive industry during stopovers at an American consultancy and as manager at a German premium manufacturer.

In October 2011, he became a founding partners of Berylls Strategy Advisors. The top management consultancy was the origin of today’s Group and continues to be the professional nucleus of the Group.

After studying business administration and economics, he earned his doctorate with a thesis on virtual product development in the automotive industry.

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Global Truck Players: Q1 2022 Review

Munich, May 2022

Featured Insights

Global Truck Players: Q1 2022 Review

Munich, May 2022
T

he global truck players Daimler, Traton, Paccar and Volvo are regularly monitored by Berylls commercial vehicle expert Steffen Stumpp.

Here are his major findings for Q1 2022:

  • Supply chains remain uncertain
    The Ukraine war has added even more uncertainty to supply chains which have been under stress since the recovery from the sharp market decline in Q2 2020. With Shanghai being in lock-down, there are significant risks looking forward.
  • No signs of weakness on the demand side
    Although there are first signs of economic slow-down on the horizon, the need for new trucks is still considerably high. There is a massive pent-up demand and a huge order backlog – 2022 production is sold out.
  • German OEMs have homework to do
    While Volvo and Paccar are very profitable with double-digit margins, both Daimler and Traton need to improve performance, namely for Fuso, MAN and Navistar which are below 5% RoS.

Can’t wait to read more? Download the Insight now!

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Global Truck Players: Q1 2022 Review
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Authors
Steffen Stumpp

Partner

Andreas Oesinghaus

Associate

ABOUT THE AUTHOR

Steffen Stumpp (1970) joined the Berylls Group in October 2020 as Head of Business Unit Commercial Vehicles. At this point, he already looked back on extensive professional and leadership experience in the commercial vehicle industry. Stumpp started his career in an OEM and went through different roles in research, marketing, product planning and after-sales service. When he switched to the automotive supplier industry, he took over the responsibility for worldwide sales and marketing of a medium-sized tier 1 supplier. After another step as head of sales he decided to join Berylls, where he is now responsible for the commercial vehicle business.

Stumpp is a graduate engineer and has studied industrial engineering at the KIT in Karlsruhe and the Technical University of Berlin with focus on logistics.

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