The Automobile Industry:The Automobile Industry:
A Never-ending Competition A Never-ending Competition SectorSector
Giuseppe VolpatoCa’ Foscari University of
Venice
YICGG – 2008 - Rome
2
ContentsContents
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
Main Changes in the Automobile Demand
Main Changes in the Automobile Supply
How to compete effectively?
3
Automobile Industry as Employment Generator in Automobile Industry as Employment Generator in EUEU
Metal Raw Materials andMachine Tools
1,540,000
Textiles, Glasses and Chemical Row Materials
300,000
Tires and Rubber Parts
660.000
Automobile Component Manufacturing1,300,000
Automobile Industry (Final Assembly)1,854,000
ServicesConnected with the Vehicle Use
890,000
Vehicle Distribution and Maintenance
3,150,000
TransportationServices
9,360,000
Automobile Market
Employment of EU Automobile Industry No. 1,854,000 Employment of EU Automobile Filière (overall Supply Chain) No. 6,304,000 Employment of EU Automobile Industry & Related Activies as a whole No. 19,054,000
4
The Automobile Industry is a The Automobile Industry is a Key Sector for:Key Sector for:
New Technologies Development
New Process Organization (Fordism, Lean Production, WCM)
Creating and Learning New Jobs
Industrial Practice Diffusion in all Industrial Activities
People and Goods Transportation
5
ContentsContents
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
Main Changes in the Automotive Demand
Main Changes in the Automotive Supply
How to compete effectively?
6
Automobile Filière (whole supply chain)Automobile Filière (whole supply chain)
2° T
2° T
OES
OES
3° T
3° T
OEMOEM
Nat. BranchNat.
BranchDealerDealer
Customer
Orders
ServiceService
7
Cost Structure in Car Manufacturing and Cost Structure in Car Manufacturing and AssemblyAssembly
Total capacity
Break-even
Profit
Loss
Fix cost prevalence
8
Cost Structure in Car Distribution (Dealer)Cost Structure in Car Distribution (Dealer)
Quantity Cash Prizegiven to Dealers
by Manufacturers
Profit
Loss
Break-even
“sure”customers
“doubtful”customers
Maximumprofit
variable cost prevalence
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ContentsContents
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
Main Changes in the Automotive Demand
Main Changes in the Automotive Supply
How to compete effectively
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
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The Motorization ProcessThe Motorization Process
200019901960 19801970
Cars for 1.000 inhabitants in different countries
150
300
750
450
600
2010
2006USA 813Italy 673Germany 597France 595Japan 593UK 571Poland 385S.Korea 322Brasil 124China 23India 12
11
AffluentFamilies
Poor Families
1960
The Pattern of Motorization – The Italy CaseThe Pattern of Motorization – The Italy Case
Distribution of familiesby income
Familieswith a car
12
AffluentFamilies
Poor Families
1960
19701980
1990
2000
The Pattern of Motorization – The Italy CaseThe Pattern of Motorization – The Italy Case
In 2006, 95% of families has 1 car
and 43% owns 2 or more cars
13
19,18% 18,60%
5,91%4,49%
1,77% 1,40%
0,00%
5,00%
10,00%
15,00%
20,00%
25,00%
Car Park Growth in W.EuropeCar Park Growth in W.Europe(Average growth ratio in the decades)(Average growth ratio in the decades)
‘50-’59
‘90-’98
‘80-’89
‘70-’79
‘60-’69
‘00-’07
14
13,70% 13,77%
0,27%
4,61%
0,61% 0,29%0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
New Cars Registration in W.EuropeNew Cars Registration in W.Europe(Average growth ratio in the decades)(Average growth ratio in the decades)
‘50-’59
‘90-’99
‘80-’89
‘70-’79
‘60-’69 ‘00-’07
15
Evolution of the Car Range in W.EuropeEvolution of the Car Range in W.Europe
0
500
1000
1500
2000
2500
3000
3500
1990 1995 20060
50
100
150
200
250
300
1990 1995 2006
No. of Models No. Of Versions
16
5,6 years (100%)
100
90
80
70
60
50
40
30
20
10
100
90
80
70
60
50
40
30
20
10
10,7 years (100%)
7,2 years (67,8%)
Uni
t so
ld a
s %
on
pea
k
Years
5,4 years (92,4%)
3,2 years (54,8%)
5,2 years (48,9%) 4,1 years (71,2%)
PLC 1970-1980 PLC 2000-2006
3,6 years (33,6%)
Model Car Cycle in W.Europe (1970-2006)
17
14
16
18
20
22
24
26
28
2003 2006 2009 2012
N.A.
Asia
W.Europe
New Car Registrations – Market Forecasting
Million of cars
18
11,5
22,5
33,5
44,5
55,5
6
2003 2006 2009 2012
E.Europe
Africa and M.E.
S.America
New Car Registrations – Market Forecasting
Million of cars
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ContentsContents
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
Main Changes in the Automotive Demand
Main Changes in the Automotive Supply
How to compete effectively
20
A Sector Characterized by a Very Strong A Sector Characterized by a Very Strong Competion ProcessCompetion Process
Competion produces a concentration of makes
Competition reduces profit margins
New labor division between car manufacturers and suppliers
Competition spurs product and process innovation and cost reduction
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1960 = 51 1970 = 38 1980 = 33 1990 = 27 2007 = 16
Car Manufacturers – Concentration Car Manufacturers – Concentration ProcessProcess
Acquisitions and Mergers Among Makes
22
Component Suppliers – Concentration Process
30000
10000
4000
100
600
2000
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
1990 2000 2010
0
500
1.000
1.500
2.000
2.500
Total Suppliers 1° Tier Suppliers
23
Structural Overcapacity(milion units)
80
18
62
22,5%Capacity Production
20052005 20152015
87
15
72
17,2%
Capacity Production
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ContentsContents
Why Automobile Industry Is So Important ?
What’s the Shape of the Automobile Filière ?
Main Changes in the Automotive Demand
Main Changes in the Automotive Supply
How to compete effectively
25
How to Compete How to Compete effectivelyeffectively
Invest in Low-cost countries
Utilize Word Class Manufacturing Procedures
Smart Standardization and Differenziation: less architectures, less components, more models
Reduce Time-To-Market
Industrial agreements for commonalizations
Product and Process Innovation
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Labor Cost per Hour(2003-2009 values in US $)
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
Germ
any
USA
Japan UK
France
ItalySpai
n
Korea
Taiwan
Czech
R.
Hungary
Brazil
Poland
Russia
India
Cina
Indones
ia
2003 2009
27
0
10
20
30
40
50
60
Mar
ch '07
April '0
7
May
'07
June '0
7
July
'07
Sept. '07
Oct. '07
Nov. '07
Dec. '0
7
Jan. '0
8
Feb. '
08
Mar
ch '08
April '0
8
May
'08
June '0
8
July
'08
Sept. '08
Average Number of Defects for Work Shift
(Body Sealing Station)
Application of WCM
28
Average Number of Defects for Work Shift
(Body Welding Station)
0
20
40
60
80
100
120
140
160
Application of WCM
29
13 105 6
No. ofArchitectures
6
19
6
16
6
11
6
Architectures in 2002
New Architectures
2006 2008 E 2010 E 2012 E
New models by each Architecture
Production by each Architecture
1.7 2.7 3.7
150 K 450 K270 K
Cost Reduction through Common Architectures (The Fiat Case)
30
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013
Different Types of HVAC Modules(Heating, Ventilation & Air Conditioning)
Cost Reduction by Component Standardization(The Fiat Case)
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ConceptDefinition
TechnicalConceptDefinition
TechnologicalDevelopment Tooling
ProcessValidation Pre-series Ramp-Up
KickOff
Briefing Start ofDevelopment
TechnicalValidation
Job 1 Launch
- 26 - 16,5 - 42001Stilo
2006Bravo
- 18 - 9 - 2,5
2008Delta
- 15 - 9 - 2,5
Cost Reduction by TTM Compression(The Fiat Case)
Use of Simultaneos Engineering
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Investments in Innovations (R&D + Capex)
2003 2004 2005 2006 2007R&D + Capex (million euro) 6.188 6.681 6.457 6.857 7.187 R&D + Capex per car 5.600 5.527 4.880 4.991 4.662 R&D + Capex (million euro) 5.626 4.977 4.047 3.839 3.938 R&D + Capex per car 4.623 4.057 3.326 3.067 3.045 R&D + Capex (million euro) 2.039 2.744 2.247 2.838 2.616 R&D + Capex per car 1.102 1.445 1.223 1.345 1.171 R&D + Capex (million euro) 4.414 4.302 4.678 4.374 3.648 R&D + Capex per car 1.343 1.275 1.380 1.300 1.064 R&D + Capex (million euro) 4.525 4.924 5.143 5.985 5.415 R&D + Capex per car 1.895 1.977 2.029 2.460 2.180 R&D + Capex (million euro) 10.428 9.347 8.515 8.316 9.958 R&D + Capex per car 2.079 1.818 1.640 1.454 1.608 R&D + Capex (million euro) 12.431 13.563 17.071 15.865 14.500 R&D + Capex per car 1.850 1.831 2.141 1.861 1.627 R&D + Capex (million euro) 12.996 11.014 12.137 11.150 9.209 R&D + Capex per car 1.929 1.620 1.794 1.690 1.405 R&D + Capex (million euro) 11.227 11.094 11.735 11.230 10.641 R&D + Capex per car 1.386 1.346 1.297 1.223 1.146
GM
Toyota
Renault
VW
Fiat
Ford
Investments in Innovation (R&D + Capex)
BMW
Mercedes
PSA
33
What Next?What Next?
The return of the Great Empires:
China, India, Russia are using the domestic market as levier for gaining new competitive position
The necessity to stop the global warming:
New Technologies (electric car, ethanole of 2° generation, hydrogen, etc.)
The necessity to stop fuel guzzler cars:
Substitute heavy car (SUV) with city car
34
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