Electromobility – Transformation of an automotive supplier

The permanent change of the markets forces companies to constantly adapt. If companies do not react or react with delay, they can quickly get into a crisis. Crises cannot always be prevented, but they can usually be managed. The best way to do this is with a clear strategy, clear instructions for action and determined implementation, as the following example of the transformation of an automotive supplier during electromobility shows.

Nothing is more constant than change

This has been particularly true of the automotive industry in recent years. The progressive conversion of the drive system from combustion engines to electric motors poses enormous challenges for the entire industry. Above all, the suppliers who supply parts and components for the powertrain.

This is also the case for our customer, an iron foundry that has been able to expand as a successful supplier for parts in combustion engines that are subject to particularly high temperatures and has built up a great deal of expertise in this special segment. Due to the expected decline in the global production of combustion engines, the strategy and business model had to be reviewed and adapted to the changed market situation.

In addition, the German foundry industry has been under severe pressure for many years anyway: Lower production costs abroad (including in China and Turkey) and a migration of customer production abroad have already led to insolvencies and plant closures at foundries in Germany.

Those who have specialized and found their place in growth niches have been able to survive. With know-how and quality, German suppliers – like our customer – were able to avoid the pure price war. Together with our client, we researched the opportunities and risks for strategic realignment in this challenging competitive environment. On this basis, we jointly developed the concept for the strategic realignment and drew up a plan for the transformation process and economic development

If you don’t move with the times, you move with the times

It is true that VW, Daimler and many other OEMs have discontinued or announced the development of new (pure) combustion engines.

But the fact is that more than 90% of globally produced car powertrains are currently still combustion or hybrid engines.

The change is coming, that’s for sure

But it will take time. Experts predict that in 10 years’ time, more than 75% of cars produced will still have internal-combustion or hybrid engines. This development is even slower for commercial vehicles; today, more than 95% of trucks run on diesel.

The internal combustion technology relevant to our customers is therefore likely to continue to generate sales for some years to come, although the clock is ticking ever louder.

New technical developments – especially in battery technology – or political decisions, can significantly accelerate the process of electrification.

Global sales of passenger cars by drive type, in million vehicles (Excluding gas and fuel cells)

Global sales of passenger cars

It is important to identify opportunities to occupy alternative product niches in good time and not wait until the competition has done so. For our foundry, this means consistently reducing our dependence on the automotive sector and looking for new or different castings applications outside the area of combustion technologies, in growth sectors such as energy technology.

Structured approach to identifying growth niches

A structured approach was necessary for this. The first step was to identify growth niches which showed possible applications for castings and in which the company’s own strengths, such as expertise in special alloys, complex casting molds and, where appropriate, experience in the high-temperature range with high quality requirements, etc., could be brought to bear. These strengths had to be transferred to other applications and industries. To date, around 200 potential customers have been identified in numerous (growth) sectors.

The task now was to systematically contact existing and potential new customers in order to demonstrate the company’s own expertise, identify possible applications and actively develop innovative casting solutions together with the customers.

We supported our customer in its transformation as management consultants and in controlling the process. As part of the regular progress reports, we were able to determine where the goals had been achieved and where adjustments had to be made. In this way, our client was able to dynamically adapt its strategic realignment to the continuously evolving market and competitive situation and changed internal requirements.

This approach requires tight management, clear responsibilities, and project controlling that keeps a constant eye on the goals of the strategic change: The teams are managed with key figures (number of new customers, volume of offerings with new products, etc.) and target achievement is continuously monitored.

The first fruits have already been harvested

The proportion of sales not dependent on the combustion engine has already been increased by almost 50% within a year. However, the process of change is far from complete. It is expected that the changeover will take several more years.

However, the foundation has been laid for a continued successful future.

Contact us if the change in the markets makes a strategy review and realignment necessary for your company as well. 

Please feel free to arrange a non-binding appointment with one of our experts.

Dr. Armin BratzDr. Marcus Engels