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Automotive OEMs need to increase R&D efficiency to overcome the current growth dip and thereby shape a successful future
Carmakers’ research and development costs have risen significantly as they develop electric, connected and autonomous vehicles. The level of R&D spending has outpaced sales growth in Europe and North America even with continuous growth in production volumes and revenues since 2011. Now, as COVID-19 further accelerates the economic downturn which started in 2019, car sales at the 15 largest carmakers worldwide are expected to shrink for the first time in eight years. Both sales volumes and revenues will remain below 2019 levels until 2023, Strategy& estimates show.
Challenging market conditions greatly intensify the pressure to make R&D more efficient. Carmakers that cut investments in electric, autonomous, shared and connected vehicle technologies during the downturn risk falling permanently behind their competitors. The good news is that digital tools exist to bring spending under control, making key stages of the product creation process faster and more cost-effective.
To stay ahead in a rapidly transforming industry, carmakers in Europe spent far more on R&D in the past decade than did their rivals in the US and Asia. European R&D spend increased by 75 percent between 2011 and 2019, to €42 billion. US OEM spending over the same period grew by 30 percent to €13 billion, while Asian carmakers increased their spend by 33 percent to €28 billion. Revenues among the top 15 carmakers in the three regions grew by 55 percent, 18 percent and 40 percent respectively between 2011 and 2019.
Recommendations for OEMs to successfully digitize R&D according to their digital way-to-play
Safe drivers
- Start with mature digital technologies in concept and series development phase to cover gaps in expertise
- Attract and hire the right people and upskill current workforce
- Build scalable IT systems
Fast followers
- Review organization and capabilities to fully evolve potential of digital enablers
- Become place-to-be for digital elite and thoroughly drive upskilling of workforce
- Partner with tech companies to implement digital application over all PCP phases
Digital disruptors
- Fully integrate suppliers in IT systems to utilize complete potential of digitization
- Push frontiers of digital enabler in all PCP phases by research and lead in digital trust
- Keep an eye on cost structure, if technological borders too far
Manuel Hohmann, Andreas Wild and Martin Gerhardus also contributed to this study.
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