Carmakers Found to Make Slow Progress Toward Digital Redo

Auto companies are finding that it’s easier to adopt the trappings of the digital economy than to push through the changes necessary to become full-blown members

Auto companies are finding that it’s easier to adopt the trappings of the digital economy than to push through the changes necessary to become full-blown members.

While some executives have swapped suits and ties for trainers, and carmakers have established glitzy urban software outposts to attract new talent, the accompanying cultural shift is moving at a painfully slow pace, according to a new study by KPMG and recruiting consultant Egon Zehnder International Ltd. being released at the Shanghai auto show.

The industry “seems to be clinging to its old ways,” according to the researchers, who surveyed more than 500 global industry executives. “Leaders recognize the unprecedented challenge now facing them, but have yet to establish the digital‐ready culture needed to meet it.”

The messaging is on-target. Outgoing Daimler AG Chief Executive Officer Dieter Zetsche now presents new models clad in jeans and track shoes, while Volkswagen AG headquartered its Moia future-tech division in Berlin, a one-hour train ride from the German carmaker’s mothership in Wolfsburg. Factories from Detroit to Turin are being re-fitted for the dozens of electric models planned over the next several years.

Read: BMW and Germany Prepare for the Twilight of Combustion Engine

But in the crucial area of culture, not much has changed to get companies digital-ready, more than half the respondents said. While almost everyone agreed that the way the workplace operates must be redefined to tackle the transforming market, just one-third supported concepts such as flatter management structures. Even fewer would welcome a greater tolerance toward making mistakes.

“Executives are still thinking about digital transformation in terms of process change rather than a shift in mindset,” KPMG and Egon Zehnder said.The findings align with investor skepticism that traditional car manufacturers are able to adapt fast enough and conquer new business opportunities in the unprecedented industry shift -- electric vehicles packed with the latest gadgetry are replacing combustion-powered cars, and car ownership is shifting toward app-based car-sharing and ride-sharing pioneered by new technology rivals. Even companies in relatively robust financial health like Volkswagen and Daimler trade at recession-like valuation multiples.

Automakers have taken pains to open urban labs in big cities, fitted with lounge-like office space better suited to meetings with startups and accommodating software programmers who would never relocate to hulking factories in the hinterland.

VW, the world’s largest automaker, established a program called Faculty 73 to train 100 workers in Germany who want to become software developers, while Daimler established “corporate incubator” Lab1886 more then a decade ago with locations in Stuttgart, Berlin, Beijing and Atlanta. Robert Bosch GmbH, the biggest global car-parts maker, plans to add 25,000 software experts over the next five years and quadruple the number of artificial intelligence specialists to 4,000 by 2021.

New Competitors

While that is a lot, it’s unclear if it will be enough to stop the likes of Alphabet Inc.’s Waymo and Baidu Inc. from taking over the wheel in technologies like self-driving cars that are poised to reshape the industry.

“What’s needed to positively shift the automotive industry are bold, equitable partnerships with external and digital players,” said Dieter Becker, KPMG’s head of its automotive consultancy. “A clear and revolutionary vision is lacking.” 

Source: Bloomberg 

Posted on : 15 April 2019
Last Updated : Thursday 16th January 2020