The need for western manufacturers to localise their R&D activities in emerging markets is ever increasing. Primarily due to a shift in production and sales volumes, it has been intensified by the necessity to address local market requirements.
Roland Berger’s Dr Wolfgang Bernhart, Dr Wilfried Aulbur, Ludwig Fazel and Junyi Zhang discuss the success factors for captive engineering centres.
In the future, the majority of the increase in global passenger car sales will take place in emerging markets. This will have a significant effect on the expected sales distribution of western OEMs: both European and US manufacturers will see their share of sales generated in the BRIC countries shift from the current 21-28% to 27-41%.
In addition, the importance of western markets as production hubs will decline steadily: the volume of passenger cars produced in Europe as a share of global production has already decreased continuously from 22% in 2009 to an estimated 16% in 2013, and will reach around 15% in 2019. A similar picture can be observed for production volumes in the US, which will drop from an estimated 13% in 2013 to 11% in 2019. At the same time, the production share of the BRIC countries will increase from 22% in 2009 to an estimated 40% in 2019.
To participate in this development, and the resulting sales growth shift towards emerging markets, OEMs must adapt products and engineering processes to local requirements.
This process of localisation and customisation of products to emerging market needs can be implemented in 4 steps. The first comprises the de-contenting of global products, combined with low-cost production and purchasing.
Step two requires a global platform with local components, offering the possibility to realise further cost-saving potential. The next stage combines designated concepts for low cost markets with the integration of local suppliers. Very often, partnerships and/or joint ventures with local companies pave the way for a fast and effective realisation of such a low-cost product.
Finally, the fourth step requires the establishment of a product creation process, specifically tailored to the requirements, needs and capabilities of emerging markets. This low cost development process must be backed by additional low cost processes within the organisation, for example adjusted testing and validation. This can help cut product costs by 20-30%.
Implementation
The reasons for OEMs to increase their presence are manifold. On one hand, emerging markets have become major global automotive powerhouses and are increasingly gaining importance as hubs for innovation. On the other hand, emerging markets strongly differ from established western markets and are characterised by specific requirements, resulting in the need for local adaptation and customisation…
Dr. Wolfgang Bernhart is Senior Partner of the Automotive Competence Center; Dr. Wilfried Aulbur is Managing Partner – India; Ludwig Fazel is Senior Consultant at the Automotive Competence Center; and Junyi Zhang is the Principal of the Automotive Competence Center at Roland Berger Strategy Consultants
This article was first published in the Q4 issue of Megatrends magazine, to continue reading, simply download your free copy now and turn to page 24.
