Managing challenges in auto industry

Issue #114, Oct 12th 2021

Challenges are not new to the automotive industry. It has faced several challenges before. Those who handled them well continue to be market leaders. The situation is no different now, although the challenges are different. The chip shortage is forcing vehicle makers to shift to a make-to-order model, but with a pricing advantage. The lack of driving pattern data for Electric Vehicles (EVs) makes it difficult to price insurance policies for them. The increasing size of electric SUVs makes them accident prone. Vehicles are found to have many features, many of which customers never use. This situation should also change to manage the chip crisis. To improve vehicle quality at Honda Cars India, a control system was designed to identify product defects in real time. The use of IoT on the shop floor enabled end-to-end part traceability and significantly reduced manual effort. Here are some recent challenges faced by the auto industry and some more interesting updates reported in the media.

Make-to-order to manage chip shortage

It turns out auto executives are doing some serious plotting as to how they’ll run their businesses differently once ample supply of semiconductors is restored. This year, though, the scarcity of chips has forced executives to idle assembly lines whether they like it or not. While missing out on deliveries isn’t ideal, the quality of sales has improved. In June, Ford Chief Executive Officer Jim Farley called the automaker’s new-found pricing power “breathtaking.” When reporting a surprise profit a month later, Farley said Ford is “committed” to an order-based system in which customer demand will dictate production. - Bloomberg

The insurance confusion for EVs

Insurance premium is linked to risk, which is assessed based on years of data. But the concept of electric vehicles itself being new, there is no data to bank on. As a result, auto insurers haven’t been able to price risk accurately while providing cover to electric vehicles. - Economic Times

The accident risk with EVs

Despite their potential to curb emissions, many of the EVs will exacerbate another safety crisis: traffic deaths.?In the U.S., enormous vehicles are largely to blame for increasing death counts. Over the decades, as almost every other technology has gotten smaller, from laptops to cell phones, cars keep getting bigger and more dangerous. Now, SUVs and light trucks are so large that they spur comparisons to World War II tanks and complaints that they’ve outgrown garages. As they have expanded in size, they’ve also become heavier. Larger and heavier vehicles tend to have longer stopping distances, and hit with greater impact on collision. - Bloomberg

Spend for unutilized tech in cars

Automakers are stuffing vehicles with technology they think consumers want but there are some high-tech features owners not only refuse to use, but actively avoid. That was the revelation discovered in the 2021 J.D. Power U.S. Tech Experience Index Study. Specifically, 61% of owners said they never used the in-vehicle digital market technology with 51% of those saying they don't need. More than half, 52% also said they've never used driver/passenger communication technology and 40% of those saying they have no use for it. - Forbes

Black gold from used tyres

In Nigeria, a country heavily reliant on revenues from its oil exports, entrepreneur Ifedolapo Runsewe has identified another type of black gold: used car tyres. She has set up an industrial plant dedicated to transforming old tyres into paving bricks, floor tiles and other goods that are in high demand in Africa's most populous nation. "Creating something new from something that will otherwise be lying somewhere as waste was part of the motivation," Runsewe told Reuters at her factory in the city of Ibadan in southwest Nigeria. - ET Auto

The Brexit impact

Cars remain the U.K.’s No 1 export but volatile energy prices and the cost of complying with EU regulations post-Brexit are blunting the industry’s competitive advantage, the sector’s trade body has said. Nine in 10 firms in the industry told the Society of Motor Manufacturers and Traders (SMMT) that costs, measured in time and resources, had increased as a result of leaving the EU, with 60% saying the extra expense for trading with the bloc was a “much more significant rise than other export destinations”. - The Guardian

Smart manufacturing @ Honda India

From IoT-powered processes on the shop floor to seamless customer experience, digital transformation is accelerating the growth of leading businesses in the automotive industry. Find out how Infosys realized Honda Car India's philosophy of joy with a holistic smart manufacturing strategy. Click here to know more.