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Supply chain issues have been addressed by some tech-savvy companies through price upsurges and a strategic focus on producing higher-margin vehicles. However, the luxury of employing such tactics is no longer viable. Prices continue to rise, but with a slower customer demand, controlling top-line growth has become increasingly challenging.
In the realm of autonomous vehicles now, a cautious approach in focused investments might be prudent, as the competitive landscape continues to progress. OEMs must decide whether to differentiate themselves by developing their own autonomous solutions or by forging partnerships with prominent technology companies. This could be an opportunity for industry outsiders like Apple and Google to intensify their efforts and establish a significant presence in the market, potentially prompting existing players to reassess their own initiatives.
Connectivity, on the other hand, is an area where OEMs cannot afford to slow down. Customers have become increasingly discerning, demanding highly customizable cars with continuous enhancements. This is where differentiation can and must occur. OEMs face the choice of either building their own connectivity solutions or seeking partnerships and leveraging the expertise of engineering firms with prior experience in other industries and close ties to connectivity providers. Collaborating with such entities could help lower costs and streamline the implementation of advanced connectivity features.
Investments in new business models may also be necessary to navigate the industry’s challenges. This may involve restructuring the balance sheet through innovative financial engineering. Shorter contracts and increased flexibility could enable OEMs to tap into new markets and leverage the uncertainty of the economic situation. However, these endeavors will require investments in clearing away legacy systems or establishing more advanced integration hubs. While new business models hold promise from a commercial perspective, establishing the necessary backbone processes to support these models is often underestimated.
The automotive industry is at a critical juncture, and the moves made by OEMs will be closely watched. How they leverage the current situation, adapt to emerging technology trends, and take strategic bets will ultimately determine their future. Only time will reveal the companies that think ahead and make the right choices and seize the opportunities that lie ahead.
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