Florian Kähler (ECM Equity Capital Management), Dirk Liedtke (Raymond James), Martin Schwarzer (PwC), Alexander Sixt (Sixt), and Fabian Wasmus and Thomas von Werner (Penta Investments) discussed the impact of digitalisation on the automotive sector. Dr Joachim Koch (IMAP M&A Consultants) moderated the panel.
The automotive industry is changing like never before as a result of digitalisation. In an environment where volume growth will decrease in the next decade, digital leadership in the automotive industry is expected to translate into growth.
The panel first discussed the impact of digitalisation on small and medium-sized automotive suppliers. By implementing a homogenous and connected IT system within a company and between companies along the value chain (industry 4.0), companies can significantly increase operational productivity and responsiveness to changing market conditions, and create new business opportunities, particularly by offering just-in-time services. Private equity companies can add significant value by initiating and supporting this digital transformation in small and medium-sized automotive suppliers.
The panel also discussed digitalisation’s disruptive impact on the automotive aftermarket. New e-commerce business models for automotive spare parts and accessories are experiencing double-digit growth rates and high profit margins, and are attracting interest from strategic and financial investors.
The panellists agreed that software competence is quickly becoming one of the most important differentiating factors in the automotive industry for various applications in the car, such as advanced driver assistance systems, connectivity and infotainment systems. Large tier-one suppliers in Germany are leading the global industry in integrating advanced software solutions in new automotive components. At the same time, consolidation in traditional component manufacturing will likely accelerate as a result of declining volume growth and economies of scale.
The digital transformation will also continue to change consumers’ mobility behaviour. Mega cities in the United States and Asia will fundamentally change the way cars are used in the future. Cars will evolve from traditional transport vehicles to high-tech self-driving devices. OEMs can no longer focus on providing hardware, but must become providers of mobility solutions. Shared mobility services or data connectivity services will increase at double-digit growth rates. The panel unanimously agreed that innovative mobility concepts will be an important growth driver in the future, but questioned the current high valuation level of mobility solution providers such as Uber.
The panel concluded that the entire automotive industry is seeing tremendous changes due to digitalisation, which offer attractive opportunities for strategic as well as private investors.