How Automotive Companies Are Navigating Global Disruption

In an interaction with Asia Business Outlook, Prashanth Doreswamy, President and CEO of Continental India, shared his views and thoughts pertaining to how changing consumer behaviors are influencing automotive companies' strategies as well as how automotive companies are embracing digital transformation to stay competitive amid global challenges. With over 30 years in the automotive industry, he has a proven track record of driving exponential business growth, leading change management, and spearheading organizational transformation across various sectors. His expertise encompasses automotive electronics, user experience, architecture, networking, safety, and autonomous mobility.

The global semiconductor shortage has severely impacted vehicle production. How are automakers addressing the semiconductor shortage and its impact on production?

The automotive industry experienced a serious semiconductor shortage back in 2020 during the coronavirus outbreak, and due to production disruptions, we saw a significant fall in global light vehicle production during that time, which set the entire industry back by several years. By 2023 this became more of less settled.

After an initial stumble, automotive parts manufacturers and OEMs managed to tide through by adapting to the situation through various measures, such as increased supply chain visibility, partnerships beyond traditional customer-supplier relationships, and adapting production schedules to availability. Supply chain pressures, geopolitical uncertainty and resultant trade tensions, regulatory controls etc, continue to be potential factors that can impact this supply chain. It also went to a point where companies had to redesign certain systems while optimizing product portfolios to reduce dependency on specific chipsets without compromising on functionality or performance.

Collaboration across the value chain is key and it is important to closely work with the customers, suppliers, and industry partners to navigate this situation collectively.

During that phase, there were several discussions on automotive OEMs investing in in-house chip development for self-sufficiency, e.g., Chinese EV companies who sought to do this to reduce external reliance.

Similarly, wafer fabrication was traditionally limited to a few regions, but subsequent to the global chip shortage, several countries, including India, have shown serious intent to reduce dependencies and strengthen their own semiconductor supply chain.

The demand for semiconductors in the automotive industry is not slowing down anytime soon. The automotive trends of CASE – Connected, Autonomous, Shared & Electric – in fact continue to increase the demand for semiconductor chips, to be topped up by the increasing adoption of Software Defined Vehicles (SDVs).

Consumer preferences are shifting towards digital and personalized experiences. How are changing consumer behaviors influencing automotive companies’ strategies?

Earlier, vehicles were considered just as a mode of transportation but with time, they have transformed into computer on wheels. As the needs of the customers are evolving, people want their vehicles to be equipped with the latest features and technology.

Therefore, evolving consumer preferences for digital and personalized experiences are reshaping automotive engineering strategies. Several connected and smart mobility technologies are already standard features in modern automobiles. As connected technologies in vehicles become more prevalent, so will software in vehicles. Old analog displays are being replaced by panel-to-panel displays and digital infotainment systems, transforming the in-vehicle experience of the customers. AI-based voice assistants and advanced security features are also finding their place in cars. Vehicles now act as an extension of one’s home, offering comfort, safety and security. Chinese OEMs are, in fact, setting new standards when it comes to connectivity features. However, the response to new technologies in cars varies greatly between generations and also between countries.

Since 2011, Continental, as a technology company, has periodically commissioned mobility studies that focus on a variety of topics, the most recent one being in August 2024 in Germany, China, France, Japan and the USA. Among other topics, the study focused on people’s general mobility needs. It also shed light on the importance of cars for everyday mobility, respondents’ attitudes to automated driving and sustainable tires as well as their views on in-car technologies and artificial intelligence.

With people prioritizing sustainability and demanding cleaner, energy-efficient vehicles, the industry is also gradually moving towards electric mobility. A look at age-dependent attitudes toward electric mobility in our study reveals that e-mobility is more appealing to younger drivers than older ones. Another example is that hybrid drives are highly popular across all countries. In Germany (48 percent) and the USA (47 percent), nearly half of respondents who do not own an electric car can imagine their next vehicle being a hybrid with a combustion engine and an electric motor. In China, that figure rises to almost nine out of 10 respondents (86 percent). This means that hybrid cars could increasingly bridge the gap to e-mobility and give it a renewed boost.

Automakers are continuously monitoring emerging trends to ensure a consumer-centric future while at the same time balancing this with commercial viability.

Digital transformation is becoming a critical response to global disruptions. How are automotive companies embracing digital transformation to stay competitive amid global challenges?

The automotive industry embraced digital transformation a few years back, so this is not new, although compared to some other industries, the pace is slower, more difficult and capital intensive. Digital transformation has become a cornerstone for automotive companies to navigate global disruptions and remain competitive in the industry.

There are two aspects of digital transformation, one pertaining to technologies in a vehicle, aligned to the trends of Connected, Autonomous, Shared and Electric, and the second, digitalizing manufacturing operations.

Advanced technologies such as AI, IoT, cloud computing, and big data analytics, have helped automotive companies in both aspects of digitalization, significantly helping improve operational efficiencies, reduce costs, create new in-car experiences and features enhancing customer delight and safety.

Digital transformation also means a fundamental shift in competencies and skills - for instance cybersecurity, artificial intelligence, machine learning, core software development etc - which requires upskilling of existing employees and attracting the right talent.

Digitalization and tech infusion into the industry also poses challenges, a good example is how the threat of cyber-attacks have led to the development of cybersecurity in the automotive industry. With the connected car being a future norm, we also see how data management and the cloud have become increasingly important in this space. Automotive companies are trying to balance innovation with ethical and economic considerations for sustainable growth amidst challenges like ensuring robust cybersecurity, data privacy, etc.

Another aspect of this transformation is the blurring of boundaries between industries, which has enabled the entry of several high-tech companies into the space of automotive. Developments in electric mobility and autonomous mobility have also seen several new entrants and start-ups in the space. This also requires a mindset change to rethink traditional supplier-customer relationships and forge partnerships which are symbiotic in nature.

With supply chain disruptions affecting everything from microchips to raw materials, how are automotive companies ensuring resilience amid ongoing supply chain disruptions?

The automotive industry operates in a complex supply chain network, and the pandemic showed us its vulnerability. Factors such as pandemics, natural disasters, logistics issues, and geo-political tensions can all have crippling effects on our industry. Supply chain resilience quickly became a priority topic for our industry.

Diversifying the supplier base also became a necessity. Automakers also started looking to reduce regional dependencies and focusing on building nearshore ecosystems. Post Covid, many companies adopted a China plus one strategy to reduce over-reliance on one region. As I mentioned earlier, after the semiconductor crisis, many countries, including India, have shown intent to strengthen their domestic manufacturing and semiconductor supply chain. Some governments, for example, Japan, announced subsidies to restore manufacturing operations or to relocate to other Southeast Asian countries, primarily aimed at diversifying supply chains. Collaborative partnerships with suppliers have also proven to strengthen supply chain ecosystems. Another strategy that evolved in the industry was building its own chip development capacity. However, semiconductor investments do not yield results immediately.

With vehicles becoming more software defined and technology-rich, semiconductor requirements are only going to grow in the near term and long term. Increasing semiconductor inventory is in the priority list of OEMs and tier-1s.

The adoption of digital technologies to build an intelligent, data-driven supply chain is today seen as an imperative to ensure supply chain resilience, and also to improve transparency with the customer. Data analytics and AI can also be leveraged to better foresee risks, and ensure quicker decision making, agile actions and mitigation measures.

With the rising demand for sustainability and tightening environmental regulations, what role is electrification playing in the future of the automotive industry amid global disruptions?

Electrification has a vital role in making this industry more sustainable, and regulatory pressures, together with consumer interest, have ensured its momentum. Amid global disruptions like supply chain challenges and energy crises, the shift to electric vehicles (EVs) helps reduce carbon emissions and fossil fuel dependence. Automakers and several start-ups continue to invest in advanced electric power trains, battery technologies, and charging infrastructure. Innovations such as solid-state batteries promise longer ranges and faster charging. Hybrids are also gaining popularity. Some industry analysts stick to their prediction that by 2030, about one in four new cars sold will be an EV.

Advancements in vehicle connectivity and autonomous driving are further accelerating the transition to smart electric vehicles. Global sales of fully electric and plug-in hybrid vehicles have been growing, with China leading the trend. However, challenges like high development costs, limited charging infrastructure, consumer range anxiety and energy grid demands remain. The success story of China demonstrates how building a domestic supply chain and low-price strategy can boost growth, coupled with connectivity features in the EV.