The global automotive industry and its supply chain is going through a time of great change. Businesses will need to be agile, aware of fast-moving trends and ready to make significant shifts in their operational and people practices to keep up with how the sector is evolving.
In this blog, we'll take an in-depth look at some of the most significant themes and challenges in the industry right now, as well as what this all means from an HR and workforce management perspective.
global trends shaping the automotive industry
Automotive industry businesses certainly have a lot to think about at the moment, from the disruption the sector has experienced in recent years to the changes and challenges it's likely to encounter up to 2030 and beyond.
Your talent acquisition and management practices will prove critical in determining whether you not only survive, but succeed and thrive during this period of upheaval.
dealing with disruption
Technology will continue to gain influence and importance in the automotive sector in the coming years, but it will be the people working in the industry who have the biggest impact on how it evolves and which companies enjoy the most success.
The International Labour Organization (ILO) underlined this point in a paper prepared for a meeting on the future of work in the automotive industry, which took place in Geneva in February 2021. It pointed out that the sector has reached a turning point and "faces an increasingly uncertain future". Global trade tensions and restrictions, changing consumer preferences and increasing regulatory pressures are among the issues businesses will have to contend with. The industry is also facing an ongoing shortage of semiconductors, which has impacted manufacturers across the world.
In an environment where change is constant and there will always be new challenges and opportunities on the horizon, a talented workforce will give you the adaptability and capabilities you need to succeed.
"There is broad recognition that disruption will to a large extent become a permanent feature of the industry in the years to come and that the automotive industry of the future will look markedly different from the automotive industry of today," the ILO said in its report. "The future of the automotive industry will to a large degree depend on the capabilities and skills of the women and men that work in the industry."
Disruption will to a large extent become a permanent feature of the industry in the years to come and that the automotive industry of the future will look markedly different from the automotive industry of today.
Looking at specific industry issues in more detail, one trend that has highlighted the difficulties facing all kinds of businesses across the sector is declining sales.
According to the International Energy Agency (IEA), global car sales dropped from 92 million in 2018 to 88 million in 2019. The impact of COVID-19 on the international economy led the IEA to predict that sales would slump to 73 million in 2020.
Future prospects for the industry suggest sales will increase in the coming years, but many businesses will continue to struggle with the lasting effects of the pandemic and ongoing uncertainty in regional economies and consumer demand.
S&P Global forecasts growth of 8% to 10% in global auto sales in 2021, which would take total unit sales to between 83 million and 85 million. However, it also stressed there will be regional inconsistencies in the recovery, with China leading the way, followed by North America, and Europe lagging behind.
IHS Markit painted a similarly uneven picture in a report released in December 2020. It predicted new light-vehicle sales of 83.4 million worldwide in 2021, up 9% from its 2020 forecast of 76.5 million.
Colin Couchman, executive director of global light-vehicle forecasting at the firm, said the industry's recovery will "very much depend on the path of the pandemic, especially whether governments can deliver on vaccine programs".
growth of electric and autonomous vehicles
The escalating impact of new technologies on the industry is another key trend that will prove particularly significant with regards to the skills auto manufacturers and service providers will need to succeed. This is evident in the growth of autonomous and electric vehicles (EVs), which looks set to be a defining trend of the industry in the 2020s.
Figures from the IEA show that following a decade of "rapid growth", there were ten million electric cars on roads all over the world at the end of 2020. Total electric car registrations increased by 41% during the year, despite the overall worldwide downturn in car sales.
The organization predicted there could be as many as 230 million EVs in use around the world by 2030, if governments introduce stronger policies to reach their climate objectives. The private sector will also have a key part to play in this trend, as more companies make the transition to electric fleets and lease cars.
There could be as many as 230 million EVs in use around the world by 2030, if governments introduce stronger policies to reach their climate objectives.
Autonomous vehicles are also expected to become an increasingly common sight on roads. McKinsey highlighted this as one of the key contributors to the "unprecedented disruption" taking place in the automotive sector. It noted that, by 2025, 60% of the top 20 original equipment manufacturers plan to have a level-four autonomous vehicle in their offering.
Another noteworthy trend is the rising popularity of internet-connected vehicles. McKinsey's research revealed that 12% of new cars sold today feature embedded connectivity, while 40% of consumers are prepared to switch to a brand that offers better technologies in this area.
Innovation is happening faster than ever before in the automotive sector, so your business needs to be prepared with the right HR and talent acquisition strategy to keep up.
5 key focuses for HR
Much of the responsibility for making sure your company is prepared for forthcoming changes and challenges in the industry will fall on the HR department.
So what are the top talent and workforce priorities you should be focusing on to position your organization for success?
Download this whitepaper with a summary of the latest HR trends and recommendations for the automotive sector or continue reading this article.
1. future-proof talent acquisition
All the tech-driven change and evolution taking place in the automotive industry right now will make it even more important that you have high-quality talent in your workforce. The business will rely on the knowledge, skills and experience of its employees not only to keep track of the most significant trends in the sector, but to benefit from them.
This is an area where many companies are currently falling short, research has suggested. McKinsey conducted a survey of automotive-supply firms which revealed that only 30% of respondents felt confident they had the right capabilities to respond to current trends.
Only 30% of automotive-supply firms felt confident they had the right capabilities to respond to current trends.
Forecasts from the company's Center for Future Mobility suggested that, by 2030, up to 30% of an average vehicle's costs will be driven by software and electronics. However, only 9% of businesses surveyed said they prioritize recruiting for software architect and developer roles and for system integrator positions.
McKinsey highlighted some best practices to optimize talent acquisition, management and retention. It recommended:
- Promoting close collaboration between the CEO, CFO and chief HR officer to ensure the company's strategic, business and talent strategies are tightly linked
- Identifying the 'critical 2%' of roles that generate the most value for the business and focusing on developing talent for these positions
- Boosting agility by creating small, cross-functional teams with a mix of capabilities to apply to specific tasks
- Utilizing new digital and analytical tools to improve vital processes such as workforce planning, talent identification, recruitment, onboarding, learning and performance management
2. preparing the workforce for automation and robotics
The automotive industry is comparable to many other sectors in the sense that automation and robotics are on course to play an increasingly important part in how it functions in the coming years.
According to Global Market Insights, the automotive robotics market will grow in value from more than $4 billion in 2017 to close to $6 billion by 2024.
The automotive robotics market will grow in value from more than $4 billion in 2017 to close to $6 billion by 2024.
The ILO pointed out that industry investments in new technologies were on course to reach US$82 billion (£69.4 billion) in 2020, with new tools and systems "being integrated into already highly advanced manufacturing in order to reduce lead times and increase customization".
"Digitalization is heralding a new era of advanced manufacturing in the automotive industry - elements of which have been described as 'Industry 4.0'," the organization said. "These technologies include the integration of advanced analytics, artificial intelligence, sensor technologies, the internet of things, cloud computing, blockchain, cyber-physical systems, machine learning, robotics and 3D printing."
Discussions of robotics and automation of key processes could create concern in your workforce about people losing their jobs or being of less value to the organization. If this situation arises, the HR department should focus on engaging with employees and sharing information about what changes are happening and why.
These discussions could focus on:
- Answering workers' most common questions
- Supplying information about any new systems and technologies the business is using
- Demonstrating how these processes could provide opportunities for workers to take on new responsibilities
- Introducing skilling programs that will help people acquire new abilities and boost their long-term employability
- Internal mobility efforts, which can help you deliver a better employee experience and retain talent
We've created a white paper that summarizes these key trends for the sector and recommends practical actions you can take to position your business for future success.
3. safety, health and employee wellness
If you want to retain your most valuable employees and attract new talent to your organization, you must be able to show a commitment to protecting people's health and wellness. This will prove more important than ever in the post-COVID era, with the pandemic shining a light on how employers need to take responsibility for keeping people safe and minimizing health risks in the workplace.
As well as putting essential workplace health and safety protections in place, automotive businesses need to ensure they're considering the unique risks employees face in this industry.
The ILO pointed out that the sector has seen significant improvements in worker protection and safety standards in recent years, but "remains hazardous". It highlighted specific risk factors such as:
- Exposure to noise
- Slips, trips and falls
- Exposure to hazardous substances
Recognizing these dangers, and showing the targeted measures and safeguards you have in place to protect against them, will be essential if you want to build an employer brand that will help you attract new talent and retain current employees.
4. workforce diversity and inclusion
You can give yourself access to the broadest possible range of talent and experience by making diversity a core principle of your recruitment and workforce management. The wider you cast your net, the higher your chances of acquiring the sort of talent that will raise your business performance to the next level.
As noted earlier in this blog, technological progress - whether it's the growth of robotics in the manufacturing process or the proliferation of electric and autonomous vehicles - will be a critical theme for the automotive industry in the coming years.
That means businesses need to be innovative if they want to succeed, and research has shown that diversity fuels innovation. A study by Boston Consulting Group found that building more diverse leadership teams gives rise to higher standards of innovation and, ultimately, improves financial performance. Companies that had above-average levels of diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of less diverse organizations.
Many organizations have clear challenges to overcome in this area. There is awareness of the importance of diversity at a strategic level, but from an operational perspective, the main priority is to address staff shortages and hire the right number of people. This can make it difficult to maintain commitment to diversity and inclusion (D&I), creating a disconnect between operations and strategy.
So what practical measures can you implement to make your workforce more diverse?
- Secure leadership buy-in for diversity and inclusion policies by making a clear business case and connecting this issue to the company's broader goals.
- Provide diversity training to raise awareness and promote discussion of this subject at every level, from senior management to junior staff.
- In your job descriptions, use inclusive language and tactics that will encourage applications from a range of candidates, such as limiting job requirements to essential skills.
- Work with an HR solutions partner to plan a more tailored and targeted approach to recruitment.
5. learning and skills development
Recruitment will have an important part to play in preparing your business for future challenges and opportunities in the automotive industry, but you will also have a lot to gain from nurturing skills and developing new competencies within your existing workforce.
The ILO noted in its recent research that business investment in skills and lifelong learning will be a crucial element of "advancing decent and sustainable work in the automotive industry, as well as ensuring a just transition to a future of work that contributes to sustainable development".
Reskilling and upskilling your employees will prove particularly important in light of the growth of automation and robotization in the automotive sector. As cutting-edge systems and technologies shape how automobiles are designed, manufactured and used, the ability to future-proof your organization by cultivating crucial capabilities in your current employees will prove a key factor in your success.
Trends in the industry will also see automotive companies facing stiff competition for vital talent, making internal learning and development even more crucial. The ILO's analysis revealed that, in six out of seven countries surveyed - Canada, China, Germany, India, Indonesia and Thailand - the automotive sector will increasingly compete with other industries to find workers who have backgrounds in science, technology, engineering, mathematics and IT.
The automotive sector will increasingly compete with other industries to find workers who have backgrounds in science, technology, engineering, mathematics and IT.
To succeed in this increasingly challenging environment, you will need to stay up to date with the latest and most relevant trends, both across the automotive industry as a whole and in the HR and talent management space.
Find these trends and solutions helpful? We've compiled a recap of these automotive HR trends, so you can keep them on hand for quick reference as you navigate the uncertainties of a post-pandemic market.