The 22nd Annual Meeting of the Automotive Sector: Managing Global Uncertainty
The Outlook for the Car Industry
Is the automotive industry in crisis? What opportunities and threats will emerging markets bring to the sector? These were some of the questions raised at the annual Automotive Industry Meeting, held at IESE's campus in Barcelona. The event was attended by a range of experts who cast some light on the main question marks hanging over the industry and the challenges the sector will face in the near future.

The outlook for the car industry looked ambiguous as IESE hosted the 22nd Annual Meeting of the Automotive Sector at the Barcelona campus on Nov. 22. The meeting brought together experts who dispelled some of the doubts clouding the global sector.

Future bright for Spain

Erich Schmitt, president of SEAT had good news for the Spanish sector with his announcement that the company plans to build 800,000 vehicles at SEAT’s Martorell factory to the northwest of Barcelona over the next decade, taking the plant to its maximum capacity of 550,000 vehicles per year. And Schmitt told potential automotive part suppliers that they would have to meet the highest criteria. “SEAT’s aim is to build cars to the same quality standards as at Audi,” he said.

José Manuel Machado, president of Ford Spain, also saw a bright outlook for Ford’s Almussafes factory, south of Valencia, which has been honored as Ford’s best plant in Europe. Machado pointed out that Valencia is one of the closest ports in Europe to China and one of the principal points of entry for subcomponents manufactured in China. This will benefit automotive part suppliers clustered round the Almussafes factory.

The car dealerships

During the meeting, representatives of the retail end of the automotive industry highlighted the pressure they face to meet sales targets. The sales executives made repeated references to other industries such as the food sector, where even the largest brands have less influence over supermarkets and the relationship between manufacturer and seller is different. 

Juan Antonio Fernández Sevilla, president of the Spanish Association of Automobile and HGV Manufacturers (ANFAC) raised the alarm on spiraling logistics costs which have outstripped labor costs as the main cause for concern. “The industry still has a lot of work to do in terms of improving workforce flexibility, productivity and absenteeism but it’s up to the authorities to tackle the problem of rising logistics costs.”

Highly qualified workforce

Antoni Soy, industry minister for the Catalonian Government, agreed with Schmitt and Machado’s optimistic outlooks saying “the car industry is not in crisis.” He pointed out that the sector’s workers were highly qualified, while recognizing that “more should be done to strengthen research and development and raise productivity.”

Environmental impact

The event’s participants also discussed the car’s impact on the environment.  “Polluting vehicle emissions have been reduced significantly in recent years,” said the president of ANFAC. According to data from Spain’s environment ministry, privately-owned cars contribute 13 percent of CO2 emissions while road, sea and air haulage accounts for 17 percent. The remaining 70 percent of emissions come from the energy sector, homes and industry. Fernández Sevilla noted that from January, vehicles that emit less than 120 grams of CO2 per kilometer will be exempt from vehicle registration tax.  
 
Environmental concern is on the rise in China too, according to Wayne Xing. “In the light of population and demand growth, it is likely that the consumption of cars in major Chinese cities will rise significantly; it is therefore essential that the government begins to focus on key issues, such as energy consumption, congestion and pollution,” he said.
Marketing online

Isabel Aguilera (PDG ‘98) CEO of Google Spain and Portugal encouraged the automotive sector’s executives to exploit the tools offered by the Internet to position their brand on the web: “With online marketing, we can measure the effectiveness of our advertising spend and identify any problems with usability,” she said.

The Emerging Economies

Industry experts opened the program with a discussion on the new “tiger economies” – China, India and Russia. Vinay Khotari (MBA ’92), member of the board of Force Motors Ltd India, said there is “huge potential for growth in the Indian market, especially in the light vehicles sector.” Currently just seven in every thousand Indians owns a car. In fact, the country has one of the lowest rates of car ownership in the world, which is set to change dramatically as its inhabitants become increasingly urban and the young middle class population swells.   

Looking at China, Wayne Xing, editor of China Automotive Review, said that the entry of new companies has increased competition in the Chinese market. Foreign companies want to position themselves ahead of local brands, according to Xing.

Pál Négyesi, manager of Global Automotive Systems Europe in Russia, acknowledged that the main problem facing the sector in his country is the shortage of “local talent.” He added that “the arrival of foreign manufacturers should create new opportunities in the market,” though.