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July 2005, pdf, 3.7 MB
The sector study covers business activities specified by NACE 34 as the "manufacture of motor vehicles, trailers and semi-trailers”. The industry consists of a cluster of closely interrelated firms that belong to one value chain and whose final products are motor vehicles.
The automotive industry is in general well equipped with information and communication technologies (ICT) infrastructure. However, the availability of internet access and the adoption of basic ICT applications still vary across size-classes. Sophisticated computer networks and broadband connections are more common in larger firms. Large enterprises in the automotive industry lead in using e-business technologies to automate business processes. The most frequently adopted technologies include Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and collaborative design systems.
The automotive industry predominantly uses EDI-based standards and proprietary standards to exchange data between companies. However, EDI applications that barely allow the exchange of data between systems hinder the diffusion of more flexible and open standards.
Online procurement has become a part of everyday business and belongs to the most frequently adopted e-business applications. However, online purchases are rather limited in terms of volume and, contrary to commonly held opinions, micro firms emerge as e-procurement leaders. Although online marketplaces play only a minor role in the sector, evidence presented in the case study on SupplyOn indicates that electronic marketplaces slowly gain acceptance in the automotive industry.
Online sales remain a niche application. Contrary to other e-business solutions implemented by firms in the automotive industry, small and medium-sized enterprises (SMEs) are the most frequent users of e-sales channels. Furthermore, volumes of online sales of SMEs are relatively higher than those of large firms. Large companies seem to use the web primarily as a sales supporting tool.
Despite the fact that numerous e-business applications are frequently used in the automotive industry, the empirical evidence confirms that ICT-enabled innovations still remain a source of competitive advantage. Interestingly, the relationship between innovative activities and firm performance is independent of company size. Thus, ICT-based innovations are equally attractive for both large and small enterprises.
Yet, the economic success of companies does not strictly depend on the endowment with ICT infrastructure, i.e. we do not find a simple relationship between ICT usage and firm performance. What seems to be of greater importance is whether companies effectively use the available technologies, implement efficient routines and whether they are able to deliver innovative products relevant for their particular market. ICT is an important enabler of organizational efficiency and innovation, but not the only way to reach these targets. Thus, taking into account market- and firm-specific factors, firms should select those ICT applications that match their needs and budget.
The process of inter-firm integration proceeds rapidly in the automotive industry. However, to integrate business processes with their customers, companies still have to make relationship-specific investments in ICT. Although the automotive industry is already characterised by an unequal distribution of power, further integration and the emergence of a network supply structures controlled by OEMs or large suppliers will affect the way of profit sharing between cooperating companies. Increasing standardisation and interoperability of ICT systems would help to overcome some of the problems related to inter-firm integration.
Legal barriers still constitute an important hurdle to e-business diffusion. As the cost of legal services is particularly high for SMEs, this might hamper the adoption of e-business among SMEs. The legal framework is highly developed at the European level, but the level of awareness of the contents of the law applicable in the national context remains low. Moreover, to deal with these challenges necessitates clear distinctions between real and perceived barriers in the legal field, i.e. within existing national legal and administrative practices. Thus, policy effort is still needed to raise awareness of existing regulations among companies and to ensure that the conditions of the legal framework governing electronic transactions do not constitute additional barriers for doing e-business, in particular for SMEs.
Utilising simple and inexpensive applications can help SMEs to acquire the necessary expertise and know-how for using more advanced applications. Thus, it is important that small companies also have an understanding of e-business and are aware of the benefits it offers them. Increasing the awareness about the e-business potential and internet literacy remains an important challenge at both European and national level.
ICT facilitates the integration of companies and the emergence of network structures in the automotive value chain. Since the relationships between networked companies are different from market-type arrangements, the integration of supply chain raises issues that are also relevant for competition policy. The principal subjects of concern include the hold-up problem, protection of property rights on innovation created in the course of cooperation, and vertical restraints.
The European automotive industry still struggles with sluggish demand and growing overcapacity. In addition, high labour costs harm the profitability of vehicle production in Western Europe. Thus, automakers are relocating their production factories to Central and Eastern Europe or Asia. As a result, a large share of European auto production takes place outside of the former EU-15 Member States. Looking for greater flexibility and further cost savings, Original Equipment Manufacturers (OEMs) downsize their operations and outsource them to their suppliers as well. It is predicted that the value added share of automotive suppliers will increase by almost 70% within the next decade. Therefore, despite stagnating car sales, the automotive supply industry has experienced sound growth in recent years. However, since the process of consolidation in the supply industry will continue, not every automotive supplier is to benefit from this development.
Becoming key partners to the manufacturers, automotive suppliers have to face some challenges. First, the supply industry has to participate in developing new products. Second, the production of modules and systems for a particular OEM requires close cooperation with the automaker. These developments have some implications for the ICT adoption in the automotive sector. For example, OEMs and their suppliers use sophisticated e-business applications facilitating the exchange of inputs. Furthermore, collaborative product design systems are frequently used. Therefore, ICT strengthens the integration between companies in the industry value chain.
The sector was covered as part of the "Transport equipment manufacturing" in sector studies of 2004.
