At the end of the line

How automakers can embrace flexible production

Executive summary

The automotive industry is currently undergoing the greatest transformation in its 100-year-plus history. Customer demand and regulatory pressure mean the number of electric vehicles made, including hybrid models, is expected to increase by 466% by 2027, and cars will become increasingly autonomous and offer more connectivity. The setback to car-sharing and ride-hailing services caused by COVID-19 will be temporary, and we expect shared vehicles to account for around one-third of the market in Europe by 2030 and a greater proportion in the US and China.

At the same time, profitability is being squeezed: Investments in electric and autonomous cars need to be made, yet sales at the world’s biggest carmakers are expected to fall by between 13% and 24% in 2020 as a result of the pandemic and ensuing economic shock. To keep pace with all these changes, automakers (OEMs) and their suppliers must invest to transform the way they make vehicles. In our 2018 analysis of the market we identified two distinct production models that will be required: First, highly automated “plug and play” plants producing almost identical mass-market vehicles, predominantly for car-sharing services; and second, the “flex champion” – technologically-advanced flexible plants producing high-end, driver-owned customized vehicles.

Key findings

In this study, we will focus on the “flex champion” because the need for greater flexibility has accelerated. There is growing demand for a range of engine technologies, for new models to be available faster, and for customized models to be delivered more quickly. There is also supply-chain uncertainty due to trade tensions and the disruption caused by COVID-19 lockdowns. Both highlight the need to be able to respond quickly to unforeseen shocks. Our key findings are:

  • The current trend towards more models and the mix of electric and conventional powertrains means machinery that can only be used for one distinct group of models is not being used to its maximum capacity, making it less economical
  • Technology that enables OEMs to meet these demands has matured to the point that it is affordable, shifting the balance between the cost and the benefit of flexibility
  • Assembly lines will be less important and may disappear from flexible factories. Instead, car bodies and components will travel along individual routes, in a flexible sequence, to modular assembly stations that can be configured to carry out the task at hand. Materials will be ordered and delivered using self-organizing automated systems
  • The current production order-control principle of sequencing (‘pearl chain’) also comes to an end in the flexible factory – new forms of more autonomous, self-organizing order control are required
  • OEMs that are already making some new models in this way say investments are paying for themselves within a year and help to speed up production

This report was prepared in cooperation with Fraunhofer IOSB.

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Axel Borowski

Axel Borowski

Partner, Strategy& Germany

Claus Hafner

Claus Hafner

Director, Strategy& Germany

Peter Trögel

Peter Trögel

Director, Strategy& Austria

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