Financial Times

Mumbai – As global automotive manufacturers face extreme competition, they are looking to adopt common automation and software architecture at all global locations to drive operational efficiency and reduce costs.

A new analysis from Frost & Sullivan finds that Automation and Software Solutions in World Automotive Market earned revenues of $5,813.1 million in 2005 and estimates to reach $9,963.1 million in 2012.

The competition in the automotive market has increased manifold with no market being considered as a safe market as a result of globalization. Automotive manufacturers and their suppliers are forced to replicate the best practices followed in a particular plant at all their global locations to maintain uniform quality and maximize productivity. This also necessitates effective communication channels between OEMs and their suppliers on a global platform. This explains the need for automation and software solutions for the automotive market.

“With the kind of competition that is prevailing in the automotive market, it is becoming increasingly difficult for major automotive manufacturers to obtain higher profits considering the burgeoning costs of recalls, warranties and labor,” says Frost & Sullivan Research Analyst Sanjeev R. Sridharan.

“In such an environment, massive investments by the struggling automotive manufacturers on automation and software solutions are relatively less.”

The rise in the cost of raw materials coupled with the worldwide increase in gas prices has created an unfavorable environment for automotive manufacturers.

They are in turn passing on costs down to their suppliers who are facing an even greater crunch.

“The major automotive manufacturers in the U.S. are also facing huge costs on account of their contractual obligations to its workers and pensioners,” says Sridharan.

“This has further pulled down their profit margin thus marginally denting their purchasing power. However the need to create a leaner and more efficient workflow to attain operational excellence has driven automotive manufacturers to invest in newer standards based automation and software solutions.”

The key success factor for automation companies is to establish long-term partnership with automotive customers. Even as automotive customers look for standardization, automation companies need to grow aggressively with their automotive customers as they expand globally. The relationship starts from educating and generating awareness among customers. Having selected specific automotive engagement opportunities, it is important for automation vendors to build critical momentum and achieve a dominant business differentiator.

Once automotive customers are reasonably satisfied with the metrics, they are more comfortable awarding repeat orders at many other global locations. Long-term partnerships could prove to be profitable to both the automotive industry as well as the automation vendors.