ACES - A revolution for risk management in the automotive industry?

Automotive industry products are undergoing a dramatic transformation into self-driving, connected and digitalized vehicles powered by alternative drive technologies, particularly electric ones. In addition, shared mobility has given rise to new business models in which products are not used solely by the buyer's friends and family. All these changes are captured by the acronym "ACES", which stands for autonomous driving, connectivity, electrification, and shared mobility. The developments induced by ACES will change not only the nature and appearance of road traffic but also the premises on which the automotive industry operates, particularly for OEMs and their suppliers. Tomorrow's mobility solutions will still have to be manufactured; however, the production supply chain will change. The growing digitalization and electrification of motor vehicles will require new and different suppliers who will occupy an entirely different position within the supplier market than established automotive suppliers. The changes will affect not just OEMs or their first- and second-tier suppliers. The industry's transformation will trickle all the way down to the raw materials markets. For example, competition for rare earths has intensified since these materials are needed not only for many ACES innovations but also by manufacturers in industries such as consumer electronics. In this environment, supply chain risk management is particularly important. Strategy risks and issues have to be addressed before awarding contracts to existing suppliers or establishing new, potentially unknown suppliers for ACES-related components and technologies. This demands new approaches to qualitative and quantitative risk identification, analysis, and evaluation. Operating risks must be managed better, too. For example, OEMs have to compete with other industries for components, particularly for those needed to digitalize and electrify the products. It should be noted that competing sectors such as consumer electronics sometimes buy much larger volumes of components from suppliers than the automotive industry does. As a result, responses to risks that affect multiple sectors may not have the same effect as they would in established supplier networks that only serve the automotive industry. This whitepaper aims to take an initial look at these aspects of risk management as ACES trends continue to unfold. It draws on interviews with automotive industry experts and scholars as well as an initial industry analysis of the supplier market conducted by Dun & Bradstreet. In addition to touching on theoretical risk management approaches, the whitepaper highlights the implications of ACES trends for the automotive industry and particularly for OEMs and identifies new supplier risks emanating from these trends. It also presents initial data-supported information from the industry analysis. The industry analysis provides an initial glimpse into the changing supplier industry as well as the changes that took place between 2010 and 2020. In addition, it shows that the supplier market began differentiating during this period, with some suppliers specializing in technologies relevant to ACES trends.