Podcast transcript: How product innovation is proving to be a differentiator in mobility
9 min approx | 19 January 2022
Announcer
Welcome to the EY Advanced Manufacturing and Mobility Business Minute podcast series, where EY professionals explore the critical business issues impacting our industry today.
Moderator
Greetings to our audience, and joining me today is Avinash Sagar, who serves as an analyst for our Global Mobility sector. Today, Avinash will be sharing his insights into third quarter earnings calls that took place in October and November 2021 for 43 mobility sector companies and will discuss key themes derived from these discussions.
So, let’s get started for a lively discussion as we hear what was discussed during these earnings calls and round out with a few insights of what we can expect from fourth quarter closing.
Welcome, Avinash, it’s a pleasure to have you here.
Avinash Sagar
Thank you for having me.
Moderator
Our analysis highlights the top five market forces and company responses; however, we do call out the top theme in each of these categories that garnered a fair amount of discussion. Let’s give our audience a quick insight into each one. Avinash if you could first elaborate on the top market force that stood out then we can follow up with the top company response.
Sagar
Demand pattens remain the top market force for this quarter.
While the global automotive sector continues to recover and is witnessing a surge in
demand, automotive OEMs are facing challenges to meet the orders (especially in the US) owing to supply chain constraints and production disruptions.
The transportation sector is also witnessing an increase in e-commerce demand, and a change in consumer buying habits is supporting the growth of logistics providers from both a business-to-business (B2B) and business-to-consumer (B2C) perspective.
Moderator
It looks as if there is optimism for growth and increased demand. How are companies responding?
Sagar
You are correct, Bhavini, companies are optimistic about the accelerated growth.
Competitive positioning is the top company response for this quarter.
On the back of recovery across end-consumer segments, mobility players are aiming to offer their customers a wide selection of cost-competitive, technology-advanced, green product portfolios.
These players are also actively acquiring companies in areas such as battery cell manufacturing, vehicle-to-everything (V2X) software and autonomous driving, to maintain a competitive advantage over their peers.
Transportation companies are adopting a surge in pricing, especially on large shippers, to manage the elevated demand that has led logistics companies to add more labor to their operations and secure capacity in different modes.
Moderator
Thanks for sharing those insights. Avinash, how about sharing the other themes that made up the top five market forces that we can share with our audience.
Sagar
We’ve already talked about the demand patterns, which was the top theme as we witnessed recovery across the end consumer segments and regions.
At number two, we have value chain breakdown, as the demand upsurge coupled with raw material shortages, such as semiconductors, petrochemicals and port delays, led to disruption in production schedules.
Number three was consumption behavior, as consumer behaviors shift the themes evolved as digitization of retail products, new business models to embrace digital technologies and embracing warehouse automation and robotics to reduce labor costs continue to emerge.
Number four was operating cost, as companies are facing headwinds due to incremental raw material and fuel inflation.
Finally, we heard leaders talk about new entrants in the space such as green products and suppliers, acquiring new companies, digital marketplaces and new loyalty programs and offerings.
Moderator
Thanks for those detailed insights. Let’s now dig into the other company responses.
Sagar
We’ve already talked about competitive positioning.
Going down the list, we saw significant developments in customer acquisition and connectivity through new orders, customization, distribution management and omnichannel experience enhancements to deliver seamless consumer experiences.
Third on the list was business restructuring. OEMs are managing capital allocations for new revenue streams in shared and connected mobility. There is new acquisitions and partnerships to expand portfolios and reduce costs.
Coming in at number four was changes in financial outlook, peers continue to raise their guidance for the full year and are confident of leading recovery in the coming quarters. However, they remain cautious of the impact of supply chain disruption and raw material shortages.
Finally, we observed product design and innovation, expanding and transforming offerings through focused investments – companies are investing in technologies solutions and platforms for greater visibility and product redesign.
Moderator
Great insights, Avinash. Thanks for delving deeper into each.
Our analysis also includes subsector-specific findings for automotive and transportation companies.
Let’s give our audience a view into what each of these subsector companies had to say.
Avinash, back to you.
Sagar
Glad to share.
Airlines continue to witness strong domestic activity, as well as international demand evidenced by sequential improvement in passenger bookings.
Logistics providers continue to invest in technology and expand their digital platforms to further reduce inefficiencies, improve overall supply chain visibility and better collaborate with customers.
New-age players are emerging in the transportation and logistics space, offering solutions to remove operational inefficiencies and provide greater supply chain visibility. These players have begun to operate across the transportation value chain, acting as digital marketplaces, digital freight forwarders and entities that enable digital payments.
Moderator
The transportation subsector seems to be pointed in the right direction. Can you give us an insight on the automotive subsector?
Sagar
I would be happy to.
In transforming from manufacturers to mobility service providers, automakers have actively launched or have planned new business modes and revenue streams toward customer service, as customers embrace digital technologies faster.
Pandemic-related shutdowns and a shortage of semiconductors and other raw materials are posing significant supply chain concerns for automakers. Thus, automakers have taken varied steps to ensure supply chain resiliency and mitigate the risks.
Moderator
Avinash, thanks for sharing those insights, as always, a lot happening in the mobility sector.
For our audience, be sure to check out our third quarter update on ey.com, where we have also included interactive charts that show even more detail on the market forces and company responses, as well as subsector sentiments.
Avinash, in the next few weeks as we conduct our analysis of fourth quarter earnings calls, let’s give our audience a sneak peak of what to expect for mobility companies and the industry in general.
Sagar
Here’s what I’m observing:
Most mobility peers continue to raise their guidance for the full year and are confident of leading recovery in the coming quarters. However, they still remain cautious of the impact of supply chain disruption and raw material shortages.
Automotive suppliers have lowered their guidance in the near term owing to intense supply chain disruptions, high operating costs and the impact of COVID-19 in certain regions. However, suppliers remain optimistic in recovering their volumes and achieving profit margins in the long term on the back of electrification trends, cost management programs and strategic partnerships.
As consumer behavior and attitude toward digitalization improves rapidly, mobility players are now looking to take greater control of the digitalized services that will be provided to customers, rather than ceding those revenue opportunities to a third-party player.
Moderator
Avinash, as always, a lively discussion and I hope our audience took away some insights we shared with them and what we may expect to see as we complete our fourth quarter analysis. I’m looking forward to our next discussion in a few weeks.
Sagar
Thank you for having me today and I definitely look forward to our next discussion.
Announcer
Thanks for listening to today’s EY Advanced Manufacturing and Mobility Business Minute podcast. We hope you found it engaging and informative. To listen to other Business Minute podcasts, you can find them at ey.com/ammpodcasts.
