Automotive brands make up more than 14% of the 100 Best Global Brands in 2017: impressive for a single industry. Since the 2009–2010 recession, most have been gaining value year-over-year, driven to a large degree by sales growth and expanding product lines. This year, 12 of the 16 on our list grew in value—with Ferrari returning to the fold. But with the global auto market cooling, especially in the US, where it is forecasted to decline in 2017, can these brands continue to gain value?
The automotive industry is facing unprecedented challenges that are affecting the entire ecosystem—from manufacturers to suppliers, retailers, and the brands themselves. These are being driven by changes in technology, public policies, and the consumer market—all materializing at the same time:
- Technology: Autonomous vehicles are being tested regularly on streets across the globe, and investments by both established automakers and pure technology companies, like Google’s Waymo, are accelerating. This technology, coupled with the burgeoning ride-sharing market, will require automotive brands to look beyond the consumer market of individual car ownership as their primary source of sales as they have for the past 100 years. They will have to consider expanding into mobility services and selling self-driving cars to fleet companies that offer transportation services to the market. Or perhaps the automakers themselves will become the service providers by offering ride services directly to the consumer market. There are many unknowns as we look ahead, but there is no question that this new technology will change the way automakers sell their vehicles and generate revenue in the future.
- Public policy: Environmental concerns, Corporate Average Fuel Economy (CAFE) regulations in the US, CO2 caps in Europe, and heavy emission regulations in China are creating increasingly difficult headwinds for carmakers. They are being forced by governmental bodies to invest billions of dollars in alternative-fuel power trains, including electric and hydrogen power, in order to keep up and meet new regulatory requirements.
- Consumer markets: Across industries, an emphasis on the customer experience is changing expectations. The experience of buying a car is not generally on par with contemporary high-touch retail experiences that deliver delight and value. There is still a lot of sales pressure in the automotive experience because of the manufacturers’ dependence on large scale production and the resulting reliance on vehicle incentives to sell inventory. Younger generations are already prompting changes through their regular use of digital technology and by the choices they make in the market. Countless research shows that these younger consumers are empowered and seek a better retail experience. They simply won’t accept high-pressure sales tactics because they are in control and have different expectations. This phenomenon of the changing automotive consumer market will only accelerate as the emphasis on individual vehicle ownership dwindles.
Growth by design
So, how can automotive brands address all this change and succeed in the future? The top growers will be the ones that have systems in place and are making the business decisions to drive the needed investments in change.
Toyota, the top-ranked automotive brand and number seven of all brands in the 2017 BGB list, is preparing to tackle change by building agility into the organization. “The present automobile industry is being asked to make a paradigm shift,” said Toyota President Akio Toyoda in a May 2017 earnings announcement. “I want to continue planting seeds with a look to 10 or even 20 years into the future.” The company made a major leap forward with the relocation of its North American headquarters to Texas in early 2017. A massive 100-acre campus was created in an effort to transform the business by improving communication across design, engineering, manufacturing, sales, and customer service and to enable faster decision-making. Building this hub in the company’s largest market strengthens the Toyota brand through investments in capability and internal culture, which will enable Toyota to efficiently and successfully navigate industry shifts.
People are the fuel
While growth starts on the inside, the major systematic changes that need to be made don’t necessarily happen at speed in the automotive world. These are capital-intensive legacy organizations that move slowly, and can be their own worst enemies. However, auto companies have a powerful lever to pull: their own cultures. Because the engines of change are fueled by people.
A number of carmakers have begun to address culture change within the organization. Earlier this year, Ford Motor Company forced a leadership shake-up with the appointment of a new president and CEO, Jim Hackett, billed as a “visionary and a transformational business leader.” The company wants to shift faster into electric and autonomous cars, along with ride-sharing services. Chairman Bill Ford noted in an interview that his company needs to reinvent the car business and “stick our necks out” in regard to building for the future. His executive changes were designed largely to create a new organizational culture at Ford, one that will take the necessary risks to drive change and innovation.
Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, recognizes that growth must be embedded into culture. “These days, everybody’s talking about the reinvention of the car. Granted, I do that too. But to get there, it’s not enough to change our drivetrains—we also need to rethink what drives us,” he said in a 2017 interview. His comments reflect the brand’s commitment to cultivating the creativity and talents of employees in order to stay ahead of the curve. “If you give people instructions,” he explains, “then ideally you will get the results you had expected. However, if you give them greater freedom, you can get ideas far beyond expectations. And that’s what we need for the future of our business.”
The value of brand-led growth
Automotive is the second most valuable sector, representing 14.5% of the BGB table’s total value, at USD $266,827 million. These companies have an opportunity to leverage the significant strength of their brands for the future. Brand value comprises both external and internal elements. Great design, engineering, and use of technology are clearly important, but if an organization cannot change its culture, it will not be positioned for success in the fast-approaching automotive future. How these companies manage their businesses, treat employees, and make decisions will be key factors for their success and brand growth in the years to come.