According to a new report ‘Automotive Smart Factories: How Auto Manufacturers can Benefit from the Digital Industrial Revolution’ prepared by Capgemini’s Digital Transformation Institute, the automotive industry can achieve $160bn in productivity gains annually from smart factory adoption from 2023 onwards. The report reveals that the automotive sector has set more aggressive targets for smart factory initiatives as compared to other sectors.
Top ten global automotive manufacturers are expected to realise an additional $4.6 billion or a 50% growth in operational profits annually within five years of a full smart factory implementation, the report stated. The Capgemini report predicts the average productivity growth of smart factories within the automotive sector to be at 7% as of 2023, while an automaker will breakeven within a year of executing the full potential of smart factories.
The report brought to the fore a crucial fact that 24% plants of automotive manufacturers are expected to be smart factories by the end of 2022. Around half of automotive companies (46%) already have a smart factory initiative, behind only industrial manufacturing (67%) and aerospace (63%), while smart factory initiatives are currently being formulated in 43% of automotive companies.
As per the report, the automotive sector has the highest share (49%) of organisations who have invested more than $250 million in smart factories. However, the report pointed out that 42% of automotive manufacturers concede they are not on track to realise the full potential of smart factories and are struggling with the technology move. The report identified that those making the best progress are investing three times more than the companies who are struggling. The more advanced manufacturers are also investing in software such as advanced analytics and AI-based components, whereas those struggling focus too heavily on hardware-based components putting them on the back foot, the report noted.
The report said that while a large proportion (46%) of (OEMs) has been successful in their smart factory initiatives, less than a third of automotive suppliers (32%) claim to have been successful. The report highlights that OEMs are leading the way, but can do more to help suppliers adopt smart factories.
Nick Gill, Chairman of Automotive Council, Capgemini said digital maturity holds the key to realising the full potential of smart factory initiatives. He added that this study clearly demonstrates the enthusiasm among automotive organisations to invest in smart factories and the awareness of the long-term benefits. However, more can be done for automotive suppliers to take a collaborative approach with OEMs to optimise their smart factory initiatives, he noted. The next few years will be critical as OEMs step up their digital maturity, accelerating outcomes to maximise business benefits, he pointed out.