Auto Industry Change: Sustainability and Product Life-Cycle Management

PERSPECTIVE #MI222748

K i mb e r ly Kni c k le
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J o e Ba rk a i

IN THIS PERSPECTIVE This IDC Manufacturing Insights Perspective expands on a blog originally published on our IDC Community about the importance of sustainability and product life-cycle management in the auto industry. The pace and complexity of change the automotive industry is facing are staggering. If we look ahead 10 or 20 years, how many times will the product need to change? IDC Manufacturing Insights has reviewed a few of the high-profile announcements we've seen over the past couple months from recent auto shows, investments in new technologies, and even the relationship between the industry's products and regulations, voluntary or involuntary. A common theme runs through many of these announcements sustainability. For the auto industry, sustainability isn't just about one issue or one product. It's about addressing a combination of environmental, social, and economic issues, such as customer expectations, government regulations, and financial pressures, all at the same time; knowing the risks and opportunities across every aspect of the business and across the life cycle of every product is crucial. Earlier in January, at Detroit's auto show, much of the conversation was about incorporating new greener technology into the products. "Green technologies are the master key to the future of the automobile," said Thomas Weber, the head of research and development at Mercedes-Benz. A wave of technology and business innovation is upon us in the form of electric vehicles and new supporting infrastructure. In December, 40 cities (www.c40cities.org) around the world announced that they will focus on four key areas necessary for becoming electric-vehicle ready in collaboration with BYD Auto, Mitsubishi, Nissan, Renault, and the Clinton Climate Initiative. Cities in the United States include Chicago, Houston, and Los Angeles. Better Place (www.betterplace.com), an infrastructure provider for electric cars founded by former SAP executive Shai Agassi, raised $350 million in equity as part of a second round of financing. Better
April 2010, IDC Manufacturing Insights #MI222748 IDC Manufacturing Insights: Emerging Agenda: Perspective

Place is working on creating a network of battery-swapping stations (to complement a network of battery-charging spots) for plug-in electric vehicles. In September 2009, Renault and Better Place signed an agreement to bring the infrastructure and Renault's first passenger electric vehicle to Israel. Automakers also need to respond to the growing pressure to capture their product's environmental footprint, for their own use as well as for outside interests, including regulators and even car buyers. The Product Life Cycle Accounting and Reporting Standard is one of two new GHG Protocol standards that defines a method to account for emissions associated with individual products across their life cycles and of corporations across their value chains. The standard was developed in 2009 and recently introduced by the World Resources Institute (www.wri.org), which developed the standards along with the World Business Council for Sustainable Development (www.wbcsd.org). Ford Motor Company is one of the companies testing this new reporting standard. While the automotive industry has been proactive and fairly successful in mandating standards for emissions of internal combustion engines, it has some way to go before we have a regulated or de facto standard for green autos and a supporting green infrastructure. But this industry can't wait, even though it's already stressed by economic pressures and weak market demand. It's essentially guaranteed that automakers are going to have to redesign their products in response to changing customer expectations, new regulators, and the need for new infrastructure. For an industry that is characterized by very long engineering cycles and multiple iterations to align technology, quality, and customer demand, incorporating sustainability into its business model and its products is going to pose yet another significant challenge for which it may not be ready. We define some of the more visible challenges of this shift toward greener vehicles as: Development of design and operational standards for interchangeable batteries, including physical interfaces (access and size) and charging methods Availability of infrastructure for battery switching and charging, including how to incorporate safety standards in the usage and replacement of batteries Integration of a battery-recycling process to coincide with the introduction of the battery into the service channel

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Adding sustainability considerations will challenge automakers, especially as green is incorporated into already complex design decisions that strive to balance cost, time to market, safety, and quality. We believe that companies should develop the use of product life-cycle management (PLM) practices and tools to improve their ability to design vehicles that harmonize functionality, safety, and sustainability in a cost-effective manner. LEARN MORE
Related Research

Top 10 Predictions for 2010 - Engineering Oriented Value Chains (Manufacturing Insights #MI222119, February 2010) Top 10 PLM Predictions for 2010 (Manufacturing Insights #MI221834, January 2010) Best Practices: Engineering-Oriented Value Chains Industry Outlook and 2010 Budget Guide (Manufacturing Insights #MI220681, November 2009) Seeing the Business Benefits of Sustainability Revenue, Profit, and Inventory Management (Manufacturing Insights #MI219564, August 2009) Vendor Assessment: Sustainability Strategy Services Guide for Manufacturers (Manufacturing Insights #MI219421, August 2009)

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