IMD business school for management and leadership courses
Future Readiness Indicator
Beyond Tesla, Who Else Is Ready for the Future? Explained in Three Graphs. Hint: BYD
In arguably one of the most turbulent industries, carmakers have witnessed the meteoric rise of newer players like BYD and Xpeng as the industry pivots towards new capabilities such as chipset design, battery manufacturing, and software.
Tesla continues to secure its top spot, evidenced by its increased revenue and profit despite the pressure from rising competition. Some may worry over its recent recall of 1.1 million cars in China over potential safety issues. But the so-called recall is literally a feature update, all fixed by a software update delivered over the air.
Meanwhile, Warren Buffet–backed Chinese automaker BYD surged to number two. This rise has been mostly spurred by its enormous capacity to produce both batteries and microchips, making it completely self-sufficient. VW’s aggressive push toward battery electric vehicles and autonomous vehicles also paid off, allowing it to expand its global footprint further and secure the number three position.
Below is the 2023 ranking for the global automakers.
Click on the company’s name to see details of the score and drag slider to adjust year.
At IMD’s Center for Future Readiness, we gauge companies’ preparedness for the evolving future. We utilize hard market data for our quantitative approach, resulting in a balanced composite score. The data feeding these rankings are sourced from company websites, annual reports, press releases, and news stories and is supplemented by third-party sources such as CrunchBase, Espacenet, and Google Trends. Read more about our methodology here. You can also compare historic trends by selecting your favorite carmakers and plotting your own chart below.
Select your favorites companies for historic comparison in the following line chart. Use the slider to adjust years.
So What’s New in 2023?
As we can see, the industry is at a crossroads. Remember the semiconductor shortage a year ago? That time when you couldn’t get a new car even if you had the money to buy one? Thankfully, that time has passed. There are finally enough chipsets to go around, and production lines are running full time again.
But, and it’s a very big but, it’s wrong to assume that things are back to normal. The reality is that chipset demand is likely to remain highly unpredictable. Such demand is affected by the speed of the rollout of new technologies like AI, cloud computing, the internet of things, and 5G or 6G.
On the supply side, chipset factories typically run close to maximum capacity. That leaves the production system extremely susceptible to disruptions. Natural disasters like earthquakes and floods can cause major problems, as can accidents such as fires and power outages. Geopolitical or military tensions, including those between the US and China, could also pose challenges.
That’s why top-ranking carmakers are aggressively cultivating in-house expertise in microchip sets. Rather than relying on suppliers or sub-suppliers for semiconductors, they are directly engaging with chipmakers and doing the relevant designs in house. Ford, for instance, collaborated with US chipmaker GlobalFoundries to create chips for its vehicles while exploring the prospect of expanding its domestic chip production. Such an approach has already been commonplace among the newer players. Tesla, BYD, and Xpeng all have extensive operations dedicated to designing or even producing their own chipsets.
What this implies is a fundamental shift in the core capabilities of carmakers. Historically, VW, GM, and Toyota all focused on final assembly. From the boardroom to the shop floor, their expertise lay with mechanical engineers. Now expertise is becoming digital, emphasizing software. This requires a faster decision-making pace and the ability to avoid being inhibited by hierarchy and bureaucracy. You may wonder: is this shift toward faster decision-making and less bureaucracy really happening?
That’s why we conduct a final analysis. We’ve built an AI algorithm that has sifted through 70 news sources, analyzing over 10 years’ worth of reports. The Financial Times, Wall Street Journal, annual reports, earning announcements—we feed all this information into the system to conduct a sort of sentiment analysis in a big-data style. Again, you can read more about how we do this here. And the result is the picture you see above, which shows the overall behavior of different companies.
A picture is worth a thousand words, and the above picture demonstrates that traditional carmakers need an overhaul of their disposition. They need to move faster and become digital-first. The world has no time to wait.