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Denso Announces Business Restructure |
NEWS |
This month, Denso released its 2018 Annual Report, which details plans to restructure the company, along with its long-term corporate strategy. The report outlines plans, like having its Original Equipment Manufacturers (OEM) clients re-align with the company’s focus on “ACE” or “CASE”-based trends: Automated Driving, Connected Cars, and Electrification. As part of the new focus, the company will form a new Mobility Systems Unit that will focus on providing vehicle autonomy and providing new mobility services.
The establishment of a new mobility-focused division follows similar announcements by Bosch in March 2018, establishing Bosch Connected Mobility Solutions, Delphi spinning off APTIV, a separate mobility-focused business in 2017, AutoLiv spinning off Veoneer in 2017, and Continental’s 2020 mobility restructuring announcements made in July 2018. But why are Tier Ones restructuring so drastically and what mobility opportunities are out there for them?
Tier One Suppliers Attempt to Adapt to a Rapidly Changing Automotive Landscape |
IMPACT |
Historically, Denso has focused on developing subsystems in a manner that was optimized for each of its businesses, namely Powertrain, Electronic, and Thermal Systems. However, under the new restructure, Denso will establish a new Mobility Systems Unit. The Mobility Systems Division will consist of a Business Unit, a Connected & Cockpit Business Unit, and an Automated Driving and ADAS Business Unit.
The establishment of a new mobility division by Denso, and similar moves and announcements by other Tier One suppliers, such as Autoliv, Bosch, Continental, and Delphi, suggests that the current Tier One structures, business models, and strategies are simply not applicable to the future mobility market. From a Tier One perspective, the following trends are defining the mobility market:
Although the automotive market is still some time away from seeing a complete transition to mobility-as-a-service, the lack of involvement in developing autonomous technology and the ability to develop new connected services are issues that need to be addressed by Tier Ones now. Not only can restructuring help enable this, but restructuring could also enable Tier Ones to work with new customers and develop new mobility products.
Mobility Focus Brings a Wave of New Benefits for Tier One Suppliers |
RECOMMENDATIONS |
The mobility market, as identified in the previous section, is defined by numerous potentially disruptive trends for Tier One suppliers. By shifting to a mobility-focused strategy, whether by establishing a separate mobility division or through a complete spin-off, tier ones can accomplish the following:
In summary, the traditional automotive market is undergoing a significant period of transformation, shifting from traditional vehicle ownership to mobility-as-a-service, defined by increased autonomy. The shift in market dynamics and the ecosystem has caused disruption to all market participants, including Tier One suppliers. This, in turn, has led to companies like Denso, Bosch, Delphi, and others to realize that the current Tier One structures, business models, and strategies are simply not applicable to the future mobility market, leading to these companies forming new mobility divisions. These new mobility-focused divisions/spin-offs will enable these Tier Ones to maintain their leadership in technology development, develop new mobility products/services, and establish new customers. Other Tier One suppliers should now also follow their lead and seriously consider establishing similar divisions/spin-offs; in the end, this recommendation may not be optional, but a requirement for success.