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Automotive industry could gain $160 billion through smart factory adoption, says report

Capgemini has announced a new report by its Digital Transformation Institute which reveals that the automotive industry can expect to achieve $160 billion in productivity gains annually from smart factory adoption from 2023 onwards.

The report, Automotive Smart Factories: How Auto Manufacturers can Benefit from the Digital Industrial Revolution, which surveyed more than 320 automotive manufacturers, demonstrates that the automotive sector has set more aggressive targets for smart factory initiatives compared to other sectors.

A global top 102 automotive manufacturer can expect to realize an additional $4.6 billion or a 50 percent growth in operational profits annually within five years of a full smart factory implementation. 

The report predicts that the average productivity growth of smart factories within the automotive sector will be seven percent as of 2023, while an automaker will break-even within a year of executing the full potential of its smart factories.

By the end of 2022, automotive manufacturers expect that 24 percent of their plants will be smart factories.

Nearly half of automotive companies (46 percent) already have a smart factory initiative, behind only industrial manufacturing (67 percent) and aerospace (63 percent), while at a further 43 percent of automotive companies, smart factory initiatives are currently being formulated.

According to the report, the automotive sector has the highest share (49 percent) of organizations who have invested more than $250 million in smart factories.

However, 42 percent of automotive manufacturers accept they are not on track to realize the full potential of smart factories and are struggling with the technology move.

This is the highest across all the manufacturing sectors studied. 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.

While a large proportion (46 percent) of original equipment manufacturers  have been successful in their smart factory initiatives, less than a third of automotive suppliers (32 percent) claim to have been successful.

The report highlights that OEMs are leading the way, but can do more to help suppliers adopt smart factories.

For example, it highlights that OEMs can contribute through financial support and working closely with suppliers on innovation via startups and academies. When OEMs and suppliers work together to create smart factory processes, issues can be minimized early on in the production process.

Nick Gill, chair of automotive council at Capgemini said: “Digital maturity holds the key to realizing the full potential of smart factory initiatives.

“This study clearly demonstrates the enthusiasm among automotive organizations 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 optimize their smart factory initiatives.”

He further added: “The next few years will be critical as OEMs step up their digital maturity, accelerating outcomes to maximize business benefits.”

Grégoire Ferré, Chief Digital Officer at Faurecia and a Capgemini client said: “By using smart factory technology in our business, we have seen great benefits with regard to our employees’ productivity.

“They use sophisticated tools such as smart robots to create a safer environment, which in turn provide them with more time to focus on other important tasks.”