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Automakers and suppliers have a failure-to-launch problem. How can they fix it?
Auto launch delays persist as a trend
Over the last four years, there’s been a steady increase in new-model auto launch delays in North America. These delays, caused in part by the pandemic, have also stemmed from numerous challenges surrounding electric vehicle (EV) development and other factors, including pervasive production and supply chain issues. The result has been costly for both original equipment manufacturers (OEMs) and suppliers. According to a PwC analysis, a single 12-month delay can cost an OEM up to $200 million and cost a supplier $15 million. Our analysis, however, does suggest a slight slowing in the rate of delays in 2023. Looking ahead, our analysis suggests that the number of planned launches is estimated to nearly double through 2026 from 2023 levels.
We examined delays — which we define as the actual production start date beyond the originally planned start of production (SoP) — of all major launch programs planned in North America (including new vehicle, midcycle refresh, platform changes, etc.).
The chief culprit? Production delays
Our analysis opened the hood on the cause of launch delays and revealed that the main reason lay in entrenched issues surrounding production. In the past three years, more than half of delays were attributed to production issues. Reasons for production challenges that OEMs identify include persistent supply chain delays (particularly of electronic/powertrain components), issues related to meeting quality standards (e.g., emissions standards) and workforce constraints leading to difficulty scaling up production.
Strategic misfires are also factors
To a lesser though still significant degree, strategic decisions on production have also led to launch delays. Examples of strategic stumbles include:
- Portfolio changes, including model updates, change in model launch prioritization or switch in investment focus on other models
- Launch timing, including postponing launch after pandemic
- Changing customer preferences and expectations
A single 12-month launch delay could cost an OEM up to $200 million
Indeed, launch delays can be costly — not only for newly minted EV entrants, but also for incumbent OEMs and suppliers. According to a PwC analysis, a single program launch delay, on average, can cost an OEM about $200 million over the course of 12 months.
Across the North American automotive industry, delayed launches could translate into losses of 2% to 7% of the industry’s total value, or $30 billion to $50 billion a year.
Launch delays lead to profit losses from lost sales opportunities and reduced program volumes, as well as costs surrounding personnel, development (additional prototypes, pre-production builds, etc.), manufacturing, logistics and material (e.g., late-stage design changes and product obsolescence).
Delays can also precipitate other non-financial setbacks, including:
- Reputational damage between OEMs and suppliers and consumers
- Cascading supply-chain disruption
- Loss of competitive advantage and market share
- Technology obsolescence, which can also cut short the life cycle of a vehicle
- Quality and warranty concerns
- Lower employee morale and productivity due to stress, which could, in turn, lead to higher turnover rates
Warning: delays ahead
Looking forward, our analysis forecasts that the number of EV models will nearly double through 2026, as part of aggressive societal, governmental and industrial push to mainstream EVs. Due to this additional launch activity, we expect delays to persist — with delayed launches averaging between 20 and 40 per year through 2026. Our model forecasting such persistent delays over the next several years assumes that currently entrenched issues persist.
Principal internal and external causes for historical — and future — launch delays include:
- Added product development complexity of electrification, advanced driver assistance systems (ADASs) and software technology as the transition to EV accelerates
- New players (both OEMs and suppliers) with limited launch experience entering the industry
- Shorter product EV development life cycles and increasing number of models
- Persistent cost pressures and capital availability through the EV transition
- The tight labor market for technical skills
- Customer preferences for — and expectations of — advancing computer-aided software engineering (CASE technologies)
- Lasting effect of global supply chain disruption during the COVID pandemic on sourcing (especially microprocessors, batteries and rare earth metals), as OEMs move toward realigning supplier footprints in a push for nearshoring and reshoring
Putting the brakes on launch delays: key actions to consider
There can be myriad causes for launch delays. They typically occur because of insufficient risk-mitigation planning at the beginning of a product development and production project as well as late detection of problem areas and a slow response to address them. Early-stage missteps, then, can lead to later-stage issues and unrecoverable cost overruns.
So, as OEMs plan new model launches (and especially EV launches), many could benefit by reassessing (or even recalibrating) traditional approaches to design and production and how they work with their supplier networks. Below are some key actions both OEMs and suppliers can consider to help avert launch delays.
- Improved — and better informed — design and development
- Take greater care in quoting and supplier selection
- Enhance your organization’s project management skills
- Tighten collaboration and communication with suppliers
- Ramp up risk management assessments in early stages
- Prepare your people to mitigate launch delays
- Recalibrate OEM-supplier partnerships
- Deploy a launch task force
Improved — and better informed — design and development
It is important to thoroughly develop product and technology leveraging simulations at both the vehicle and component levels. Engineering teams should be involved in design and development from quoting all the way to industrialization to ensure end-to-end accountability for design.
Take greater care in quoting and supplier selection
Select suppliers and sub-suppliers based on verifiable capabilities and expertise, as well as a solid capacity bandwidth assessment. OEMs should rigorously assess quotes from suppliers with technical experts early in the sourcing process to help ensure that quotes are feasible and reasonable. Likewise, suppliers need to ensure the quotes they offer are not only realistic, but also have sufficient contingency buffer plans in place.
Enhance your organization’s project management skills
Both OEMs and suppliers should establish a robust project management team and set realistic deadlines for all stages of the project’s timeline. The series production team should be involved — and series production processes leveraged — as soon as possible (especially regarding suppliers). Also, company key performance indicators (KPIs) and personal performance goals of all manufacturing departments need to be aligned to the priorities surrounding the launch.
Tighten collaboration and communication with suppliers
Effective and timely internal communications of clear, measurable KPIs and structured status reports are critical to timely decisions. OEMs should create efficient communications with suppliers to drive results and communicate the status of projects without overwhelming supplier organizations.
Ramp up risk management assessments in early stages
Risk identification and mitigation are key to preventing delays for both OEMs and suppliers. Be sure, for example, to develop solid process failure mode effects analyses (PFMEAs) early in the process and use them continuously.
Prepare your people to mitigate launch delays
Apply lessons learned from previous projects that had experienced delays (for whatever reason) to institutionalize change-management programs to enhance and share the necessary technical and non-technical knowledge. Implement regular employee upskilling and performance reviews, especially in areas that led to project delays.
Recalibrate OEM-supplier partnerships
Automakers have entered a dynamic era with their supplier networks, at once sourcing for legacy internal combustion engine models and developing relationships with a new breed of suppliers to support burgeoning EV programs. At this juncture, OEMs must be judicious in selecting suppliers — especially those providing new technologies — by weighing capabilities and expertise as chief selection criteria, rather than considering only cost. Rigorously vetting suppliers can help prevent delays of new technologies development and integration into a vehicle program — as well as possible concessions by OEMs on the design, function and cost of a given component. As OEMs encounter a talent crunch in digital and software skills, they may need to leverage the expertise of suppliers that specialize in these areas.
Deploy a launch task force
To help get launches back on track, establish a cross-functional project task force as early as possible once significant deviations or delays from project-management plans are apparent. Also, be prepared to add targeted ad-hoc resources (with clear responsibilities and objectives). Make sure to review the existing project team’s responsibilities, align those responsibilities and mitigate misunderstandings through overcommunicating.
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