Article Summary

What defines winning OEM strategy today? Explore how automakers adapt cost, capacity, and portfolios in a tougher market.

From 2000 to 2016, annual global light‑vehicle sales rose 68%, a period of “easy growth” for OEMs. However, that era is over. Today, the industry is operating in a phase of “painful saturation,” where volume increases are modest and the path to success for OEMs depends far more on operational efficiency and disciplined revenue management than on scale alone. With growth tightening, competition expanding, and technology cycles accelerating, manufacturers now face a more complex and volatile environment.

This shift is driven by a combination of factors now defining S&P Global Mobility’s forecast framework:

  • Slower global growth, with traditional high‑opportunity (“blue ocean”) markets maturing or stagnating.
    More competitors, including both established global players and fast‑advancing newcomers.
  • Greater technological complexity, --such as electrification, ADAS, and software‑defined architectures –which raises the bar for investment.
  • Fragmented regional regulations, complicating global product strategies.
  • Geopolitical uncertainty, affecting supply chains, investment decisions, and market access.

Together, these conditions mean OEMs must rethink their playbooks, not by pursuing volume at any cost, but by designing operations and portfolios that are efficient, flexible, and regionally tailored. 

What OEMs must do next

To succeed within this more demanding environment, we’ve outlined four strategic imperatives:

  1. Become cost‑competitive through operational efficiency.
  2. Strengthen product competitiveness (“product substance”).
  3. Regionalize offerings to reflect local regulations and customer expectations.
  4. Maximize volume only where profitable and consolidate where necessary.

Cost efficiency: The six P’s

Achieving cost leadership in today’s environment requires a structured approach. The efficiency challenge is organized around six core levers—Plant, Platform, Product, Parts, Propulsion System Design (PSD), and People—each representing an area where OEMs can significantly improve their cost base.

1. Plant: Aligning capacity with market reality

Across the industry, plant utilization has fallen as volumes level off and competition intensifies. In Europe, average straight‑time utilization among major Western OEMs has dropped from 79% across 2000-2019 to 68% between 2020-2025, while Greater China shows an even sharper decline, falling from 77% to 46% over the same period. 

Data Compiled January 2026 Note: Only Legacy Western Manufacturing Groups included (BMW, Ford, GM, Honda, Hyundai, Mazda, Mercedes-Benz, Nissan, Renault, Stellantis, Toyota, Volkswagen); Europe excluding Kazakhstan, Russia, Uzbekistan

Source: S&P Global Mobility Light Vehicle Production Capacity Forecast December 2025

These figures illustrate how overcapacity continues to erode cost competitiveness. Addressing the issue requires:

  • Adjusting capacity, particularly in Europe.
  • Considering partnerships to boost utilization while recognizing that cooperation with Chinese OEMs may also increase competitive pressure.
  • Balancing expansion in the US against the risk of further under‑utilization in Europe, Mexico and Japan/Korea.
  • Managing export ambitions amid tightening tariff environments.

Optimizing the global footprint is one of the most impactful ways for OEMs to rebalance their cost structure.

2. Platform: Standardization with regional adaptation

Platform strategy remains a fundamental efficiency lever, but global platform convergence is becoming more difficult to sustain. Regulatory differences, propulsion diversity, and software architecture needs increasingly require regionalized platforms rather than universal ones.

The shift toward multi‑energy platforms—simultaneously supporting ICE, hybrid, and BEV powertrains--reflects this reality. Investments initially concentrated in BEV‑only architectures are now spreading to ICE and hybrid platforms, ensuring that software‑defined capabilities extend across portfolios.

Regional regulatory variation, such as emissions requirements or market‑specific safety standards, reinforces the need for more “local‑for‑local” approaches in both hardware and software.

3. Product: Reducing complexity while remaining competitive

Despite expectations that electrification would simplify portfolios, OEMs must manage parallel ICE, hybrid, and BEV offerings well into the next decade. This prolongs internal complexity and heightens cost pressure. Legacy OEMs will have to streamline product complexity within the individual model offerings to save cost.

Key focus areas include:

  • Sharing components and systems across ICE‑ and BEV‑based models.
  • Optimizing the China portfolio by retiring low‑volume legacy platform products.
  • Reducing powertrain and trim variants that add cost without meaningful volume.

4. Parts: Resetting the supplier balance

Semiconductor and software suppliers now wield more influence, driven by high demand across multiple industries. Meanwhile, consolidation among ICE suppliers and some insolvency risk on the component side create potential bottlenecks.

One important cost improvement area: BEVs contain materially fewer mechanical parts than ICE vehicles, which changes supplier economics and forces OEMs to rethink sourcing strategies.

Additional considerations include:

  • Localization requirements for Chinese OEMs expanding abroad, which can raise costs.
  • Opportunities for Western OEMs to diversify by working with new supplier bases, including those in China.

OEMs will need more flexible, resilient sourcing models to balance cost, security of supply, and access to emerging technologies.

5. Propulsion System Design (PSD): Matching technology to regional needs

Electrification adoption is still progressing, but unevenly. 

According to S&P Global Mobility’s regional powertrain forecast, ICE and hybrid systems still hold a majority share in several major markets in 2026, while BEV adoption is strongest in China and parts of Europe.

This variation is driving different PSD trajectories:

  • Large‑displacement ICE remains relevant in parts of the US, where consumer preferences and a lack of stringent regulation and infrastructure are influencing demand.
  • REEV technology (range‑extended EVs) is gaining traction in China.
  • Hybrid systems are continuing to deliver strong margins, supporting OEMs in the short and medium term

This uneven landscape may prompt closer collaboration between OEMs on propulsion technologies where scale is otherwise difficult to achieve.

6. People: Building a more productive and adaptive workforce

Improving workforce effectiveness is another central element of cost efficiency.

Cost competitiveness comes from optimizing workforce size and maximizing each employee’s value, not just reducing headcount but strengthening workforce effectiveness.

Data Compiled January 2026 based on FY2024 data

Source: S&P Global Mobility powertrain production forecast January 2026; S&P Global CIQ Pro - 2024 OEM annual report data; Morningstar.

The chart shows wide variation in Earnings Before Interest and Taxes (EBIT) generated per employee across legacy OEMs, highlighting the importance of workforce effectiveness as a core component of cost competitiveness.

Strengthening cost performance requires:

  • Aligning headcount with realistic production forecasts.
  • Enhancing productivity through robotics, automation, and AI to support employees.
  • Streamlining management layers to accelerate decisions and reduce overhead.

The goal is a more effective workforce equipped with the tools and organizational structure needed to support long‑term competitiveness.

Revenue efficiency: Calibrating volume and price

The revenue side of the equation is equally important. In Europe, price‑volume analysis reveals that BEV offerings have expanded into new price bands, reshaping competitive dynamics. In some cases, larger vehicles now overlap with smaller ones in MSRP, influencing consumer decisions.

Successful revenue optimization requires:

  • Understanding how demand clusters in specific price bands by region and propulsion type.
  • Monitoring competitor price positioning and where cross‑segment substitution is likely.
  • Adjusting pricing at the trim and powertrain level to reflect real market elasticity.

With margins under pressure and consumers increasingly value‑driven, precision in pricing and portfolio configuration is essential.

Competing in a more turbulent market

Growth is no longer a given. OEMs now face a market defined by slower demand expansion, greater complexity, and more competitive intensity at every level.

Strong performance will depend on:

  • Disciplined portfolio and platform decisions.
  • Efficient and adaptive operating models.
  • Region‑specific propulsion strategies.
  • Rigorous cost and revenue optimization.
  • Faster, data‑supported decision‑making.

Manufacturers that can pair operational efficiency with informed, agile strategy execution will be best positioned to navigate and lead in this more demanding phase of automotive maturity.

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This analysis was based on a presentation given at our 22nd annual New Year's Briefing in Frankfurt on 22 January 2026, titled "OEM strategic responses to forecast framework changes." The event offered fresh insight into the forces shaping the automotive landscape for the year ahead.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Article

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Automotive Industry Forecast and Analaysis