Driving SME growth in the automotive sector

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Join our Advice for Small Business group for a live LinkedIn Q&A

Paul Sefton and David Smith are Team Coordinators (TC) specialising in the automotive sector and have been working with the EBRD since 2014. They will hold a 2-hour Q&A session on the Advice for Small Businesses LinkedIn Group page on 2 December from 10am until 12pm (GMT).

What is the automotive sector?

The automotive sector is composed of a tiered supply-chain. The majority of our clients operate in the Tier 1 supply chain and seek to develop their business with domestic and/or international vehicle manufacturers. We also work with supporting industries such as vehicle logistics, automotive engineering and design, aftermarket products, servicing, sales etc.

How do you describe your role as a TC on international advisory projects?

To ensure that a project is successful, the company needs to have functional capacity and the CEO must be determined to bring about change. The TC’s role lies in evaluating these two factors – ability and desire to grow significantly and internationally – and to respond with the choice of a suitable adviser. Advisers need to have extensive background in the automotive sector at managerial and operational level and to be proven in developing strong client relationships and team-building, with good project management skills and a vast network of contacts. They should be able to reassure the client that they have “felt their pain” and should be passionate about motivating the client to achieve the agreed outcomes, leaving a know-how legacy that ensures a sustainable growth path for the company. The selection of the adviser is thus key to the TC role as a crucial stepping-stone to the success of the project.

What have you learnt from your executive experience working with large international companies?

In large companies, we have learnt about the necessity of having a clear vision and strategy that must be shared and embraced by the various stakeholders, particularly the shareholders and employees. These key values present in large companies are transferable to SMEs, although with one main difference. Large companies have rigorous strategy reviews and tough profit and cash targets that must be delivered on a monthly basis. SMEs typically operate within a longer-term perspective, adopting a more flexible approach which enables them to take strategic and investment decisions much more promptly. SMEs’ objectives may not be purely business-oriented but may encompass other considerations such as family relationships in a family-business context, lifestyle and passing on the business torch to the next generation.

Where do you see a need for advice in the automotive sector?

Our clients primarily seek advice and assistance in operational improvement and strategy and marketing (including export development). Quite often, SMEs in the automotive sector in our regions have grown through a partnership with one significant customer. In increasingly saturated domestic markets, SMEs often fall under the pressure of entering international markets, faced with the need to take a leap forward to survive. In this “go big or go home” context, improving operational efficiency and marketing products and services for new customers in view of developing international collaborations is usually at the heart of what we do. By the same token, we also typically provide assistance in meeting international quality standards and in feeling the pulse of international market trends and opportunities. In the automotive industry, being aware of the latest market trends and product models is of particular importance to be able to hold a competitive advantage. 

How do developments in the automotive field affect SMEs in the geographies you work in?

Automotive is a rapidly-changing industry sector revolving around technology developments and changing consumer-demand. For over a hundred years vehicles have used internal combustion engines and we are now quickly transitioning to electric power. Innovation also takes the shape of new materials such as composites, new production techniques including Industry 4.0 and 3D printing coupled with IT and connectivity for car infotainment systems and driverless vehicles. There are also the relentless ongoing market drivers of safety, efficiency, durability and life-time cost of ownership. These are exciting times in this sector, which bring many opportunities. But these are also disruptive times, posing a great risk to those who fail to adapt.

Globalisation has prompted a need for international standardisation in production processes and quality standards at different levels of the supply chain. Therefore, local suppliers are faced with the challenge of meeting these standards, often through collaboration with international suppliers to build local capacity. For SMEs in automotive manufacturing, there is the additional challenge of how to fund the tooling, technology and innovation required to win business and remain competitive. Increasingly, joint ventures with large companies encouraging global technical cooperation are spreading as a way for SMEs to keep up with the pace of innovation and for large companies to get representation at the local level.

The automotive sector is a priority strategic business for national governments as an engine for economic growth. It is estimated that one new job in the automotive sector creates four new jobs in indirect support and services. So governments are keen to encourage the local industry supply chain through the development of an SME supplier community. The glass is half full when it comes to innovation in the automotive sector.

Paul Sefton runs his own consultancy which specialises in supporting manufacturing companies to develop in Central Europe. Prior to that, Paul has been Managing Director of a variety of international manufacturing companies in the automotive, aerospace and engineering industries.

 David Smith has worked in the automotive industry with a Tier 1 global supplier of paints and chemicals and has independently consulted for the automotive and manufacturing sectors for both corporates and SMEs.

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