Driving Success in Uncertain Times: Global macroeconomic and risk scenario tool

Enabling a major automotive manufacturer to anticipate and respond effectively to evolving market dynamics across its global operations.

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In the evolving automotive industry landscape, where some advanced and ageing markets have plateaued in per capita vehicle ownership, automotive companies are navigating a complex terrain. They are devising strategies to seize market share from competitors or focusing on manufacturing higher-priced, higher-margin vehicles to boost revenue. Simultaneously, they are aggressively targeting emerging markets with more favourable driver age demographics and where per capita vehicle ownership is set to continue rising for long-term growth. All bread and butter for these organisations.

However, businesses in the automotive sector frequently face challenges despite their solid understanding of market performance when trying to integrate the broader macroeconomic context and risks into their strategies. Economic risks can be dynamic, ranging from short and volatile fluctuations to persistent, long-term challenges. Unfortunately, many of these businesses lack the necessary tools to anticipate and plan for the impact of various economic headwinds on their operations and to maximise the opportunities that arise. This leaves them vulnerable to the unpredictable forces of the global economy.

The Challenge

Our client, a major multinational automotive manufacturer, wanted to enhance their strategic decision-making process and respond effectively to evolving market dynamics across its global operations. The company already had access to new car sales forecasts but recognised the need to understand better the underlying macroeconomic drivers of car sales in their 30+ key markets. They wanted to be able to run economic scenarios and understand how global macro factors and risks would impact future vehicle sales in the short, medium and long term.

As they lacked the capability to run the necessary extensive and sophisticated macroeconomic simulations themselves, they approached Oxford Economics to develop a robust modelling toolkit that they could use in-house to leverage their own market knowledge while simulating global macroeconomic scenarios. They needed a user-friendly frontend developed as part of the project to enable business users to update and implement scenarios themselves.

The Solution

The team began by using Oxford Economics’ econometrics expertise to study the factors affecting car sales in each of the 30+ markets. They then tested these factors with historical sales data and created equations for all the variables.

To build the modelling framework that links the identified macroeconomic variables (drivers of car sales) to each target market, we used our Global Economic Model (GEM). The GEM considers the interconnections between all countries and markets. For example, if one country has an economic slowdown, it quantifies the impact on economic growth in another and the effects on all economic drivers of car sales. This interconnectedness gives the client a crucial holistic understanding of how various factors and economic risks influence business operations and decisions.

The tool was built to enable economists and non-economist business users to integrate economics into their decision-making easily:

The solution was handed to the client alongside a comprehensive, in-person training programme.

The Result

Oxford Economics’ solution, anchored by the award-winning Global Economic Model, offers the client an integrated, economic-driven approach to forecasting and analysing motor vehicle sales. It empowers the client to make informed decisions, assess risks, identify opportunities and understand how various economic and market factors impact their business operations and sales performance. The combination of a robust model, access to diverse data sources, and the expertise of Oxford Economics’ 300+ economists position the client for strategic success in their industry.

The solution is already providing a significant return on investment for the client, with the model’s outputs driving improved performance across the organisation, from strategy to marketing, sales through to finance, and group to country manager.

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