Shifting gears: How talent demand is transforming the automotive industry 

21 April 2023

The automotive industry is experiencing a profound shift. Talent is in the driver’s seat, and automotive manufacturers and suppliers need new skills for future success. 

The changes underway are primarily induced by technological innovations. Novel combinations of artificial intelligence and related autonomous technologies, the Internet of Things (IoT)/Internet of Robotic Things (IoRT) and edge computing are dramatically transforming automotive manufacturing as well as the capabilities of the vehicles they sell. Other factors come into play, too: consumer expectations, energy considerations, regulatory changes, supply chain bottlenecks, new work models and a change in the employer/employee relationship. 

As a result, automotive manufacturers and their suppliers are rethinking how they:

“Snatch up” and compete for talent

From other industries (such as high tech) to bring in and retain new skill sets in environments not historically designed for these talent types. Engagement and retention strategies are essential as automotive companies are just one group among many that are targeting this type of talent. 

Develop and engage existing talent

Within the organization to support more innovative work models. Upskilling talent is necessary because there isn’t enough talent if acquiring talent is the only strategy. Creating career paths that enable employees to develop and grow critical skill sets (and higher levels of proficiency within them) becomes crucial.

Manage supply chain disruption and deliver value

From procurement (such as preventive risk management for suppliers and vertical supply chain control strategies) to manufacturing (such as identifying and onboarding the right skills to manage uncertainty in the supply chain).

Address new regulations and compliance norms

(Such as Emission Euro 7 and China 7) as well as environmental, social, governance and sustainability (ESGS) drivers that require adapting the technological manufacturing backbone and related knowledge capital to permeate throughout the organization to scale innovation with agility to change.

Design new operating models, culture and talent practices 

To attract and nurture talent with scarce skills and provide an environment where they can thrive, innovate, design and deliver today and in the future.

While there is much to consider in this dynamic space, this paper presents a snapshot of the changing skill sets and cultures required to attract and retain new talent, the fresh thinking needed for operating evolving models to succeed — and is supported by a case study of a leading automotive manufacturer that is experiencing success. 

Seismic workforce shifts create new in-demand skills   

Historically focused on attracting and retaining traditional automotive talent, automotive HR leaders must shift their gears significantly. Fewer than one in two automotive HR leaders (49%) understand the workforce skills they have today, and even fewer (43%) have business plans with enough detail to identify future skill needs.

So, what types of skills do automotive manufacturers need?

  • Core technical and engineering skills

    These skills are needed to innovate, design and deliver new technologies, including: 

    • Automotive technology: Autonomous vehicles (AV), electric vehicles (EV)
    • Programming: Machine learning, AI, C++, Matlab, Java, Python and others
    • Advanced electronics: Electrical/robotics engineering, car connectivity, human-machine interface (HMI), and infotainment related to communication interfaces and protocols 
    • Secure carware: High-end mechanical design requires cybersecurity best practices to spoof-proof vehicles and safeguard owner’s information, requiring skills related to vulnerability scanning and assessment
Top in-demand skills in the automotive industry?
Top emerging skill in the last 12 month: Top five skills within engineering and sciences: Top skills driving pay:
Systems design Engineering design process, Business development, Quality control,
Go(the programming language),
Problem-solving and data analysis
  • Transformative leadership skills
    These skills will be pivotal in creating an environment that breeds innovation and attracts technical, engineering and other scarce talent. Transformative leadership skills include creativity, strategy-setting, adaptability, talent development, influence, motivation, empathy, team-building, risk management, simplification, communication and charisma. Support functions, including HR and IT, must also evolve to support the shifts their companies will undergo and provide business partnership throughout the transformation.
Pivotal questions for automotive leaders
How will we redesign work to enable talent to flow to it while allowing for work’s perpetual reinvention?
How will we re-envision talent experiences to meet all talent where they are and on their terms?

Sourcing talent

In reality, most traditional automotive businesses aren’t equipped to upskill and reskill their existing workforce, nor are they prepared to successfully attract talent from other industries with very different cultures and ways of working. Sourcing these scarce leadership and technical skills will require resourcefulness and knowledge of what skills can be developed versus bought. Only two in five automotive HR leaders (41%) in our 2023 Global Talent Trends study were confident they could make this distinction. A robust skills taxonomy linked to an internal company job architecture is the foundation for understanding an organization’s skills in internal talent pools. Understanding where skills gaps exist will allow companies to acquire talent thoughtfully and effectively from this baseline.

Adjacent industries with these skill sets include high-tech robotics, manufacturing, and research and development functions. High-end or highly qualified profiles with selected skills (such as cybersecurity) can be traced within professional services/consultancy firms and IT-related industries.

Based on the above list of skills that automotive manufacturers need, jobs that house these skills are:

  • Quantitative analytics
  • Satellite systems engineering
  • Computer vision R&D
  • Natural language processing R&D
  • Infotainment engineering
  • Microelectronics/semiconductor engineering
  • Aeronautical engineering
  • Software development engineering
  • Integrated solutions (hardware and software) engineering
  • Corporate affairs
  • Public relations
Fewer than two in five automotive HR leaders have effective upskilling/reskilling programs to prepare talent to move into new areas.

These in-demand skills are scarce, and over time, automotive companies may want to propagate them through upskilling, reskilling and fostering partnerships with educational organizations (such as universities and community colleges) to accelerate skill development and open access to more talent. This requires a thorough understanding of the existing workforce’s capabilities, knowledge of what this type of talent wants, and the ability to respond accordingly. For instance, more than six out of 10 technology employees will only join or stay with a company if they can work remotely or in a hybrid workplace model. Moreover, one in three employees would forego a pay raise for a fully flexible or compressed work schedule and additional well-being benefits for themselves or their families.

In the meantime, options are to explore new operating models to fast-track skill development and culture change.

New operating models

Given the challenge described above, automotive manufacturers must develop new operating models to attract these skills into their workplaces and implement supporting talent practices and leadership behaviors to create a culture that rewards and retains them. Given the difference between work structure, culture and ways of working in traditional automotive companies versus a more future-facing automotive company that feels like a tech company, simple integration into the existing automotive company operating model may not work. Better ways of organizing as automotive companies transform and prepare for a different future include the following operating models. None are mutually exclusive of the other — meaning that several models could coexist in one organization.
Model (option) Benefit Limitation
Outsourcing Limited up-front investment in technology and infrastructure Skills and ways of working don’t become part of the fabric. 
Partnership/joint venture Shared investment and collaboration The “devil is in the details” of partnership models. Risks can include non-exclusivity, power imbalance, etc.
Incubation hub/internal “company within a company” New and existing models are separate but porous, creating a path toward greater integration in the future This can create feelings of inequity and perceived value differences between the two companies. There is a risk of attrition on the traditional automotive side before the company is ready.
Flow/flex model (i.e., some sort of “all of the above” option) Reduces dependence on a single approach as it allows organizations to test multiple approaches before (or without) committing to a single one Not a drawback per se — but there needs to be a governing strategy that drives choices versus putting a few eggs randomly in each basket.
“Acquihire” Lift and shift talent with mid-term impact Competition with other potential acquisition-minded firms (potentially outside of the automotive sector) and challenges with cultural integration can arise.
  • Critical transformation plans for 2023

    - Focusing on company culture

    - Increasing ability to adapt

    - Enabling a skills-based organization

    - Upholding diversity, equity and inclusion

    - Enabling new ways of working

Transforming for the future of work

Automotive organizations must design a future that is hospitable to the type of talent they want to cultivate for creativity, adaptiveness and innovation to position their firms for future success amid continued disruption. Essential components include:
  • Strategic workforce planning
    to determine the talent required to effectively support new business challenges, balancing skills required while optimizing headcount and anticipated future need for skills 
  • A talent strategy
    to design an approach that develops, rewards and engages this specific talent effectively
  • A skills-based framework and innovative career paths
    that enable employees to navigate their careers and development and allow organizations to know and maximize particular skill sets in their business 
  • A culture
    that creates a leadership environment and working norms and behaviors conducive to nurturing talent and driving creativity and innovation
  • A structure
    that flattens the organization and makes it less hierarchical while enabling the efficient flow of ideas and talent from the edge to the core
  • Work models
    that factor in different ways of working — everything from workplace strategy to location strategy 

Kicking into high speed

To get started, automotive leaders need to consider the right strategy and partnership model for their organization. We can help you think through the people implications for the models you are considering. Once you have selected a business model, we can partner with you to design the people strategy, operating model, organizational structure, culture and talent programs you need to make the new model successful. We also can help you evaluate, redesign and reroute work so your organization is functioning efficiently and effectively and your people can maximize their contributions.

You don’t have to go it alone. Planning for a markedly different future requires an “all hands on deck” approach from automotive companies. Mercer offers a multi-disciplinary, “all hands on deck” partnership that helps organizations address the workforce, talent and organizational challenges and opportunities that lie ahead. 

Client success story
A renowned Italian manufacturer of luxury sports cars and SUVs had achieved new performance levels with double-digit growth and a rapidly expanding workforce. While its future performance targets were even more ambitious, the industry’s structural transformations posed additional challenges to cost competitiveness and the capability to reshape the workforce’s competencies. The client wanted to review its approach to workforce planning to ensure it met performance targets by rightsizing the company and its talent competencies.
Project goals 

Mercer and Oliver Wyman teamed up to focus on both quantitative and qualitative sizing, with the specific key objectives to:

  • Achieve proper, balanced staffing to support the new product pipeline effectively
  • Evolve a competencies mix more focused on emerging technologies, like hybrid powertrains and electronics
  • Define an appropriate build/buy mix of competencies, optimizing headcount while considering market opportunities
  • Make the workforce more flexible to address new challenges from disrupting events
  • Developed a “skills master dataset” to divide skills betweencommodity” skills, which every listed role should have as of today and represent an essential skill; “core” skills, competencies that are currently found within the organization’s skills portfolio to be further developed to face future business challenges; and “forward-looking” skills, emerging ones now not available (or with a low ratio) within the organization that must be addressed to cope with industry disruptions and that will be the basis of future roles.
  • Defined the supply model (i.e., build versus buy) for headcount on a five-year scale, identifying key drivers to fuel the model at its core.
  • Co-identified the 2023–2027 recruiting plan, matching rightsizing insights with business requests and aligning the workforce toward the required skills for future fit.
  • Prioritized profiles according to critical skills for the recruitment plan for 2023–2027, based on a high-level external job market assessment to highlight essential roles for the hiring plan and provide concrete recommendations to HR.
Overall, the client gained awareness of the comprehensive skills needs of its future workforce, with details on the skills emerging in the market and absent currently throughout the organization. This allowed for designing a supply model to connect the skills needed with the rightsizing while considering market constraints (e.g., skills availability). Finally, the design of a practical recruiting plan and the prioritization of profiles developed a plan on a five-year scale to acquire and develop skills to respond to crucial business challenges. 
About the author(s)
Jesse Bramall

Mercer Principal and US Skills Advisory Solutions 

Peter Stevenson

Go-to Market Leader, Skills Edge

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