Why Audi is getting hands-on with SAP S/4HANA

Auto-makers are quickly exploring new ways of working, and new technologies and partnerships will be more crucial now than ever before.
5 June 2020

An Audi showroom in Russia. Source: Shutterstock

  • Digital transformation has become more vital than ever for the car industry, with sales hit globally by the pandemic
  • Audi has partnered with Capgemini to launch a digital transformation consultancy, focused on smart manufacturing
  • It is one example of how the incumbent car industry is leaning on technology and partnerships to secure its future

The car industry is under immense pressure to digitize its operations, and given the size and length of industry tenure of incumbents, doing so is a task of monumental proportions. 

Originally built on steel and oil, members of the car industry are now leaning into tech-driven partnerships to ensure they continue to innovate and streamline production methods in order to produce vehicles at mass while saving costs. 

Rolling into a post-pandemic economy where dwindling buying power and choken operations has hammered industry growth, all matters of digital transformation have become more pressing than ever before. 

Following regulatory approval, German car giant Audi has teamed up with Capgemini to launch a joint venture called XL2, a separate company that will provide digital technology and consulting services focused on SAP S/4HANA and cloud for the entire Audi and Volkswagen Group. 

As reported by Green Car Congress, the real mission of XL2 is on the digital transformation of the entire manufacturing process. The first focus of SAP projects will be on production and master data management, and in developing cloud based applications. But the independent company will provide consultancy in production planning, logistics, finance, maintenance and materials management. 

On the new partnership, which is the latest of a line of projects between the carmaker and consultancy firm, Capgemini’s automotive sector global head, Markus Winkler, said the new company “stands out from the market combining an agile start-up culture and the experience and capabilities of two industry leaders.”

“Its employees will shape digital transformation in the automotive industry with key state-of-the-art technologies. For that, we are excited to join forces with Audi, a technology leader in its own industry.”

The time for tech and partnerships

The COVID-19 pandemic has brought a tsunami to the global car industry, closing dealerships and factories, and hitting customers in their pockets. Commentators suggest while “some automakers may emerge stronger,” others will be too weak to survive on their own – it’s generally agreed that there will be no going back to business as usual.

Aside from reduced buying power and the sudden impact of supply chain disruption, the auto industry faces the emergence of new trends such as remote work reducing dependency on personal transport, as well as increasing pressure to go electric. Hybrid and electric vehicles represented one in five of new car purchases in April in the UK, and this market is bringing in a raft of new tech-driven competition

The effects of this decline will lead established auto-makers to explore new ways of working and new technologies, deepening their relationships with tech companies and open innovation initiatives which have been in the making for some time. 

Last year, BMW and Microsoft teamed up in efforts to spur innovation towards the vision in an initiative called the Open Manufacturing Platform (OMP).

According to the firms, the open technology framework and community, built as a result, will support the development of smart factory solutions across the automotive and broader manufacturing sectors. 

Key goals for the project included accelerating future IoT developments, shortening time to value and drive production efficiencies by providing a reference architecture with open source components based on open industrial standards and an open data model.

Volkswagen and Ford last month struck a deal to share the large investments needed to develop next-gen vehicle technology, helping each other further into the autonomous vehicle technology and battery power market.