Navigating the Challenges of Commodity Traps and Platform Economies: An Assessment in the Context of the Northern Black Forest Region and Future Directions

Abstract

The transition to battery electric vehicles (BEVs) poses significant challenges for automotive suppliers, particularly in the Northern Black Forest Region, Germany’s largest industrial area. This study examines the risk of falling into the commodity trap and the impact of platform economics on these suppliers. A VUCA (volatility, uncertainty, complexity, ambiguity) analysis is used to assess the consequences of the open platform approach promoted by the Mobility in Harmony (MIH) Consortium. The methodology is based on a comprehensive literature review on commodity traps and platform economies, as well as an analysis of the MIH Consortium’s strategies for standardizing BEV components. The results show that while the MIH Consortium’s modularization and standardization efforts can reduce costs and facilitate mass production, they also intensify competition and limit differentiation, threatening the profit margins of smaller suppliers. The study highlights the importance of strategic positioning and innovation to counter these risks. It concludes with recommendations on how automotive suppliers can adapt to the evolving environment and be agile in responding to new technological standards and market dynamics.

1. Introduction

As more and more consumers opt for battery electric vehicles (BEVs) over traditional combustion engine vehicles, the demand for certain components and materials used in the production of BEVs may increase. However, because these vehicles tend to have fewer moving parts and are generally simpler to manufacture than conventional combustion engine vehicles, the production of these components and materials may become more standardized and commoditized.

1.1. The Impact of BEV Transition on Northern Black Forest Automotive Suppliers

BEV production can lead to intense competition among suppliers, reduced profit margins, and a lack of differentiation in the market. These challenges may make it difficult for automotive suppliers, especially smaller- and medium-sized ones, to remain competitive and profitable in the face of the growing popularity of BEVs. The Northern Black Forest Region is Germany’s largest industrial region, mainly consisting of automotive suppliers. With increasing popularity of battery electric vehicles, many suppliers are at risk of becoming a victim of the commodity trap through platform economics.

1.2. Research Problem

This paper aims to explain the dangers of the commodity trap and platform economics with a focus on the Mobility in Harmony (MIH) Consortium. Using a combination of case study and literature-based analysis, the paper evaluates the potential challenges arising for suppliers in the Northern Black Forest Region. A VUCA analysis (volatility, uncertainty, complexity, ambiguity) is carried out to assess the impact of these challenges. Finally, recommendations on strategic positioning for the automotive suppliers in the region are provided to help them survive the upcoming transformations in the automotive industry. Specifically, the research hypotheses to be tested are:

H1: 

Platform economics pose a significant threat to the competitive positioning of automotive suppliers in the Northern Black Forest Region.

H2: 

The commodity trap leads to economic shifts in the automotive industry, affecting profit margins and market dynamics.

H3: 

Conducting a VUCA analysis provides a robust framework for assessing and addressing the challenges posed by platform economics and the commodity trap.

H4: 

Tailored strategic measures, including innovation in product differentiation, operational efficiencies through modular design, and enhanced customer relationships, are essential for automotive suppliers to mitigate the impact of platform economics and navigate the commodity trap effectively.

2. Research Method

The methodology for this paper follows the recommended review structure presented by vom Brocke et al. [1]. This methodology begins with defining the scope of the review. Following Cooper’s taxonomy, the literature review focuses on research findings and theories in the areas of commodity traps and platform economies. It also examines the application of the open platform MIH. The aim of this publication is to summarize the existing literature and to integrate findings, such as the key issues of how to escape the commodity trap. A conceptual structure has been chosen for this work. Furthermore, a neutral, non-evaluative perspective is adopted until the end of chapter 6. Thereafter, in order to formulate a recommendation for action, the perspective is changed to an advocacy perspective. The paper is addressed to the general public, in particular to small- and medium-sized suppliers to the automotive industry in the Northern Black Forest Region. As there is already a large amount of literature on the subject, a representative selection of the available works has been studied and compiled [2] (pp. 5–9).

Figure 1 illustrates the previously described taxonomy of the literature review that was chosen for this work.

After an initial clarification of key terms, a mind map was created to help identify the concept for this publication [1]. The primary literature search was then carried out using a set of keywords (search string) appropriate to the topic using online databases such as SpringerLink, Google Scholar, MDPI, IEEE, and ScienceDirect. In addition, an online review of company websites and publications was carried out. Relevant homepages, such as those of the MIH Consortium, Wirtschaftsförderung Nordschwarzwald, and TraFoNetz, were examined. TraFoNetz is the largest joint initiative to date in the Northern Black Forest to support regional automotive companies. In particular, small- and medium-sized enterprises (SMEs) in the supply sector and their employees are supported free of charge in the revolutionary transition from fossil combustion engines to alternative drive technologies. TraFoNetz is funded by the German Federal Ministry of Economics and Technology.

This representative sample of sources was then further evaluated and allocated using a concept matrix derived from Webster and Watson [3] (pp. xvi–xviii).

A total of 52 different sources were consulted. Most of these were gathered via SpringerLink and Google Scholar. However, as the topic of the MIH Consortium is relatively new, there are few publications available. Online research was therefore carried out via Google. The same applies to the analysis of the Northern Black Forest and the TraFoNetz.

The structure of the paper is as follows: Section 3 explains the state of the art in terms of platform economies and commodity traps. Section 4 analyzes the MIH Consortium, its structure, organization, and projects. Section 5 describes the importance of the Northern Black Forest Region for the automotive industry. Potential challenges for the region are then examined in detail in Section 6. Section 7 then outlines 4 key actions for future positioning. Finally, Section 8 concludes the paper and provides an outlook for future development.

3. State of the Art

This chapter outlines the basic concepts and theories. These include the ideas of platform economies and commodity traps. Consequently, this chapter answers the questions of understanding the meaning of these theories, examining how they work, and identifying the purposes to which they can be applied. Through this analysis, we aim to provide a solid basis for discussing the implications of these concepts for automotive suppliers in the Northern Black Forest Region and to contextualize the findings from the case study and literature-based analysis.

3.1. Platform Economy

Since the late 20th century, information technology has experienced rapid development, particularly in data storage and processing capabilities [4]. This evolution has led to the global proliferation of platforms [5], with the digital component being fundamental to the platform business model, as seen in notable examples like Google, Amazon, eBay, and Alibaba. Xue et al. assert that most large technology companies today are platform-based [5], a view echoed by Evans and Gawer, who identify platform characteristics in the majority of successful companies [6]. Platforms have fundamentally altered societal norms and cognitive paradigms [6]. Operating as business models characterized by two-sided or multi-sided markets [4,7], platforms serve an intermediary role [4,5,8], facilitating exchanges between different market participants, such as consumers and producers [8] or buyers and sellers. Their primary function is to connect these participants [4], with producers generating value by creating offerings on platforms and consumers purchasing or using these offerings [7,8]. The specific industry is irrelevant [4], as platforms have redefined market relationships between consumers and producers or buyers and sellers [9].

This intermediary role introduces a dilemma known as the “chicken-and-egg problem” [8], wherein platforms can only generate value if they have users, yet users are attracted only if there is existing value on the platform [7]. Once a critical mass of users is achieved, platforms benefit from positive or exponential network effects [7], meaning the value for all participants increases as more users join [8]. Beyond network effects, economies of scale and reduced transaction costs are crucial economic drivers for platforms. Platforms benefit from extremely low marginal costs, facilitating exponential growth as the platform scales [7]. Transaction costs, the additional costs associated with finding business partners and concluding contracts, are minimized by platforms’ efficient matching processes [4].

From the user’s perspective, platforms offer the significant advantage of building trust efficiently and personally, and being data-driven. For example, platforms like Airbnb have normalized staying in strangers’ homes, while Amazon ensures seamless processes for purchases, shipping, and returns, fostering user trust [10]. Evans and Gawer identify four types of platforms: transaction platforms (I), innovation platforms (II), integrated platforms (III), and investment platforms (IV) [6]. Transaction platforms facilitate exchanges (e.g., eBay, Netflix), while innovation platforms support the development of new technologies, products, or services (e.g., Microsoft, Intel). Integrated platforms combine features of transaction and innovation platforms (e.g., Apple), and investment platforms develop platform portfolio strategies, acting as holding companies or active investors (e.g., Softbank, Naspers) [6].

3.2. Commodity Trap in the Context of the Automotive Industry

Commodities are defined as products or services with no perceived differentiation, such as metals, paper, wheat, car rentals, or call centers [11]. In industries where products become increasingly similar due to a lack of competitive advantages, to the extent that they are seen as interchangeable by customers and price becomes the sole differentiator, companies risk falling into the commodity trap [12]. D’Aveni posits that every industry will eventually face commoditization as differences among competitors diminish through escalating competition [13]. This commoditization leads to price wars, shrinking profit margins, and financial losses [11], ultimately causing businesses to fail [13]. Furthermore, the commoditization of export goods adversely affects the terms of trade for the exporting company [14]. In the context of the automotive industry, the standardization of vehicle parts exemplifies this phenomenon. As components become more uniform and interchangeable, the unique value propositions of individual suppliers diminish. This shift toward standardization can transform specialized automotive parts into commodities, making it challenging for suppliers to maintain profitability and competitive edge. The resulting price-based competition can erode margins and lead to financial instability, particularly for smaller- and medium-sized suppliers. Thus, the commoditization of vehicle parts underscores the broader implications of the commodity trap within highly competitive and technologically advancing industries.

3.2.1. Functional Principle

Figure 2 illustrates the subjective and objective differentiation of products. Products are in the commodity trap if they can be assigned to quadrants (I) and (II). Examples of born commodities are goods such as agricultural products, water, or energy. New commodities occur when the customer does not perceive the objective differences between products, as these are either not apparent or have shrunk over time [11].

According to D’Aveni, the literature distinguishes three primary types of commodity traps (see

Table 1. Suggested framework for escaping a commodity trap based on [13].

Trap-Type	Deterioration	Proliferation	Escalation
Beforehand: Spot and identify	Price and value decline New low-end competitors enter the market	New, specialized cost–value propositions New niche products enter the market	Prices decline while the value goes up rapidly
Escape	Compromise the low-end sector Reach customers via different channels Focus on different markets/regions Build a brand	Focus on your core competencies and profitable markets	Come up with a disruptive innovation Become more flexible and faster as a company
Destroy	Offer even lower prices Focus on the total cost over the product lifecycle Create different value propositions	Focus on core competencies and profitable markets Create business units, focused on niches Acquire competition and merge to build a large company and brand Show off your technology	Use long-term contracts with customers Build a brand Remove yourself from some niches Focus on the core aspects the customer is willing to pay for
Turn the trap to your advantage	Create different or higher value propositions	Use niches and come up with new value propositions Use open innovation to have better-fitting and cheaper products	Prices decrease, market grows, making economies of scale possible Better products at lower prices can be offered, putting competitors under immense pressure Control the market speed through innovation and market knowledge

), each with distinct causes and strategies for escape [13]. Deterioration occurs when new low-cost competitors disrupt the market with stripped-down offerings, exemplified by Ryanair’s disruptive impact on the airline industry. Proliferation manifests as market fragmentation due to niche products, rendering existing offerings obsolete; Sears’ decline illustrates this through competition from discounters, high-end retailers, specialty stores like Home Depot, and online retailers. Escalation ensues when companies engage in price wars to offer more features for less, as seen in the personal computer industry’s pricing pressures in the early 2000s.

Commoditization results from diminishing competitive advantages and the perception of products as homogeneous and interchangeable [11]. Various factors contribute to this process:

Company-related factors include standardization and imitation, which reduce differentiation and spur commoditization as companies prioritize cost-cutting over innovation [12]. Product-related factors highlight how aging products face increased competition, with complex products offering differentiation opportunities while simpler ones quickly become commodities. High-performance risk incentivizes differentiation based on reliability and predictability [11].

Buyer-related factors emphasize the role of customer engagement: less engagement leads to quicker decisions and reduced differentiation, while familiarity erodes the perceived value of bundled offerings over time. Rising customer expectations further diminish perceived uniqueness, exacerbating commoditization [11].

Market-related factors, such as regulations and market dynamics, also influence commoditization. Stringent regulations and low competition foster routine markets with reduced innovation, promoting commoditization. Conversely, globalization, transparency, and heightened competition accelerate commoditization by intensifying market dynamics and innovation cycles [12]. Understanding these factors is critical for companies aiming to navigate or escape the commodity trap, highlighting the strategic complexities involved in maintaining product differentiation and competitiveness in evolving markets.

3.2.2. Escape Strategies

De-commoditization is the process of transforming perceived homogeneous and replaceable commodity products into (pseudo-) differentiated offerings [11]. Achieving de-commoditization involves several general principles:

Operational Excellence and Fair Value: Companies pursue cost leadership through technological advancements, thereby differentiating themselves based on price. However, competition among multiple cost leaders can exacerbate commoditization. Streamlining product portfolios to eliminate low-profitability items may reduce customer loyalty and increase customer attrition, necessitating careful trade-offs [11]. Increasing market share can decrease fixed costs, enabling sales promotions without sacrificing margins [12].

Product Strategies: Innovation and differentiation are crucial for escaping the commodity trap. Shifting from product sales to service offerings, including auxiliary services like warranties, repairs, customization, consulting, or product-as-a-service models, enhances differentiation [12]. Mass customization, where mass-produced products are tailored to individual customer preferences post production, can boost margins and enhance product–market fit [11]. Embracing open innovation, involving external stakeholders in the innovation process, enhances market alignment and profitability, particularly in increasingly commoditized markets [15].

Customer Relationship and Bonding: Customer relationship management, customer-centricity, and fostering stronger customer bonds are pivotal strategies for de-commoditization [12]. Engaging customers in co-creating new products fosters desirable outcomes and deeper customer connections. Building a strong brand identity enhances margins and fosters customer loyalty. Delivering exceptional customer journey experiences further enhances de-commoditization efforts [11].

Market Strategies: Companies can explore market diversification into less competitive markets or leverage partnerships with other firms to capitalize on their scale or brand strength [12]. Anticipating future market trends and maintaining innovation cycles ensures sustained competitiveness. Larger firms can exert competitive pressure on smaller rivals through discount campaigns [12]. Market exit strategies, such as gradual phase-outs, harvesting residual product potential, immediate discontinuation, or selling product lines in mergers and acquisitions, provide tactical options for managing product portfolios [16].

In crafting an effective escape strategy from the commodity trap, the framework outlined by D’Aveni emphasizes these multifaceted approaches, underscoring the complexity and strategic considerations involved in achieving sustained differentiation and competitive advantage [13]. We provide the following framework for an escape strategy based on [13]:

4. Mobility in Harmony Consortium

This chapter illustrates the working principle of the MIH open electric vehicle (EV) platform. The platform uses standardized components from different suppliers, thereby reducing costs and increasing efficiency. As a result, MIH will lead to increased competition, forcing traditional car manufacturers to transform their business in order to remain profitable in the future [17]. In order to provide an insight into the MIH Open EV Platform, this chapter first outlines the background and organization of this consortium. Secondly, it provides a detailed characterization in terms of structure and function.

4.1. MIH Organization

The MIH Consortium was initiated by the Taiwanese company Foxconn [18], a subsidiary of the Hon Hai Technology Group. Foxconn is the world’s largest electronics manufacturer. In recent years, the company has expanded its expertise to include the development of electric vehicles, and its latest venture is the MIH Consortium. As a result, a joint venture between Foxconn and Taiwanese car manufacturer Yulon was established in November 2020. The newly born company Foxtron covers the tasks of “vehicle design, engineering development and system validation […] using … the long experience and assets of Foxconn and Yulon Group in the electronics and automotive sectors” [19,20].

More specifically, the MIH Consortium is “an open EV technology ecosystem that promotes collaboration in the mobility industry, while increasing innovation and expanding opportunities across the mobility industry” [21]. It was founded on 6 July 2021. MIH aims to “realise key technologies, develop reference designs and standards” [22]. It also aims to bring together strategic partners to develop “the next generation of EV, autonomous driving and mobility service applications” [22]. This will be achieved by providing an Open EV Platform [23] that includes all the major functions of an EV, such as chassis, batteries, advanced driver assistance systems (ADAS), cybersecurity, or battery management systems (BMS). The consortium operates under the supervision of the MIH Office, which is led by the CEO, Mr Jack Cheng. The Board of Directors is responsible for the oversight of the project: it supports the consortium, acquires resources, and approves annual budgets for all types of operations. Strategic direction is set by the MIH Office in consultation with the Board. The majority of the MIH’s efforts are devoted to the implementation and standardization of EV technologies [22,24].

Basic membership of the MIH Consortium is free. However, MIH offers subscription services as well as various pay-per-use offerings. For donations of $10,000 or more, members can also achieve Contributor status, which unlocks additional benefits. The main revenue comes from donations and the provision of services [22].

The number of members is growing steadily. In June 2021, just one month after its launch, the MIH already had more than 1600 partner companies. By December 2022, MIH will have over 2500 partners in 67 different countries. The consortium “welcomes all brands, developers and participants in the automotive supply chain” [23]. In addition to the services offered, members will be able to connect and network with others in the industry and thus have the opportunity to influence strategic directions. In addition, all members will receive updates on the current development of the platform so that they can choose in which areas they wish to collaborate [25].

Potential customers for the platform are mobility service providers and car brands. When using MIH’s services, customers should be able to choose from a range of manufacturing depths, varying from the basic EV platform to the finished vehicle [22,23,26].

4.2. MIH Working Groups

To establish the Open EV Platform, the MIH Consortium includes several working groups where industry experts and partners work together. The aim is to “exchange ideas and influence the strategic direction of EV development” [23]. During the MIH Demo Day in November 2022, the following six main working groups were identified [27].

The aim of the Body Structure group is to implement a flexible and configurable Body in White (BIW) using multi-material and mixed construction approaches. The German company FEV, based in Aachen, is leading this working group. Through the establishment of their so-called FlexBody technology, this new technology aims to achieve high modularity at low investment costs [28].

The Powertrain working group also follows the MIH objectives by standardizing as many components as possible. They have developed a solution that realizes different power outputs with a motor design that is flexible in length. In addition, a standardized inverter and gearbox will be used [29].

A major goal of the E/E Architecture working group is the realization of an open, standardized service-oriented architecture (SOA) with several application programming interfaces (API) using the MIH middleware as a standard interface. Furthermore, the architecture can be used in different types of vehicles. In this way, the MIH project promotes new standards and builds reference designs. In addition, they offer the HHEV.OS software platform as a middle-layer software between the vehicle hardware and the applications [30].

The Autonomy working group focuses on reference AD/ADAS implementations that can be integrated into the Open EV Platform. The platform already provides the necessary technology, such as drive-by-wire, for the implantation of ADAS. In line with the other working groups, this group also focuses on collaboration and standardization. An example is the collaboration with the Autoware Foundation, which will support the standardised MIH AD/ADAS APIs [31].

The Smart Cabin working group aims to develop open APIs for the five human senses (sight, hearing, smell, taste, and touch) as well as open software and hardware interfaces [32].

Finally, the Security and OTA working group is facing new challenges due to the increasing amount of data, such as that generated by ADAS. By implementing blockchain technology, they envision various privacy and security features, e.g., a wireless key system etc. [33].

4.3. Projects

In the competitive landscape of the automotive industry, both MIH and Foxtron exemplify distinct approaches to product development and market entry amid the rise of electric vehicles (EVs). MIH’s Project X signifies its strategic pivot into the A-segment with a phased roll-out of 3-seater, 6-seater, and 9-seater vehicles, slated for production commencement in 2025. This initiative underscores MIH’s modular design philosophy aimed at enhancing efficiency and flexibility through standardized, interchangeable parts [27]. In contrast, Foxtron has adopted the Open EV Platform to introduce a diverse range of vehicles, including an SUV, luxury sedan, and a specialized urban transport bus [34]. Despite unveiling these designs, commercial release dates remain unspecified as of late 2022 [26,34].

MIH’s modular approach aligns with industry trends favoring scalable production capabilities and cost efficiencies, potentially positioning them to meet diverse market demands effectively. The emphasis on standardized parts across different vehicle configurations not only streamlines manufacturing processes but also supports sustainability goals by reducing material waste and improving resource allocation. This strategic alignment with modular design principles reflects MIH’s proactive stance toward adapting to market dynamics and technological advancements in the EV sector.

Conversely, Foxtron’s utilization of the Open EV Platform highlights a strategy focused on innovation and differentiation through diverse product offerings. By introducing reference designs for multiple vehicle types, including a specialized urban transport solution, Foxtron aims to cater to varied consumer preferences and market segments. However, the ambiguity surrounding commercial availability timelines suggests potential challenges in scaling production or navigating regulatory landscapes necessary for market entry.

Both MIH and Foxtron navigate the complexities of the automotive industry’s shift toward electrification and platform-based economies. MIH’s modular design strategy positions them to capitalize on operational efficiencies and market responsiveness, while Foxtron’s diverse product portfolio showcases their commitment to innovation and market differentiation. Moving forward, the ability of both companies to execute their respective strategies effectively will play a crucial role in determining their competitive standing and market success in the evolving EV landscape. [35]

4.4. Technological Innovations and the Role of Commodity Hardware in the MIH Consortium

The adoption of commodity hardware in Battery Electric Vehicles (BEVs), facilitated by initiatives like the MIH EV Open Networks, is reshaping the electric vehicle industry by driving innovation and enhancing affordability. Commodity hardware in this context refers to readily available, low-cost, and easily replaceable components that form the foundational infrastructure of BEVs. Similar to the computer industry, where standardized components enable the mass production of PCs and notebooks [36], the introduction of commodity hardware is beginning to revolutionize the design and manufacturing processes of BEVs.

In the early stages of electric vehicle development, proprietary hardware solutions were predominant, with manufacturers designing custom components tailored to specific vehicle models. However, the emergence of open-source initiatives such as MIH EV, which standardizes many BEV components, underscores a gradual shift toward commodity hardware across the electric vehicle sector.

Commodity hardware components are pivotal in the development and operation of BEVs [37]:

• Battery packs: Standardized lithium-ion battery packs, sourced from open market suppliers, serve as the primary energy storage solution in BEVs [38].
• Electric motors: Off-the-shelf electric motors, such as those utilized in MIH EV Open Networks, provide the propulsion system for BEVs, offering efficiency and reliability at competitive costs.
• Power electronics: Standardized power electronics components, encompassing inverters and motor controllers, manage the flow of electricity between the battery pack and electric motor, optimizing performance and efficiency [37].
• Charging infrastructure: Standard charging infrastructure, including stations and connectors compliant with MIH EV standards, facilitates convenient and efficient BEV charging [39].

Much akin to commodity hardware in computing, the use of standardized components in BEVs presents both advantages and disadvantages [40]:

• Benefits:
  • Lower cost: Commodity hardware reduces manufacturing expenses, thereby enhancing BEV affordability and accessibility for consumers.
  • Interchangeability: Standardized components enable easy interchangeability and compatibility among various BEV models and manufacturers.
  • Availability: Components sourced from open networks like MIH EV are widely accessible through multiple suppliers, mitigating supply chain constraints.
• Disadvantages:
  • Performance limitations: While standardized components offer cost advantages, they may not always deliver peak performance compared to proprietary solutions.
  • Troubleshooting complexity: Utilizing components from diverse suppliers can lead to compatibility issues and pose challenges in troubleshooting.
  • Limited support: Unlike fully integrated proprietary systems, commodity hardware may receive limited support from the original equipment manufacturer.

The evolution toward commodity hardware in BEVs signifies a pivotal shift in the electric vehicle industry, driven by efforts to increase affordability and standardization while navigating the inherent trade-offs between cost-effectiveness and optimal performance.

5. Automotive Suppliers in the Northern Black Forest Region

The platform strategy is based on the standardization/commoditization of components and an innovative ecosystem for the development of further technologies. This offers the automotive industry the opportunity to reduce costs, increase efficiency, and improve customer satisfaction. While some manufacturers, such as Foxconn with the support of MIH, have already started to implement a platform strategy, German automakers and suppliers are still in the early stages. Ref. [17] presents the Northern Black Forest and a possible project to develop a regional strategy to manage the transformation of the vehicle and supplier industry toward a platform strategy.

According to an economic structure analysis carried out by the consulting firm MOD-ULDREI GmbH and Wirtschaftsförderung Nordschwarzwald GmbH, the Northern Black Forest is one of the most industrialized regions in Germany [41,42]. There are now more than 30,000 companies in the region [41]. The presence of several automotive suppliers makes this region important for the automotive sector. These are companies that provide automotive components and materials, such as engines, transmissions and other car parts. A cluster of related industries, such as logistics and engineering, that support the automotive sector is created by the presence of these suppliers in the region [43].

In order to provide a comprehensive classification of the automotive supply industry in the Northern Black Forest Region, this chapter provides an overview. This classification serves as a basis for the development of a threat analysis and strategic positioning approaches to assist the companies concerned in navigating away from the commodity trap and establishing a networked supplier platform. The Northern Black Forest Region, located in the south-west of Germany, is recognized as a high performing and highly dynamic economic area. It comprises several administrative units, including the districts of Freudenstadt, Calw, the regional centre of Pforzheim and the Enzkreis, which together contribute to the economic vitality and industrial significance of the region. This can be seen in Figure 3 [44].

For some of these companies in the Northern Black Forest Region, the automotive industry is a very important target market. This is evidenced by the proximity of the neighbouring region of Stuttgart, which is one of the most important regions for the automotive industry in Germany. Stuttgart is strongly characterized by automotive companies such as Mercedes-Benz, Bosch, and Porsche [45] (p. 15).

In order to serve this automotive market, a large number of companies in the Northern Black Forest Region have decided to set up in the automotive supply industry. They are located in the upstream automotive industry, in component planning and production.

This is shown by the fact that in 2022, a total of more than 1300 companies were active in this sector in the Northern Black Forest Region. This corresponds to a share of 4.3% of the region’s total industry [45,46].

Companies in the automotive supply industry are generally medium-sized companies at the lower end of the value chain (from Tier 2). A Tier 2 supplier is one that provides goods or services to a Tier 1 supplier rather than directly to the end customer. Tier 1 suppliers are the primary suppliers who have a direct relationship with the end customer, and Tier 2 suppliers supply these primary suppliers. A Tier 2 supplier has little contact with original equipment manufacturers (OEMs) and therefore high margin pressure and little influence on innovation development [47] (pp. 469–476).

However, it can be expected that this traditional structure of supply relationships and the value chain in the automotive industry will be broken up by the transformation to a platform economy, alternative drives and electrification, digitalization and automation. This means that companies in the Northern Black Forest Region are facing major challenges, but also opportunities [45] (p. 12).

In order to counteract these challenges and make the Northern Black Forest Region more innovative and resilient for the future, the Federal Ministry of Economics and Climate Protection has approved a project of Wirtschaftsförderung Nordschwarzwald GmbH. The project “Transformation Network Cooperation Platforms Vehicle and Supplier Industry Northern Black Forest”. The ministry is funding the project with a total of EUR 6.77 million [48].

The goal of the project is to develop a regional strategy for managing the transformation in the vehicle and supplier industry in the Northern Black Forest Region, which is to be implemented together with all relevant stakeholders. The strategic focus is on the creation and expansion of competences, knowledge, and networks in the area of collaborative platforms for development and production in order to address the global trend of the platform economy [49].

6. Impact Analysis for Automotive Suppliers in the Northern Black Forest Region

To recommend a strategy for building an interconnected supplier platform for automotive suppliers in the Northern Black Forest Region, it is important to examine threats they may face, for instance, regarding the MIH Consortium, and other automotive network clusters. A method for analyzing possible threats is the VUCA method, which will be discussed in this chapter.

6.1. VUCA Method

VUCA is an abbreviation that stands for volatility, uncertainty, complexity, and ambiguity. Nowadays, various industry sectors are experiencing a surge in volatility, uncertainty, and business complexity, leading to significant transformations in the nature of competition [50] (p. V).

The increasing influence of technological innovations on various industries, coupled with changes in the workforce demographics, have posed significant challenges on a global scale. As a result, leaders and organizations are under greater competitive pressure to demonstrate strategic flexibility in adapting to any changes. It is crucial for firms to be flexible and adaptable to succeed in this new reality [51] (pp. 3–4).

Bennett and Lemoine [52] structure the four VUCA elements in a portfolio with two dimensions: the knowledge about the situation and the predictability of the results of possible interventions. This matrix and its four quadrants can be seen in Figure 4 on the following page.

The following is a brief description of the four quadrants so that the method can then be applied to the Northern Black Forest Region.

The term volatility refers to a problem that is unstable or of unknown duration, but not necessarily difficult to understand as information is often accessible. An appropriate strategy in such situations is to be flexible and allocate resources to prepare; for example, by stockpiling goods or overpaying for talent. However, this approach can be expensive and should be proportionate to the level of risk [52] (p. 27), [53].

Uncertainty, on the other hand, is characterized by an understanding of the basic cause and effect of an event, despite the lack of additional information, with possible changes that are not guaranteed. To deal with uncertainty, it is advisable to invest in information by collecting, analyzing, and sharing it. This approach can be complemented by structural changes, such as the addition of information analysis networks, to reduce ongoing uncertainty [52] (p. 27), [54].

Complexity refers to situations with many interrelated elements and variables. Although some information may be available or foreseen, its quantity or complexity may make it difficult to process. An appropriate approach to dealing with complexity is to reorganize, hire, or train specialists and gather resources to manage the situation [52] (p. 27), [55].

Ambiguity is characterized by inherently unknown causal relationships and a lack of clarity about the meaning of an event. In such situations, it is necessary to experiment and test hypotheses to understand cause and effect. The approach to solving the problem should be to create experiments with a broad application of the lessons learned [52] (p. 27), [56].

Different situations may require different approaches to successfully address the four dimensions of VUCA. VUCA is a set of challenges that affect individuals, teams, managers, and organizations in different industries. While each of these obstacles may seem insignificant in isolation, their combination can lead to serious problems [51].

6.2. VUCA Analysis for the Northern Black Forest Region

In the subsequent analysis, the VUCA framework will be applied to assess the Northern Black Forest Region’s susceptibility to the threats posed by initiatives like MIH from China.

6.2.1. Volatility

The primary driver of escalating volatility is the proliferation of competitors, particularly from Asia, intensifying the ubiquitous threat of commoditization. This competitive influx exacerbates supply chain vulnerabilities, impacting availability and culminating in supplier failures or network disruptions [57]. Moreover, heightened volatility significantly impacts pricing dynamics [58], complicating forecasting and budgeting efforts. Fluctuating demand patterns further complicate production planning, leading to inventory imbalances that incur high costs or reduce profitability, thereby compromising customer satisfaction [59].

6.2.2. Uncertainty

Amid the ongoing shift toward CO₂ emission-free mobility, uncertainty prevails regarding the dominant technologies that will shape the automotive market’s future, such as fuel cell EVs versus battery EVs. Supply chain dependencies, especially on raw materials sourced predominantly from China and Asia, amplify uncertainty levels. Additionally, the strategic sourcing decisions of OEMs introduce another layer of unpredictability. Some, like Tata Technologies, have aligned with initiatives such as the MIH Consortium [60], potentially marginalizing smaller suppliers in regions like the Northern Black Forest that may not integrate into these large-scale standardized component strategies pursued by other OEMs like Volkswagen or Stellantis [61,62].

6.2.3. Complexity

Increasing product complexity stems from escalating technological demands, driving continual enhancements of existing functionalities and the introduction of novel capabilities previously unattainable. Consequently, customer expectations have heightened, demanding seamless integration into digital lifestyles, enhanced usability, extended durability, superior quality, and increased personalization.

Intensifying competition and stricter regulatory landscapes further elevate product standards, augmenting complexity and impeding the innovation process. Within corporate contexts, varying developmental stages and divergent organizational cultures and processes, as illustrated by historical cases like the failed Daimler–Chrysler merger, compound complexities, hindering collaborative efforts.

6.2.4. Ambiguity

Future sustainability of existing partnerships remains uncertain, casting doubts on the reliability of current business relationships for both suppliers and customers. Rapidly evolving market dynamics heighten the risk of obsolescence among suppliers, exacerbated by emerging competitors and evolving business models. Ambiguity also surrounds the outcomes of initiatives like the MIH platform, including uncertainties regarding participant OEMs and their strategic alignments, further clouding the future landscape.

This analysis underscores the multifaceted challenges confronting the Northern Black Forest Region amidst global automotive industry transformations, necessitating strategic foresight and adaptive measures to navigate the complexities of a VUCA world effectively.

7. Recommended Action for Positioning

Based on the threat analysis carried out using the VUCA method [52] (p. 27) for automotive suppliers particularly affected by the platform economy transformation, recommendations for action were derived. The following chapter presents specific strategies for successful transformation in the region. Based on the results of the literature review, the VUCA method and the results of a study for the German Federal Ministry of Economics and Energy [45], the following key factors for positioning were identified:

7.1. Integration into Platform Economies

Platform economies pose a significant threat to automotive suppliers in the Northern Black Forest Region (H1). The rise of platform-based business models, exemplified by initiatives such as the MIH EV Consortium, is standardizing components and promoting modular designs across the automotive supply chain. To mitigate this threat and exploit the opportunities, suppliers should strategically integrate into these platforms. By participating in collaborative ecosystems, suppliers gain access to economies of scale, shared R&D resources, and streamlined production processes. This integration increases operational efficiency, reduces costs, and expands market reach through standardized components that meet industry-wide specifications.

7.2. Innovation for Differentiation

The commodity trap (H2) highlights the risk of market homogenization and price-driven competition in the automotive industry. To differentiate and maintain competitive advantage, suppliers must prioritize continuous innovation. This includes developing advanced technologies, improving product features, and integrating sustainability measures into their offerings. By focusing on innovation, suppliers can create unique value propositions that meet customer demands for reliability, performance, and environmental responsibility. Innovation also enables suppliers to adapt quickly to changing market dynamics and regulatory requirements, mitigating the impact of commoditization on margins and market positioning.

7.3. Adoption of Advanced Technologies

Hypothesis 4 highlights the importance of tailored strategic actions, including the adoption of advanced technologies. To remain competitive, suppliers should invest in advanced manufacturing technologies such as automation, AI-driven analytics, and digital twin simulations. These technologies optimize production processes, improve supply chain management, and enhance product quality and customization capabilities. By leveraging advanced technologies, suppliers can achieve operational efficiencies, reduce lead times, and meet the stringent quality standards demanded by OEMs and end users alike. This proactive approach not only strengthens competitive positioning, but also future-proofs operations against technological disruption and industry transformation.

7.4. Strategic Customer Relationship Management

Conducting a VUCA (H3) analysis provides a robust framework for assessing and addressing the challenges posed by platform economics and the commodity trap. Suppliers should regularly conduct VUCA analyses to anticipate market volatility, regulatory changes, and technological advances that impact their business environment. By understanding these dynamics, suppliers can refine their strategic priorities, mitigate risks, and capitalize on emerging opportunities in the automotive sector. Strategic customer relationship management is critical in this context, focusing on cultivating long-term partnerships, understanding customer needs, and delivering personalized solutions that drive value and loyalty.

7.5. Invest in Talent Development

To address the evolving skills needs of the automotive industry, suppliers should invest in comprehensive talent development programs (H4). These programs should include skills training, professional development, and knowledge enhancement tailored to the needs of the digital age. By partnering with educational institutions and vocational training centers, suppliers can develop a skilled workforce with technical expertise, digital literacy, and sustainability practices. A skilled workforce improves operational efficiency, supports innovation initiatives, and ensures readiness to adopt new technologies. By investing in talent development, suppliers not only strengthen internal capabilities, but also position themselves as employers of choice in the competitive automotive market.

These recommended actions are designed to enable automotive suppliers in the Northern Black Forest Region to effectively navigate the complexities of platform economics and the commodity trap. By integrating into platform economies, fostering innovation, adopting advanced technologies, strategically managing customer relationships, fostering collaboration, and investing in talent development, suppliers can improve their competitive positioning and achieve sustainable growth amidst industry disruption. Adopting these strategies will ensure resilience, agility, and long-term success in the rapidly evolving automotive landscape.

8. Conclusions, Limitations and Outlook

8.1. Conclusions

The automotive industry, particularly in regions like the Northern Black Forest, is undergoing profound transformations driven by platform economics, the threat of commoditization, and the imperative to adapt to volatile, uncertain, complex, and ambiguous (VUCA) conditions. This study has explored these challenges comprehensively, guided by four key hypotheses:

H1: 

Platform economics pose a significant threat to the competitive positioning of automotive suppliers in the Northern Black Forest Region.

The adoption of platform-based business models, exemplified by initiatives like the MIH EV Consortium, standardizes components and disrupts traditional supply chain dynamics. This poses a dual challenge of commoditization risk and dependency on platform integrators, potentially marginalizing smaller suppliers. To mitigate this threat, strategic integration into platform ecosystems is essential, enabling suppliers to leverage economies of scale, shared innovation resources, and expanded market access.

H2: 

The commodity trap leads to economic shifts in the automotive industry, affecting profit margins and market dynamics.

As industry players increasingly compete on price due to standardized components and global market pressures, the risk of falling into the commodity trap intensifies (H2). This phenomenon erodes profitability and diminishes differentiation among products and services. To counteract these effects, suppliers must prioritize innovation in product differentiation, operational efficiencies, and customer relationship management. By emphasizing value-added solutions and customer-centric strategies, suppliers can mitigate the impact of commoditization and sustain competitive advantage.

H3: 

Conducting a VUCA analysis provides a robust framework for assessing and addressing the challenges posed by platform economics and the commodity trap.

The VUCA analysis framework (H3) has proven instrumental in understanding and navigating the complexities of the automotive industry transformation. It enables suppliers to anticipate and respond to volatility in market demand, regulatory changes, technological advancements, and supply chain disruptions. By conducting regular VUCA analyses, suppliers can enhance strategic foresight, optimize resource allocation, and proactively manage risks associated with platform economics and market uncertainties.

H4: 

Tailored strategic measures, including innovation in product differentiation, operational efficiencies through modular design, and enhanced customer relationships, are essential for automotive suppliers to mitigate the impact of platform economics and navigate the commodity trap effectively.

Strategic measures tailored to the unique challenges posed by platform economics and the commodity trap (H4) are crucial for supplier resilience and sustainability. These measures encompass adopting advanced technologies, fostering collaboration within regional ecosystems, investing in talent development, and promoting continuous innovation. By aligning strategic initiatives with market trends and customer needs, suppliers can enhance competitiveness, achieve operational excellence, and foster long-term growth amidst industry disruptions.

8.2. Implications for Practice and Policy

The findings of this study underscore the critical importance of proactive adaptation strategies for automotive suppliers in the Northern Black Forest Region and similar industrial clusters globally. Policymakers are urged to prioritize initiatives that foster industry collaboration, innovation, and talent development to bolster regional competitiveness and resilience. Supporting collaborative ecosystems, such as innovation clusters and technology parks, can facilitate knowledge exchange, joint R&D efforts, and collective problem-solving among suppliers, aligning with the identified threat posed by platform economics (H1). Investment in vocational training, higher education programs, and lifelong learning opportunities tailored to evolving industry needs is essential (H4), ensuring that the workforce possesses the necessary digital literacy and technical skills to thrive in a technology-driven automotive ecosystem.

Additionally, promoting sustainable practices and resilient supply chain strategies is crucial (H3), mitigating risks associated with global supply chain disruptions and environmental impacts. Policymakers must advocate for agile regulatory frameworks that foster innovation while upholding consumer protection, safety standards, and environmental sustainability (H2). Embracing digitalization initiatives, including Industry 4.0 technologies and cybersecurity measures, will strengthen manufacturing capabilities and data-driven decision-making processes (H4). Furthermore, promoting ethical business practices, corporate governance standards, and responsible supply chain management will enhance industry credibility and resilience against global competition (H1).

Collaborative efforts between policymakers, industry leaders, and stakeholders are pivotal in navigating the challenges posed by platform economics and the commodity trap. By adopting a forward-thinking approach informed by VUCA analyses, stakeholders can position the Northern Black Forest Region as a hub for innovation, sustainable growth, and competitive advantage in the global automotive industry landscape.

8.3. Limitations

While this research provides valuable insights and recommendations, it is important to acknowledge certain limitations:

• Rapidly evolving landscape: One of the primary limitations of this research is the rapidly evolving nature of the platform economy and electric mobility landscapes. These sectors are characterized by constant innovation, emerging technologies, and evolving market dynamics. While this analysis provides a snapshot in time, the dynamics of the industry may change swiftly due to new technological advancements, market entrants, regulatory changes, and shifts in consumer preferences. Therefore, the findings and recommendations presented here may need to be continually reassessed and updated to remain relevant in a dynamic environment. Foxconn, based on MIH EV Open, in partnership with Saudi Arabia’s Public Investment Fund (PIF), has launched Ceer, the first Saudi electric vehicle brand. This joint venture will involve Foxconn in designing, manufacturing, and selling electric vehicles within Saudi Arabia [62,63].
• Regional focus: This study focuses specifically on the Northern Black Forest Region, which possesses a distinctive industrial composition and ecosystem. The characteristics and challenges identified in this research may not be fully generalizable to other automotive supplier clusters globally. Variations in industry structure, regulatory environments, economic conditions, and technological adoption across different regions could influence the applicability of the findings beyond the Northern Black Forest. Future studies could explore other automotive clusters to provide a more comprehensive understanding of the broader implications.
• Data availability: A significant challenge encountered during this research was the limited availability of comprehensive data, particularly concerning newer initiatives such as the MIH Consortium. Access to detailed and up-to-date information on the operations, strategies, and impacts of these initiatives is crucial for conducting a thorough analysis. The reliance on publicly available data and the timing of data collection may have restricted the depth and breadth of the analysis, potentially influencing the comprehensiveness of the conclusions drawn.
• Methodological constraints: While the VUCA (volatility, uncertainty, complexity, ambiguity) framework proved valuable in structuring the analysis, it inherently has limitations in capturing the full complexity of the automotive industry transformation. The framework provides a structured approach to assessing challenges but may not fully encompass all nuances and interdependencies within the industry. Incorporating additional analytical approaches, such as scenario planning, stakeholder interviews, or longitudinal studies, could provide complementary perspectives and enrich the understanding of the implications identified in this research.
• Addressing these limitations requires ongoing vigilance and adaptation to changes in the automotive industry landscape. Future research endeavors should aim to overcome these challenges by incorporating more robust data sources, expanding the geographical scope of analysis, employing diverse analytical methods, and maintaining flexibility to accommodate evolving industry dynamics.

8.4. Outlook

Future research should address emerging trends in platform economics, including the profound impact of digitalization, artificial intelligence (AI), and sustainable mobility solutions on automotive supply chains. These areas represent critical dimensions that are reshaping industry dynamics and warrant in-depth research to fully understand their implications. In addition, longitudinal studies are essential to assess the sustainable effectiveness of recommended strategies in mitigating the challenges associated with platform economies and the commodity trap. By conducting longitudinal research, scholars can provide insights into the evolving nature of these challenges over time and provide empirical evidence on the effectiveness of different mitigation strategies. This approach will contribute to the development of robust frameworks and best practices that can guide automotive suppliers in navigating the rapidly changing landscape. While the automotive industry faces significant challenges, particularly in regions with established supplier networks such as the Northern Black Forest, strategic foresight, innovation, and collaboration can enable suppliers to not only survive but thrive in the midst of disruption. Embracing these principles can pave the way for sustainable growth, technological advancement, and competitive excellence in the dynamic automotive market.

Despite the research’s contributions, several avenues remain for future exploration:

• Longitudinal studies: Tracking the ongoing evolution of platform economics and its impact on automotive suppliers over extended periods can provide deeper insights into long-term trends and implications.
• Cross-regional comparisons: Comparing the experiences and strategies of automotive supplier clusters in diverse regions can offer a broader perspective and identify transferable best practices.
• Empirical investigations: Conducting empirical research through surveys, interviews, or case studies with automotive suppliers can offer nuanced insights into their specific challenges, adaptive strategies, and decision-making processes.
• Modeling and simulation: Developing computational models or simulations can help predict potential outcomes of different platform economy scenarios, aiding strategic decision-making among stakeholders.
• Policy implications: Exploring the role of policymakers and regulatory frameworks in shaping the impact of platform economics on the automotive industry can inform potential interventions or supportive policy measures.

As the automotive industry continues its journey of transformation, continued research collaboration between industry practitioners, academic researchers, and policymakers will be crucial. This collaboration will be instrumental in navigating the complexities of the platform economy, ensuring the long-term sustainability of the industry, and fostering the continued competitiveness of automotive suppliers globally.