The past year has been highly significant for the automotive industry, with several watershed moments redefining the automotive landscape, particularly in the EMEA region.\r\n\r\nOne of the main headlines was the impact of the dieselgate scandal on the Volkswagen Group and the industry as a whole. The scandal, which broke in September 2015 and led to the resignation of Martin Winterkorn, has seen the company spend 2016 making broad shifts within the group, revamping management structures, and rethinking the company\u2019s vision and strategy.\r\n\r\nBrexit was another defining moment for the automotive industry, and while the implications of this move by the UK are still not well defined, the industry as a whole has adopted a relatively cautious outlook.\r\n\r\nTechnology has also grown by leaps and bounds, coming together with regulation to enable an accelerated shift toward autonomous driving. Digitisation too is coming to the fore as a key area of investment, with around US$40bn invested into automotive IT over the last two years.\r\n\r\nWe have also seen several European OEMs increase their focus on mobility initiatives, with PSA Group launching Free2Move, Daimler launching EQ and Volkswagen establishing Moia.\r\n2017 is expected to be a tipping point for the European automotive industry as the full implications of the political, regulatory, technological and strategic shifts become more evident\r\nThe outlook for the automotive market in 2017 is closely linked to economic and political trends, and over the past year, the economy has been fairly resilient despite major political developments such as \u00a0Brexit and the unexpected election of Donald Trump. However, the impact to existing trade remains unclear. 2017 will see another wave of political developments with elections in Italy, France, Germany and The Netherlands expected to add to the economic uncertainty. While the European economy saw relatively stable growth of around 1.6% in 2016, the outlook for 2017 is a little dimmer. The expected rise in inflation in conjunction with political uncertainty is likely to lead to a slower rate of growth in the range of around 1.2% of 1.5%.\r\n\r\nFrom an automotive perspective, Germany is likely to continue to hold its position as the market leader in Europe in 2017, with sales remaining stable in the 3.6 million units range, growing at most by around 1%. The UK, Europe\u2019s second largest market, however, is expected to decline \u2013 in part due to the slowdown expected after a few years of continuous growth, and in part due to shaky consumer confidence, a weak pound and uncertainty around Brexit.\r\n\r\nThe other key European markets of France, Italy and Spain are also expected to see growth, though growth in the Mediterranean region is expected to be higher in the 6% to 10% range as the markets recover their economic footing and replacement demand drives growth. This demand is expected to be fed by an expansion in manufacturing taking place in North Africa, with OEMs such as Ford and Hyundai eyeing expansion of their manufacturing footprints into Morocco and Algeria, for example.\r\n2017 will see another wave of political developments with elections in Italy, France, Germany and The Netherlands expected to add to the economic uncertainty\r\nDiving deeper into some of the trends influencing the market, the impact to sales and more importantly, automotive production in the EMEA region, becomes evident.\r\n\r\nBrexit - Union no more\r\n\r\nThe UK automotive industry is one of the biggest sectors affected by the country\u2019s European referendum of June 2016. The motor industry alone employs over 800,000 people, and around 30 OEMs and 2000 automotive component providers have production facilities in the country. Production has been on an upswing, growing at a rate of 5.2% to reach 1.7 million units in 2015, 78% of which were exported. In fact, automotive exports account for 11.8% of total UK exports in all sectors.\r\n\r\nOne of the bigger concerns of OEMs is around the renegotiation of trade tariffs, which could potentially rise by 10%. This could have a negative impact on manufacturing in the UK. The German automotive industry \u2013 which currently has around 100 production sites in Britain, including suppliers \u2013 has already alluded to shifting production to Europe in the event of trade conflicts.\r\n\r\nJapanese OEMs in the UK are also likely to take a hit as the bulk of their output is exported to the EU; for instance, Toyota exports nearly 90% of all its UK-built vehicles. Manufacturing in the UK for these OEMs is highly contingent on exports to Europe; they operate with relatively low margins and profitability, and thus the uncertainty on access to a single market will make them less competitive. As a result, there is a risk of operations shutting down.\r\n\r\nAdditionally, the falling pound is expected to hit importers; OEMs such as Ford and the Volkswagen Group are expected to be at most risk due to the depreciating pound.\r\nAs the industry moves into 2017, \u2018digitisation and mobility\u2019 seems to be the catchphrase of the year. From a technology perspective, the perception of the car is moving away from a means of transport to a third living space, along with home and work\r\nPrior to the election of Donald Trump, a potential upside could have been anticipated from the Transatlantic Trade and Investment Partnership (TTIP). TTIP is expected to aid in reducing non-tariff barriers to the tune of 26%. Smaller car manufacturers such as PSA Group \u2013 which would otherwise have been unable to approach the US automotive market due to high market entry costs \u2013 might have found it easier to access the US market. However, Trump\u2019s election has effectively killed the Trans-Pacific partnership (TPP), and his dislike of free trade agreements is such that the future of TTIP now also hangs in the balance.\r\n\r\nThe future is electric\r\n\r\nThe Volkswagen scandal has shaken the entire automotive industry. As a direct consequence, the company has made a notable shift away from diesel toward alternative fuel and specifically electrification.\r\n\r\nThe growth of electrification across the industry is driven by three main forces: a push from the OEMs to reduce their fleet average emissions, a push from the infrastructure angle to build capabilities and a regulatory drive. Additionally, the consumer\u2019s mind-set towards electrification is fast changing, and these factors have a direct bearing on the manufacturing outlook for Europe.\r\n\r\nIncreasingly, the focus within Europe will be on OEMs hybridising their manufacturing through various powertrain solutions. Vehicle manufacturers are creating synergic platforms that can be adapted for electric, hybrid or gasoline on the same platform, and their manufacturing approach to vehicle development is also going to change; it needs to be modular.\r\n\r\nWhile modular architecture has been in the spotlight for a long time, to date only Volkswagen and Daimler have fully adopted their architecture. However, the landscape today is beginning to change. There will also be synergies between brands as they start sharing manufacturing and platform capabilities, such as the wide-reaching alliance between the Renault-Nissan Alliance and Daimler.\r\n\r\nConvergence of connectivity and mobility\r\n\r\nAs the industry moves into 2017, \u2018digitisation and mobility\u2019 seems to be the catchphrase of the year.\r\nGermany is likely to continue to hold its position as the market leader in Europe in 2017, with sales remaining stable in the 3.6 million units range, growing at most by around 1%\r\nFrom a technology perspective, the perception of the car is moving away from a means of transport to a third living space, along with home and work. This shift is being underpinned and enabled by the digitisation of the vehicle. This could take the form of increasing connectivity and driver-centric services within the car such as infotainment and real-time traffic updates. One example is Toyota\u2019s collaboration with Microsoft to improve telematics, data analytics and network security services.\r\n\r\nThe technology advancements are also impacting the route to the customer. By the end of 2017, it is expected that most OEMs will look toward expanding their e-retailing strategy by digitising various touchpoints with the end consumer, across the entire customer journey.\r\n\r\nEnabled by the digital revolution, \u2018mobility\u2019 is becoming an increasing focus for vehicle manufacturers. Key OEMs are beginning to look toward a future where the car is not central to the customer; rather, the focus is on mobility. Convenience is key, regardless of whether the journey is enabled by the vehicle or by the seamless multi-modal network of services ranging from car and bike sharing to taxis and public transit. OEMs have either launched a mobility strategy or an independent division to oversee their mobility initiatives, and this trend is expected to gain momentum over the next year.\r\n\r\n2017 is expected to be a tipping point for the European automotive industry as the full implications of the political, regulatory, technological and strategic shifts become more evident and stakeholders across the board begin to react to these changes.