Tesla ranked top future-proof automotive company

Mastercard ranked No 1 on the list for the finance sector, IMD's Future Readiness Indicator finds

A Tesla centre in London. The electric car maker has had 15th straight profitable quarters. EPA

Electric vehicle manufacturer Tesla has been ranked as the top future-proof automotive company for the fifth straight year as car makers globally continue to invest heavily in technology to meet changing demand in the market.

The company led by billionaire Elon Musk retained the top spot despite rising competition in the sector, according to the latest edition of IMD Business School's Future Readiness Indicator report, which was released on Tuesday.

The report ranked 68 of the world’s “top revenue-generating” players in three featured sectors, including automotive, finance and consumer goods, in terms of their ability to anticipate future challenges while limiting the present risk exposure.

Texas-based Tesla's performance was “evidenced by its increased revenue and profit”, IMD said.

While the electric car maker reported a 24 per cent drop in its first-quarter net profit to $2.5 billion due to price reductions on many models across different regions, total revenue jumped 24 per cent to more than $23.3 billion.

It marked the company’s 15th straight profitable quarter and sixth consecutive three-month period with more than $2 billion in profit.

Meanwhile, China's BYD climbed three spots into second place while Germany's Volkswagen, Europe's biggest car maker, and South Korea's Hyundai Motor remained third and fourth, respectively.

The top companies in the index have aggressively developed in-house expertise, particularly in micro chip sets, boosting their profile and capabilities, the report said.

“Rather than relying on suppliers or their sub-suppliers for semiconductors, they are directly engaging with chip makers and doing the relevant designs in-house,” it said.

Demand for chips is expected to remain highly unpredictable in the future with the use of technology such as artificial intelligence, the Internet of Things, as well as 5G and 6G mobile network standards, IMD said.

Rounding off the top 10 are Ford Motor, XPeng, Li Auto, Mercedes-Benz Group, General Motors and Toyota.

Aside from using the latest technology, car manufacturers have leaned on realigning and streamlining their strategies to succeed, said Howard Yu, director of the IMD Centre for Future Readiness.

“Historically, most car makers have focused on the final assembly. From the boardroom to the shop floor, their expertise lies with mechanical engineering,” he wrote in the report.

“Today’s strategic shift requires a change in leadership background, a shift of power among senior executives and the creation of an environment to attract new talent. That’s what distinguishes the winners from the laggards.”

In the finance sector, global payments major Mastercard topped the list for the ninth straight year — since the first edition of the finance index report was released in 2015.

Rival Visa also maintained its second-place ranking for the same period. Both companies, alongside JP Morgan Chase, in third place, have capitalised on opportunities to integrate financial services into everyday tools, the IMD said.

These tools include loyalty apps, digital wallets and other online shopping platforms, “in innovative ways that their competitors are struggling to adapt to”.

“It's not just about tech solutions. Companies need to embrace a certain way of thinking. It's about letting outside parties, competitors or not, use what you've got and improve on it to make something valuable for users,” Mr Yu said.

The top 10 for the finance sector include Singapore's DBS Bank, PayPal Holdings, Twitter co-founder Jack Dorsey's Block, Bank of America, Zurich Insurance, UBS and HSBC.

However, Mr Yu stressed that fundamentals remain vital, especially in light of the recent banking crises involving Silicon Valley Bank and First Republic Bank in the US, and Switzerland's Credit Suisse, which was acquired by UBS.

“As much as leading companies are forging new partnerships to extend their market reach and product offerings, risk mitigation — building a fortress balance sheet — remains a key concern,” he said.

Meanwhile, in the first edition of the consumer packaged goods index, beverage company Coca-Cola was placed first, followed by Procter & Gamble and L'Oréal.

Top-ranked companies succeeded in both product innovation and end-to-end innovation — from material sourcing to social engagement, IMD said.

This dual strategy is being driven by digital technology, automation, advanced analytics and, increasingly, generative artificial intelligence, it said.

However, the sector is vulnerable to consumer spending confidence, which is being affected by high inflation and concerns of a potential recession, the report said.

“Top players successfully achieve scaleable innovation that consumers find worth paying for. Laggards struggle because they fail to build these advanced systems,” Mr Yu said.

“They stick to a traditional approach, focusing on growth through mergers and acquisitions, and cutting costs. As a result, consumers lose interest in their stale offerings. Once a company gets stuck, they can't attract top talent, leading to a downward spiral.”

Rounding off the top 10 are Nestle, Diageo, Estee Lauder, Unilever, Brown-Forman, Pernod Ricard and Constellation Brands.