Study on what automotive suppliers expect in 2007

• Automotive suppliers expect 2007 to be tough year
• Relationship between suppliers and manufacturers remains tense
• Globalization continues to gain momentum
• Big expectations for broader diesel technology

Automotive suppliers expect 2007 to be another tough year. Overall, however, the mood in Europe is better than in other markets. This is one of the key findings of a study by Roland Berger Strategy Consultants and SupplierBusiness, a market research and analysis company. The study involved a worldwide survey of over 130 top managers in the automotive supply industry in December 2006 on what they expect in 2007.

73% of those surveyed expect 2007 to be even tougher than 2006. However, expectations differed from region to region. European suppliers are less pessimistic than North American and Asian suppliers. Moreover, suppliers with revenues of less than USD 1 billion seem to be more optimistic than their bigger competitors.

Main concerns include further price pressure (91%), uncertain development of raw material prices (71%) and the increasing trend toward low-cost technical components (49%). In contrast, suppliers are less concerned about poor production volumes in North America and Europe. 76% of suppliers believe that consolidation in the industry will continue to intensify.

When asked about their key management priorities for 2007, executives ranked cutting overhead costs (78%) as number one, followed by increasing low-cost country sourcing (70%) and improving launch management for new products (69%).

Relationships between suppliers and manufacturers remain tense

Business relations between suppliers and their OEMs will remain tense in 2007. 36% of executives even believe they will deteriorate further, while 45% expect the quality of their relationships to stay on the same (already poor) level as in 2006.
Besides price, it's expected that other contract components (such as tooling cost reimbursements and quality requirements) will increasingly become a bone of contention between manufacturers and suppliers.

Globalization continues to pick up speed

The automotive industry will continue to be a key driver of globalization. 80% of executives believe that the pace of globalization will pick up further. India has gained significant ground and is considered to be the number one investment priority for the next 12 months (75%). Suppliers will also direct more attention to Russia.

Still more innovations in 2007

The introduction of new technologies and innovations will also continue to accelerate in 2007. Injection technology/exhaust gas treatment (84%) and active vehicle safety (82%) are considered to be the two most important technological areas in the medium to long term.

When asked about the future of diesel in North America and Asia over the next five years, 85% of supplier executives expect diesel technology to become more important. At the same time, enthusiasm for hybrids is cooling slightly. Almost half the suppliers believe that hybrids will have a global market share of less than 3% by 2010.