Global Automotive Supplier Study 2025

By Felix Mogge and Florian Daniel

The automotive supplier industry is being squeezed by stagnating growth and the urgent need to transform its business models. The result is “stagformation”. To help suppliers navigate a course through it, the new edition of our Global Automotive Supplier Study looks at the trends behind the industry’s woes, including slowing electric vehicle sales and increasing competition in China, and lays out potential remedies.

What can automotive suppliers expect in 2025? Continued “stagformation”, according to the latest edition of the Global Automotive Supplier Study. The report, jointly produced by Roland Berger and financial services company Lazard, forecasts that growth will remain stagnant as the industry grapples with the challenges of transformation. As well as electrification and digitalization, these include the shifting regional and power dynamics in the industry, with Chinese OEMs becoming increasingly important at their Western rivals’ expense.

The study charts how a tentative recovery in 2024 fizzled out by the end of the year, with EBIT margins remaining two percentage points below pre-COVID levels. Pressure on profits is likely to intensify in the next few years, with five key trends – including flatlining sales, slowing battery electric vehicle (BEVs) sales, and growing competition in China – weighing on suppliers’ bottom lines.

As in previous years, the study draws on extensive research to outline the current condition of the automotive industry, and specifically the financial health of the supplier sector. It also analyzes the impact of the five key trends, assessing their implications for suppliers. Lastly, it builds on this analysis to propose a series of recommendations to help suppliers navigate the volatile current automotive landscape and ensure sustainable success. The study is available to download below.

Study highlights: From stagnating sales growth to the threat from China

Automotive state of health

Global vehicle production is expected to exceed 96 million units in 2030, with forecasts suggesting that pre-COVID peak levels (93 million units) will only be reached around 2028. The shift to BEVs will continue to play a key role in this growth, despite the unique challenges currently faced in BEV production. Growth is being driven by China and the countries of the Global South; vehicle production in the major markets of Europe and North America will remain below pre-COVID levels (19 and 17 million units, respectively) beyond 2030. While BEV adoption is slowing, strong sales of hybrids are supporting growth. BEV penetration is expected to reach 50–55% in Europe and China by 2030, and 20-30% in North America.

Relative to other sectors, the automotive supplier industry is underperforming. For example, MedTech and industrials have recorded higher growth and profitability since the COVID pandemic, with EBIT of around 15-20% rather than the 3-7% seen by suppliers. Falling credit ratings (more than 40% of the 25 largest automotive suppliers by market capitalization are now rated as non-investment grade) and continued high interest rates have been a major factor.

Financial health of suppliers

While supplier revenues have been slowly recovering since the pandemic, profitability has structurally declined. Global EBIT margins were 5.3% in 2021 and 2023, two percentage points lower than in 2016/17, marking a 25% loss in absolute terms. This downward trend is anticipated to persist into 2024, with industry-level EBIT margin estimates projected at 4.7%. The decline was driven by the COVID-era production downturn and inflation-driven increases in personnel and material costs. EBIT margins are projected to remain under pressure in the coming years.

Chinese suppliers recorded the healthiest EBIT margins in 2024 at 5.7%, while European (3.6%) and South Korean (3.4%) suppliers are suffering the most. By product segment, tire suppliers remained the leading OES group in 2024 with a 7.4% EBIT margin. Suppliers of electronics and infotainment components, however, experienced declining margins, despite having the highest revenue CAGRs. The growing amount of content demanded by OEMs has been offset by significant R&D expenditures, increasing costs of electronic parts, and high product launch expenses.

Key supplier trends

After the market analysis, the study looks in detail at the five overarching trends in the automotive market that have specific consequences for the supplier industry:

1. Global production is stagnating, with Europe recovering most slowly, while China and South Asia are the main drivers of modest global volume growth.
2. BEV sales are stagnating in Europe and North America as subsidies are withdrawn, but hybrid vehicles are experiencing a resurgence.
3. Software-defined vehicles are expected to become increasingly dominant in the coming years, impacting both OEMs and OESs.
4. The market environment in China is getting tougher as margins are squeezed, resulting in fierce competition among OEMs.
5. Accelerating geopolitical dynamics are reshaping global trade among core automotive regions through tariffs and subsidies aimed at fostering local economic competitiveness.

The implications of each trend are considered, with, for example, the effect of increased Chinese competitiveness on European players examined.

Recommendations

The final section of the study concludes that to address the current challenges in the automotive market, suppliers must establish a strategic positioning that is tailored to regional market characteristics, leverages their technological competencies, and aligns with their unique competitive advantages. In some cases, this may require radical repositioning to survive.

The section proposes and outlines three overarching strategic moves that should be prioritized by suppliers, tailored to individual supplier archetypes. These include portfolio optimization through partnerships, streamlined product offerings, and a refinement of regional strategies.

For more information, please download a copy of the study or contact one of our experts. We look forward to hearing from you.

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