Blogpost
Global Automotive Supplier Study 2016

Global Automotive Supplier Study 2016

Portrait of Marcus Berret
Senior Partner, Chairman of Supervisory Board
Stuttgart Office, Central Europe
+49 711 3275-7419
11 luglio 2016

Looking back, there seems to be little reason for automotive suppliers to complain about 2015 with global profit margins remained at an all-time high of ~7.5 percent. However, the ongoing year-over-year improvement that the supplier industry has enjoyed since 2010 has largely come to a standstill and revenue growth has been the lowest in seven years. Several product segments have actually seen profit margins slightly below the 2014 level.

The (aftermarket portion of the) tire business has clearly driven average global supplier profitability in 2015 withmargins well above 10 percent – powertrain suppliers have come under intensified pressure (losing ground vs. 2007), while the interior segment shows signs of recovery following a unique intra-segment consolidation over the past two years. Suppliers focused on product innovation continue to maintain a two percent average margin lead over process focused suppliers. However, the top performing process specialists achieve similar profitability levels as their innovation-focused peers.

"2015 was another excellent year for suppliers with record profits – however, at increased volatility and slower revenue growth globally."
Portrait of Marcus Berret
Marcus Berret
Senior Partner, Chairman of Supervisory Board
Stuttgart Office, Central Europe

Looking ahead, suppliers will have to cope with growing market volatility across the world. The four main challenges for suppliers

  1. The sales volume challenge – Global markets will likely become more volatile – Suppliers will have to actively manage a set of "hotspots" in their regional portfolio
  2. The M&A challenge - The ongoing M&A activity level is gradually reshaping the competitive landscape and suppliers need to participate actively
  3. The powertrain challenge – The powertrain mix is expected to substantially change over the next decade which will lead to new opportunities but also to wind-down of traditional business
  4. The automated driving challenge – Automated driving to become reality over the next decade with suppliers facing changing competition and new capability requirements

"The market for auto suppliers is expected to yield substantial further growth opportunities – innovation will be key to capturing them."
Portrait of Felix Mogge
Felix Mogge
Senior Partner
Munich Office, Central Europe

Although, there are several challenges the market for auto suppliers is expected to yield substantial further growth opportunities especially for several components. Roland Berger identified five key actions suppliers should undertake:

  1. Conduct scenario planning exercises on a regular basis to prepare for a potential disruptive breakthrough of e-mobility and automated driving (e.g. robocabs) in the mid term – especially relevant for powertrain suppliers, but affecting all other domains as well
  2. Enforce shift of investment focus to key product innovations (xEV, composites, ADAS/AD software, HMI, etc.) without jeopardizing the development capabilities for existing core products
  3. Drive-up speed and flexibility in the research and development process – Establish dedicated innovations teams outside of the traditional R&D organization and processes dealing with new products/solutions
  4. Foster active portfolio management – leverage favorable financing conditions for (technologydriven) acquisition while considering divestment of businesses with limited long-term growth perspectives (but still a feasible business case in the mid term)
  5. Maintain tight cost management and continue to resolve structural issues in footprint and overhead while economic conditions are still favorable – especially relevant for process specialists

All in all, suppliers will have to deal with an even higher degree of uncertainty regarding future innovations while maintaining an eye on costs. For further insights, please download our supplier study here:

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Study

Global Automotive Supplier Study 2016

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Being prepared for uncertainties

Published July 2016. Available in
Portrait of Felix Mogge
Senior Partner
Munich Office, Central Europe
+49 89 9230-8346