The global automotive supplier industry continues to face challenges. Stagnating production volumes, geopolitical uncertainty, increasing competition and rising cost pressure are putting pressure on companies. A study by Roland Berger and Lazard predicts that profitability will decline to an average of 4.7% (EBIT margin) this year. This is a further decline compared to last year when the turnover profitability temporarily stabilized at 5.3%. Before the Covid pandemic, this value was two percentage points higher. Roland Berger and Lazard analyzed 600 global automotive suppliers for their new Global Automotive Supplier study.
According to the study, European and South Korean suppliers are particularly affected, with EBIT margins of 3.6% and 3.4% respectively, which are below the industry average. Chinese suppliers perform relatively well with an EBIT margin of 5.7%. Weak demand in the second half of the year and difficult price negotiations with automotive manufacturers (OEMs) are further burdening suppliers. As the profitability of the OEMs has also declined, it is expected that the margins of the suppliers will continue to be under pressure in the coming years.
The study authors identify five main trends as the cause of the development: stagnant production volumes, delayed transition to electric vehicles, the trend towards software-defined vehicles, increased competition from OEMs and geopolitical developments. To succeed in this environment, suppliers must strategically restructure their business models and focus on product segments and technologies in which they can remain competitively viable. M&A activities or partnerships could also be an option.