Automotive Suppliers at a Turning Point
According to a recent Deloitte report, automotive suppliers are facing a turning point. Four out of five suppliers should be prepared to lose up to one third of their market shares.
Turbulent prospects: Automotive suppliers are under massive pressure to adapt. For car manufacturers and suppliers, e-mobility and autonomous driving represent new opportunities, but also considerable challenges. Areas such as batteries, sensors and electric drive modules will grow by up to 1,000 %, while sales of transmissions and exhaust systems will decline by 30 to 35 %. These are the results of the latest Deloitte report "The Future of the Automotive Value Chain: Supplier Industry Outlook 2025". The report predicts the exact impacts of these changes by means of four different scenarios describing the potential role of the automobile in 2025 and detailed models of market volumes in Germany, China and the Nafta region.
"Sales of components for conventional drive systems, but also of products from the steel or rubber processing industry in general, will decline sharply in volume by 2025. In Euros and Cents, this means: ‘While the market for batteries and fuel cells is going to grow from today's € 5.5 billion to more than € 81 billion in 2025, the market for transmissions could be shrinking from € 61 billion to only € 39 billion within the next seven years*," explains Dr. Nikolaus Helbig, Partner Strategy & Operations at Deloitte.
Car Manufacturers in 2025: Technology Leaders or Commodity Producers?
The four possible functions of the automotive industry in 2025 are those of a comprehensive data and mobility manager with a dominant position and a strong e-mobility segment, or that of a provider in a stagnating technological market where the OEMs were able to fend off new technology-oriented competitors by means of a defensive stance. In the third version, automobiles become pure consumer goods with no special technical requirements — private cars are the exception, while high-tech plays a minor role. In the fourth scenario, IT vendors have taken over large parts of the market. Then, OEMs only provide the basis, but can differentiate themselves through particularly high-quality "platforms".
Different Perspectives for Suppliers
Depending on the scenario, suppliers have a different position: they can benefit from an upgrading as OEM partners or retain their previous role, the report states. In the third scenario, they would support "anonymous" mass mobility with a corresponding service portfolio, for example in the form of pricing models based on concrete applications. If technology vendors enter the automotive market on a large scale, suppliers would form various alliances with them and in some cases assume the current function of OEMs, the study predicts.
Conventional Components Are Losing Ground
Due to technical developments, car manufacturers will have to reduce their spending on most component groups, the Deloitte model calculation shows. This applies, for example, to those that are directly related to combustion engines or conventional transmissions. On the other hand, elements such as sensors are gaining in importance. Depending on the scenario, however, interior components are going to profit from higher demand. This would for instance be the case if autonomous mobility becomes a mass phenomenon. According to the report, the less dynamic a technical development is, the greater will the cost pressure on suppliers be.
Batteries Have Great Potential for Growth
In the context of e-mobility, batteries attract a great deal of attention. They are among the most cost-intensive and therefore "valuable" components. The faster the advance of battery-powered electric cars is developing, the faster the corresponding suppliers will be able to benefit from a strong demand for new, high-performance batteries, the report states.
"German suppliers, including those second and third-tier suppliers, conduct a significant amount of business in the field of classic components, while battery technology is still largely supplied from Asia. It can already be observed that suppliers in the combustion engine segment are finding it difficult to obtain financing for innovations. At the same time, the sales market will diminish in the future. To survive in this market environment successfully over a long period of time and to sustainably keep jobs in Germany, suppliers need new and diversified strategies. “Our models show that it is quite conceivable to adopt a strategy that initially aims at consolidating the own market position based on the current portfolio in order to succeed in transforming the company and shape the market with greater financial power. Its success, however, depends on solid capital assets,” adds Helbig.
This article was first published by blechnet.
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