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The Automotive Industry in 2025: Four Scenarios for Suppliers

| Editor: Janina Seit

Taking a look into the future of suppliers: A new Deloitte report outlines scenarios for the role of the automobile in 2025 and predicts the market volumes of certain components in the regions of Germany, China and NAFTA. These are the current perspectives:

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According to the Deloitte report, areas such as sensors, batteries and electric drive modules are expected to grow by up to 1,000 %, while transmissions and exhaust systems will decline by 30 to 35%.
( Source: ZF )

Automotive suppliers are under pressure to adapt. For car manufacturers and suppliers, e-mobility and autonomous driving represent new opportunities, but also a considerable challenge. For example, areas such as batteries, sensors and electric drive modules will grow by up to 1,000 %, while transmissions and exhaust systems will decline by 30 to 35 %. This is one of the conclusions drawn in the current Deloitte report "The Future of the Automotive Value Chain: Supplier Industry Outlook 2025".

Weighting of component areas per scenario.
Weighting of component areas per scenario.
( Source: Deloitte )

The Impacts of a Changing Industry

Components for conventional drive systems, but also 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, for instance, is growing from today's € 5.5 billion — in the best case scenario — to over € 81 billion in 2025, the market for transmissions is contracting from currently € 61 billion to — in the worst case — just € 39 billion in seven years*," explains Dr. Nikolaus Helbig, Partner Strategy & Operations at Deloitte.

OEMs 2025: Technology Leader or Commodity Manufacturer?

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 on the basis 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. Finally, in a fourth scenario, IT vendors have taken over large parts of the market. The OEMs only provide the basis, but can differentiate themselves by means of high-quality "platforms".

Four possible scenarios for the position of suppliers by 2025.
Four possible scenarios for the position of suppliers by 2025.
( Source: Deloitte )

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. In the third scenario, they would support "anonymous" mass mobility by means of a corresponding service portfolio, for example in the form of pricing models based on concrete use. If tech suppliers 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.

Losing Conventional Components

Due to the technical development, OEMs can spend much less money on most component groups than today— according to the Deloitte model calculation nearly 80 % less. This applies, for example, to those components 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 can also benefit from strong demand — for example, when autonomous mobility becomes a mass market. The less dynamic the technical development, the greater the cost pressure on suppliers.

Batteries Offer Great Growth Potential

Batteries are particularly important in the context of e-mobility. They are among the most cost-intensive components and are therefore "valuable" parts. The faster the pace at which battery-powered electric cars are advancing, the faster their suppliers could benefit from strong demand for new, high-performance energy storage devices.

This article was first published by Automobil Industrie.

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