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 Svenja Gelowicz

Svenja Gelowicz

Redakteurin im Ressort Management

Basic Knowledge What Are Automotive Suppliers? Basics, Ranking and Examples!

Author / Editor: Svenja Gelowicz / Alexander Stark

Who are the top automotive suppliers in Germany and which are the largest worldwide? Definition, examples, trends and industry knowledge — simply explained and at a glance!

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Automotive suppliers range from small and medium-sized companies to large corporations such as Bosch or Conti: Definition, industry knowledge, trends and top 100 ranking.
Automotive suppliers range from small and medium-sized companies to large corporations such as Bosch or Conti: Definition, industry knowledge, trends and top 100 ranking.
(Source: Brose)

Automotive supplier are defined as: Companies that manufacture goods that are used in the production process of an automobile or become part of an automobile, such that they supply these goods directly or indirectly to an automobile manufacturer, synonymous with Original Equipment Manufacturer (OEM).

These goods can be individual components, such as screws, or entire assemblies, such as pre-assembled door modules. Automotive suppliers are therefore part of an automotive supply chain.

Examples of individual components are screws, bearings, seals or metal sheets. Assemblies in turn are, for example, the E axis. Bosch presented this module at the IAA.

Alexander Fraß, author of "Automobilzuliefererindustrie in Deutschland" ("Automotive supplier industry in Germany"), narrows down the term automotive supplier:

"Suppliers to the automotive industry can be divided into two main groups. Automotive suppliers in the ‘narrow sense’ are those companies that supply automotive-specific parts and components directly to an OEM. Automotive suppliers in the 'broader sense' are companies that contribute non-automotive-specific services to the value chain.

However, as a rule they are not considered to be part of the automotive industry, as otherwise a large number of companies - despite the very low proportion of value added - would fall into this category."

Explained: The Supplier Pyramid in the Automotive Industry (Tier 1, Tier 2, Tier 3)

Automotive suppliers can therefore be differentiated according to their value added stage. The supplier pyramid serves this purpose.

The supplier pyramid represents the hierarchical order of the suppliers of an OEM (Original Equipment Manufacturer) - right up to the end product, i.e. the vehicle. This car manufacturer is at the top of the pyramid. The supply chain ranging from parts suppliers to component, system and module suppliers through to original equipment manufacturers is represented in the pyramid.

A Tier 1 supplier supplies the OEM directly. They are followed by Tier 2 and Tier 3 suppliers in the supply chain. Suppliers at the bottom of the supplier hierarchy can also skip levels and supply the OEM — i.e. the manufacturer — directly, for example.

Systematic overview of automotive suppliers.
Systematic overview of automotive suppliers.
(Source: Automobil Industrie)

Ranking of the Top Automotive Suppliers

“Automobil Industrie" and the automotive consultancy firm Berylls Strategy Advisors maintain an exclusive list of the world's largest automotive suppliers , which is updated annually. You can download this list free of charge.

With sales of € 47.4 billion (Mobility Solutions division), Bosch was the undisputed leader in 2017, followed by Continental (€ 44 billion) and Denso (equivalent to € 36.4 billion ). The success of the big three is ensured by the fact that very few cars produced worldwide are churned out without any components from the top players — regardless of whether they are budget cars or luxury limousines, electric cars or conventionally powered models.

A first glance at the Top 100 table reveals a divided picture: Many areas register sales declines. A total of eight companies in the top 20 report negative sales trends — especially Asian and American companies. However, this is not due to poor business, but to particularly strong exchange rate effects in 2017. This is because all other relevant currencies have lost considerable value against the euro — in which the results of the Berylls Top 100 are reported.

Who Are the German Automotive Suppliers?

The ranking of the ten largest automotive suppliers in Germany — behind Bosch and Continental, ZF Friedrichshafen ranks third. Many of the companies are located in the south of Germany: Most of the major suppliers are headquartered in Baden-Württemberg, followed by suppliers in Bavaria (see list below).

For the German suppliers, things ran smoothly: Their average return was 9.8 % (plus 0.2 percentage points compared with 2016). 18 German companies are among the Top 100 and account for € 204,117 billion or almost a quarter of total turnover.

What Products Do the Different Suppliers Produce? Example: The Audi A4

If you divide the car into the different vehicle areas, you can use an example - let's take the Audi A4 - to explain which parts and assemblies are manufactured by which suppliers. These parts and assemblies as well as the suppliers are only selected by way of example - of course there are many more in a vehicle.

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1. Driver Assistance and Safety
Driver assistance and safety also include the areas of car IT and connectivity. So, it's about driver support, infotainment and operation, navigation systems and telematics, the networked vehicle (Car-2-X) or cloud computing. In addition to driver assistance systems, restraint systems and airbags, simulation and automated driving also play a role in the field of safety - even if the latter is not yet play integrated in the A4 selected in this example; but it will, when the model will be reissued next year.

The 2015 edition, for example, has a security system with a front camera supplied by Valeo. Various systems, such as lane change and lateral traffic assistants, require a radar that is produced by Bosch.

2. Interior
The curved front of Magna 's instrument panel is covered by a cord of integrated air vents that are interrupted only by the instruments. The component was made by Dr. Schneider. Lear is involved in the seat system; Schock Metall supplies roll-formed special profiles and guide systems for the storage and luggage compartment package, which is available as an option.

3. Car Body
The A4 has significantly slimmed down compared to its predecessor; also because the front strut domes are highly integrated cast aluminum parts. Magna supplies reinforcements and stamped parts. Structural parts are supplied by Gestamp. TRW (which has been part of ZF Friedrichshafen since May 2015) supplies caps and module clamps.

4. Undercarriage
The rear axle of the A4 comes from Gestamp, the wheel bearings are supplied by LuK.

5. Infotainment and Electronics
A tablet is available for entertainment in the rear. A Tegra-40 processor from Nvidia drives the system. Kromberg & Schubert will supply the wiring system for the A4.

6. Powertrain
The transmission control comes from Continental. Again Hirschvogel Automotive produces wheel hubs and transmission shafts as well as rails and injector bodies for the diesel aggregates.

Important Trends for Automotive Suppliers

Suppliers are increasingly focusing on the electrification of mobility, connectivity and autonomous driving. The large corporations succeed in doing this by separating entire business units that no longer fit into the portfolio in the long term and purchasing parts where gaps arise in future offerings.

One example is Continental's joint venture with Osram, which is to stand for innovative lighting and laser technology for autonomous vehicles. The aim is to develop intelligent light and sensor systems for the mobility of the future. This technology is intended to ensure communication between autonomous cars (C2C) and with other road users (C2X).

The importance of light - the most important driver assistance system of all - in the future is also shown by the recent takeover of the Austrian lighting specialist ZKW by the electronics giant LG for 1.1 billion euros. This is the largest takeover deal of the Korean group, which will affect more than 9,000 employees worldwide.

M&As of Automotive Suppliers

The pace of takeovers and spin-offs in 2017 was generally faster than in the previous year, and there is much to suggest that things will continue like this in 2018. The well-filled coffers of large companies and the general urge to become even more involved in the digitalization of the automotive world indicate that this year will again be marked by major spin-offs and takeovers. Dr. Jan Dannenberg, Partner at Berylls Strategy Advisors, provides a monthly summary of the most important M&A transactions in the automotive industry.

Start-Ups as Automotive Suppliers

The importance of creative start-ups that want to play a decisive role in shaping future mobility is growing. Their turnover in euros may be well below the top 100 threshold of 2.6 billion euros, but their influence in the supplier industry is nevertheless growing rapidly. The top ten Silicon Valley start-ups, such as Smartdrive, Greenroad, lytx, Inthinc, Nu Tonomy, Cruise etc., which stand for camera-based systems, driver attention and automated driving, have so far been able to collect over 800 million euros according to the latest M&A study by Beryll's Strategy Advisors. The top 15 start-ups for car sharing were financed with around € 700 million.

In addition to risk-oriented venture capital companies, investors increasingly include Tier 1 suppliers, who have been reluctant to invest up to now. But times are changing: The leading automotive suppliers are now on their way to the automotive future. This is also because they have realized that more and more Chinese companies are now entering the race alongside the tech-titans from Silicon Valley.

Jobs, Salary and Career in the Automotive Supplier Industry

Why work for an automotive supplier ? Suppliers are playing an increasingly important role, and especially the big players like Bosch are competing with manufacturers by developing new business models - especially with regard to new mobility concepts. But numerous automotive suppliers also take a leading role in innovation in the midmarket. Whether as an engineer, project manager or sales specialist - the wide range of employers in the supplier industry offers applicants many opportunities to contribute according to their qualifications. This report gives an overview of the salaries in the car and supplier industry:

The comprehensive Salary Report 2018 provides detailed information on the salary structures of automotive suppliers. First of all: € 72,000 is the annual gross salary (average income with a variable share). Of course, professional experience plays an important role in the level of income. People under the age of 30, receive an average income of € 48,700, those above 60 years on the other hand earn € 88,650 on average.

This article was first published by Automobil Industrie.