Increasing challenges for automotive suppliers as global vehicle production declines and margin pressure grows
The global automotive supplier industry is facing difficult times: In the first six months of 2019, vehicle production declined by 5% compared to the first half of 2018. For the full year 2019, an average EBIT margin of around 6% is expected, the lowest figure since 2012. These are the key findings of the new "Global Automotive Supplier Study 2019" from Roland Berger and Lazard. The study analyzed performance indicators of approximately 600 suppliers around the globe to assess the current state of the industry, as well as trends and challenges.
After record years, the automotive industry is facing a difficult time with multiple market uncertainties and a global production volume decline of 5% in H1/2019 vs. H1/2018. For the full year 2019, an average EBIT margin of around 6% is expected, the lowest figure since 2012.
The past year’s economic slowdown in the world's largest market, China, is causing problems for the global suppliers.
As a result, we believe that 2019 will remain challenging for automotive suppliers. The average industry margin is expected to fall below 7% for the first time in the last seven years, driving sector valuations below the 10-year average.
Amidst a weakening market environment several structural changes have taken place:
- The profitability of China/NAFTA-based suppliers is shrinking. However, it is still better than that of European peers. Although Japanese suppliers improved in comparison with previous years, they remain well below other regions
- Tire and chassis suppliers are leading in margins. Interior players remain at the bottom of the automotive suppliers field
- The profitability of product innovators decreased to a 7.3% EBIT margin in the last year, reducing their relative advantage in comparison with process specialists
The predicted transformation of the automotive industry becomes reality – Suppliers have to find their individual strategy to deal with it.