2023 Automotive Supplier Study

Explore the key findings

• Many suppliers are carrying a significant amount of debt in the wake of a pandemic-related squeeze across the automotive value chain. Meanwhile, the cost of borrowing has risen dramatically, and suppliers are finding it difficult to invest in future products and solutions to support an electric mobility future.
• Manufacturers are looking to engineer complexity out of vehicles to simplify the assembly process, reduce days on lot, improve margins, and reduce supply chain costs. This push may add further pressure to a supply base tasked to drive quality at the same time it is being asked to explore cost efficiencies.
• Some manufacturers and suppliers are realigning their business models around increasing electric vehicle (EV) adoption. Supplier efforts to restructure, acquire, divest, and even separate their businesses to best serve their customers and shareholders appear to be accelerating.
• Prompted by the Inflation Reduction Act (IRA), manufacturing investments in EV vehicle and battery production will increase, helping to increase opportunities for suppliers.
• The transition to electric vehicles (EV) is beginning to apply pressure on the competitive landscape, and suppliers must make careful choices about the customer relationships they want to focus on. The potential for more M&A activity on the horizon is growing rapidly.
  

What’s next for suppliers?

For auto industry suppliers, more disruption and fundamental change is on the horizon as they struggle to realign their businesses with new sector realities. The wholesale transformation toward an electric mobility future means suppliers should not only think about what they produce but also how they produce it. Suppliers should also think about what customer relationships they need to double-down on and which new relationships they need to forge. Operational structures are also evolving to include a volume-based business model, globally integrated supply chains, and a just-in-time (JIT) manufacturing paradigm. Handling these shifts in isolation would be difficult enough but facing them together represents a potential challenge for suppliers across the value chain.

To make matters even tougher, many OEMs have started to position themselves for a weaker economic environment by focusing on operational efficiencies and reducing headcount. In aggregate, the tone being set is making it increasingly difficult for suppliers to gain any relief on pricing through contract renegotiations. Vehicle manufacturers are also looking to use the transition to electric vehicles as a catalyst to reimagine their manufacturing footprint. Moving to more standardized, less complicated vehicle architectures may also mean fewer, more competitive opportunities for suppliers to engage with OEM customers.

Looking back

Deloitte has published its findings on automotive supply chain trends, industry challenges and opportunities since our first Automotive Supplier Study in 2013. To review past findings, explore the entire collection of Deloitte’s automotive supplier performance research below.