Global Automotive Supplier Revenue Opportunities May Exceed $700 Billion Over Next Decade – Press Release | Deloitte US has been added to your bookmarks.
Global Automotive Supplier Revenue Opportunities May Exceed $700 Billion Over Next Decade
NEW YORK, January 31, 2018 — While $150-$200 billion of traditional automotive supplier revenues are at risk over the next decade, more than $700 billion of opportunities exist for value chain players to capture, according to Deloitte's third annual "2018 Global Automotive Supplier Study." The study analyzed shareholder value performance for more than 200 automotive suppliers.
Over the next decade, automotive supplier revenues will be faced with commoditization, extensive change and risk due to a changing landscape, but at the same time, value chain players will have the opportunity to capture revenue through traditional content growth, autonomous and electric vehicle content, and new business opportunities in aftermarket and services. Our research found that new business models in aftermarket and service are likely to account for over half of the projected $700 billion opportunity through volume growth and vehicle digitization.
— Neal Ganguli, managing director, Deloitte Consulting LLP
Three key themes drove shareholder value creation by top automotive supplier performers the past 10 years: Cost and asset efficiency, product portfolio leadership and market-focused innovation. The top one-third of suppliers drove 90 percent of shareholder value over the last eight years, and were 50 percent more profitable and 33 percent more asset efficient, according to the study. Asset-light segments also outperformed other segments, generating approximately 70 percent of shareholder value. Finally, 60 percent of shareholder value correlated to leading on portfolio management and market innovation.
"While we analyzed the top performers from the past decade, we also found that past performance does not guarantee future performance. Detailed analysis of the top performing automotive suppliers of the past 10 years found that those making up the top three significantly changed over the past four years," Ganguli said. "Our analysis indicates that suppliers need to create strategies based on their current portfolios and financial capacity so that they can capitalize on new opportunities that will enhance return on capital and growth."
According to polling data connected to the study, approximately one-third (33.6 percent) of executives Deloitte polled believe that flat volume and high disruption is the most likely scenario to occur in the space over the next 10-15 years.
"The global automotive supplier industry is facing impending transformation in the coming years and it is clear that these suppliers recognize that high levels of disruption are coming in the space," said Ganguli. "However, executives polled were divided on what would be the leading strategy to capture opportunities in the future."
The poll data showed that respondents were spread for their leading strategies to capture opportunities for the future, with a variance of options including restructuring fixed costs, divesting or selling, staying the course and optimizing performance, consolidating, scaling business profitably, defining new solutions and services or shaping the ecosystem.
Other notable results from the poll include:
- One-third (34.3 percent) of executives polled said cost and asset efficiency have been the key focus that has helped their company meet or achieve growth and performance objectives over the last five years. About half as many (18.8 percent) said it was market-focused innovation and 15.2 percent said product portfolio leadership, while the other 31.7 percent chose "other."
- Approximately 24 percent of executives said electronics, infotainment, and communication are among the key concerns for their company's or client's buying agents.
- More than one-quarter (26.7 percent) perceive electric vehicle technology and infrastructure as the area with the most opportunities in the next 10-15 years, followed by 22.4 percent who believe autonomous vehicle technology and infrastructure to be the biggest area of opportunity.
About the online poll
On Oct. 26, 2017, a Deloitte Dbriefs webcast titled "Driving automotive supplier performance and growth in a slowing market" polled more than 1,800 professionals about their thoughts and company strategy for the automotive supplier sector. Respondents work in industries including consumer and industrial products (33 percent); financial services (27 percent); technology, media and telecommunications (17 percent); life sciences and health care (7 percent); and energy and resources (5 percent). Answer rates differed by question.
About the Global Auto Supplier Study
To explore what actions have resulted in superior performance and enterprise value creation, Deloitte analyzed more than a decade of data for more than 200 tier 1 global automotive suppliers to identify "winning" themes that consistently generated above-average shareholder value.
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including more than 85 percent of the Fortune 500 and more than 6,000 private and middle market companies. Our people work across more than 20 industry sectors to make an impact that matters — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthy society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them.