2023 Automotive Supplier Study

Transforming business models amidst rising operational challenges

After three years of challenges, the global automotive industry has weathered the storm remarkably well—from semiconductor shortages and inventory challenges to supply chain disruptions and raw material price swings. For suppliers, industry transformation plus economic and geopolitical uncertainties are requiring new strategies and responses. How can they continue to adapt to this rapidly changing market?

Automotive suppliers respond to supply chain trends

Suppliers have endured a state of triage over the past three years, all while maintaining the business, meeting customer demand, and finding opportunities to grow. At the same time, the global mobility sector continues to transform, as governments and consumers around the world spark a shift to electric vehicles (EV). Meanwhile, the challenges of operational transformation and uncertainty continue to place pressure on suppliers to innovate and develop new technologies.  

In our sixth Automotive Supplier Study, we look at automotive supply chain trends and the road ahead by analyzing shareholder value performance data from nearly 300 of the top global automotive suppliers. We examine performance by segment and the challenges and opportunities that automotive suppliers must address to thrive—or even to remain viable—in the new market reality.

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.

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