Kevin Jost: Grasping opportunities
Four disruptive mega-trends—shared mobility, electrification, technology convergence, and new market entrants—are driving the transformation of the automotive value chain, this according to the latest Deloitte supplier study. Researchers at the industry-leading consultancy believe that, amid the transformative disruption, billions of dollars in opportunity remain for automotive suppliers.
The company’s fourth “Global Automotive Supplier Study” (https://bit.ly/2ko7sJw), which analyzes shareholder value performance for more than 200 automotive suppliers, finds that the changes in mobility will be driven by disruptive trends including connected and autonomous technology, shared mobility, and electrification. These changes will force industry players to rethink strategies to drive superior shareholder value creation.
So, what’s at stake? According to CapIQ, in 2018 the total combined revenue of the global automotive supplier market was $1.7 trillion. Automotive suppliers have created $510 billion in shareholder value since the last recession, more than doubling the overall market value from the end of 2008. The top one-third of performers have accounted for more than 99% of that total value created, the other two-thirds for less than 1%.
Deloitte’s analysis estimates that some segments could face as much as 20% in revenue erosion over the next five to seven years. Those suppliers operating in more commoditized automotive supply segments like frames, interiors, brakes, and internal combustion engines could be at risk as these segments stagnate and decline between now and 2025. Suppliers driving innovation in autonomous and electrified systems will likely see the most opportunity and growth—tripling in revenue in some segments.
Let’s dig a little deeper. Segments with the strongest growth potential and ability to differentiate will be the most attractive, including electric drivetrain (300% growth, from $14 billion to $56 billion); battery/fuel cell (266% growth, from $39 billion to $142 billion); advanced driver-assistance systems an sensors (190% growth, from $20 billion to $59 billion); electronics (18% growth, from $108 to $127 billion), and infotainment and communication (16% growth, from $108 billion to $125 billion).
These growing segments have been our prime focuses here at Autonomous Vehicle Technology, and have garnered much of the trade and consumer press and been on full display at industry gatherings. This was true at last month’s IAA 2019 in Frankfurt, especially on the electrification front. Here are just two examples.
On the OEM side, Hyundai talked about preparing for a big push on hydrogen, but it was its battery-electric concept that got most of the attention. The 45 show car was a clear indication of how the company is also pushing EVs as it keeps its options open. The reveal of its 800-V battery pack, using silicon carbide cells in the floor, follows an investment by the company (alongside Kia) into Ionity, a high-speed charging joint venture established in 2017 by BMW Group, Daimler AG, Ford Motor Co., and Volkswagen Group with Porsche AG.
On the supplier side, Bosch boasted of “electromobility” orders of about €13 billion since the beginning of 2018, including production projects for electrical powertrains for passenger cars and light trucks. When it comes to electromobility, the company is aiming for a market-leading position, with high-profile launches in 48-volt battery tech and its agreement with CATL for battery-cell production.
With these data in mind, what do the Deloitte experts recommend? Overall, now is not the time for industry leaders to sit idly. Instead, industry executives should think through their business portfolio, including which businesses they should harvest or divest, which ones they should fix, and which ones they should fund for growth.
Bosch, for one, seems to be ready for change, according to Dr. Volkmar Denner, Chairman of the Board of Management: “The transformation of mobility entails challenges, but also opportunities. We want to grasp them.”