Global automotive supplier revenue opportunities may exceed $700 billion over next decade
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, and 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," said Neal Ganguli, Managing Director, Deloitte Consulting LLP and author of the study. "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."
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% of shareholder value over the last eight years, and were 50% more profitable and 33% more asset efficient, according to the study. Asset-light segments also outperformed other segments, generating approximately 70% of shareholder value. Finally, 60% 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 on 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%) 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%) 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%) said it was market focused innovation and 15.2% said product portfolio leadership, while the other 31.7% chose "other."
- Approximately 24% 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%) perceive electric vehicle technology and infrastructure as the area with the most opportunities in the next 10–15 years, followed by 22.4% who believe autonomous vehicle technology and infrastructure to be the biggest area of opportunity.
For more information or to download a copy of the report, go to https://www2.deloitte.com/us/en/pages/manufacturing/articles/global-automotive-supplier-study.html.