According to the report of the Global Auto Parts Suppliers Research published by consultancy Roland Berger recently, the growth of the global auto parts market in the short term will slow down. In the long run, the industrial structure will undergo a fundamental change, and suppliers that focus on products, customers, and regional structures may receive significant benefits.
The report pointed out that the global auto parts market has flourished in the past few years and has always maintained a high level of profitability. Since 2011, the global EBIT margin of auto parts suppliers has continued to rise, reaching a record high of 7.5% in 2014.
The report believes that the volatility and uncertainty of the global automotive industry will continue to increase in 2015. The output of global light vehicles is expected to continue to rise in the next two years, but the growth rate will drop significantly. Among them, Europe will maintain a low level, Japan will decline, and the North American Free Trade Area will grow moderately. China is still the only major growth driver. In addition, OEMs facing increasing profit pressure have begun to cut additional costs, which has increased the friction between OEMs and suppliers. Therefore, the report predicts that, based on maintaining a high level of profitability, suppliers will slow down their growth in the short term, and the risk of the downside outweighs the opportunity.
Roland Berger believes that as the demand of end customers continues to shift to Asia, the downstream suppliers of raw materials expand, and the currency and capital markets fluctuate, and other factors, the uncertainties faced by auto parts suppliers in the future will increase, and the industrial structure will increase. Fundamentally changed, and will redistribute the benefits of products and areas. For auto parts suppliers, this environment will create more opportunities and risks.
On a case-by-case basis, the profitability of Chinese suppliers still has a leading edge, but due to the fierce competition, its profit level is gradually declining. In the next few years, China will still be the largest market for automotive terminal customers, and Chinese customers’ demand for entry-level vehicles will increase significantly. This poses a challenge to the quality and technology of local OEMs and the cost of Western OEMs. In the long run, 2 to 3 competitive Chinese Tier 1 suppliers will appear in the top 30 global suppliers. As China's number one automotive production base, the gap between local suppliers and global counterparts is gradually narrowing.
The report suggests that suppliers should seize the next wave of opportunities to increase efficiency without limiting their flexibility to quickly adapt to more uncertain and volatile market developments. At the same time, suppliers should be prepared to benefit from the transfer of industries and mitigate the risks in the medium to long term.
In the short term, suppliers should increase their smart efficiency; increase or maintain the flexibility of the entire value chain in production, R&D, and procurement; stimulate the initiative of key resources to ensure that they can join possible working groups at any time; and strictly manage investment decisions. And one-time costs; careful monitoring of market development and the possible decline in market signals.
In terms of long-term actions, suppliers should maintain or improve their unique sales propositions, highlight distinct technical or process differences, focus on product areas with growth rates above the average, and have profit potential, and actively use M&A opportunities; It also balances regional share and customer share from the point of view of creating value; establishes optimal processes and structures, maintains flexibility and efficiency in a more complex and globalized layout, and applies scenarios simulation technology to regularly review and adjust previously developed strategies.
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