Automotive Supplier Viewpoint
In the 20 years between the healthy period before the global financial crisis and the post–Covid-19 era, the annual profit pool of the top 100 automotive suppliers has nearly tripled—even though passenger vehicle production has only grown by around 30%, from an average of 65 million to 83 million vehicles per year. This surge comes from two key factors: increased content per vehicle and market consolidation.
The age of software-defined vehicles—essentially, turning cars into “driving computers”—is here. The industry’s technological advancements and regulatory pushes toward electrification have triggered a disproportionate profit pool expansion in the semiconductors and batteries subsectors. Once minor players with just around 4% of the profit pool, semiconductor and battery manufacturers now command nearly 20% together. These two subsegments’ profit pools have grown by 970% and 1,350%, respectively, while electronics has seen a 170% profit pool increase, thanks to rising revenue and margin expansion.
Meanwhile, traditional conglomerate giants and powertrain specialists that once commanded a 56% share together now capture a mere 43% of profits. Of the two, conglomerates have experienced the lowest profit pool growth, at only 105% over 20 years. While nominal size and diversification strategies may have helped them tap into new business more easily, those factors haven’t translated into meaningful profit gains. That’s because size only yields scale effects when properly focused, and the cost of additional complexity eats up many of the benefits.
The authors are grateful for the support Torben Frenk and Ingo Stein provided to this study.
Auto Supplier Viewpoints
First published in November 2024