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Identification of the Top 25 Fastest Growing Automotive Suppliers Based on Analysis of Geographic, Technology and Financial Portfolio
Frost & Sullivan, Dec 2009, Pages: 75
With the economic meltdown having dealt a heavy blow to the automotive market, automotive OEMs and suppliers are facing a bleak future for the global automotive market. This Frost & Sullivan research aims at providing an overview of the current market scenario for suppliers and highlights their relative position after taking into consideration a number of important parameters. The study focuses on customer diversity, product diversity and geographic spread of revenues in order to rank suppliers. The study also captures Growth Monitor Ranking of the Top 50 suppliers by automotive revenue to indicate to Investment Banks and firms which companies will perform the best in the coming years.
Restructuring to Optimise Efficiency, Focusing on Innovative Technologies and Market Expansion Help Suppliers Tackle the Economic Downturn
A direct effect of the economic slump on the automotive suppliers is a fall in the prices of automotive raw material due to a decline in demand for automobiles. However, this is expected to drive original equipment manufacturers (OEMs) and suppliers to develop inexpensive components. A reduction in credit implies that although end consumers will think twice before purchasing a vehicle, they will still opt for a low-cost alternative such as a low-cost car. Therefore, suppliers can successfully weather the economic downturn by restructuring to optimise efficiency, increasing focus on faster growing technologies and expanding into emerging markets.
“Geographic diversification, customer base diversification, and investment in suitable technologies are expected to be the focal point for suppliers in the coming years,” says the analyst of this research. “Focusing on emerging markets – for low-cost sourcing of products and expansion of existing facilities in these regions – is of primary importance for global suppliers aiming to strengthen their foothold in this market.” Suppliers with a greater share of revenue from growth markets such as Asia and South America are likely to overcome losses generated in developed markets such as Europe, North America and Japan.
Leading Automotive Suppliers Seek Newer Markets to Build Resilience
The rise in raw material prices due to an unstable market and currency fluctuations are challenging for automotive suppliers, especially those with a large inventory backlog. The need of the hour is to match the pulse of the market and synchronise with the demand and supply of automotive raw materials. “Suppliers with a presence in green technologies, electric vehicle technologies, and infotainment systems are anticipated to experience rapid growth in the next five years,” notes the analyst. “These markets are likely to be dominated by unconventional automotive suppliers seeking to capitalise on these high growth markets.”
Several leading automotive suppliers are looking for alternative markets to invest in, to build their market resilience. The instable financial market has amplified the cost of obtaining additional funding from creditors, as many lenders have increased interest rates, enacted tighter lending criterion and declined to refinance existing debt. Companies should focus on retaining earnings for restructuring costs as well as R&D activities in order to sustain long-term business growth. “For instance, Japanese suppliers are planning on enhancing the geographic diversity of their revenue stream by increased spending on capital expenditure as they try and weather the economic storm by investing into emerging markets,” says the analyst. “Some suppliers have retained their R&D expenditure as they attempt to remain competitive in new growth technologies such as electric propulsion systems.”
Technologies
The following technologies are covered in this research:
- Chassis
- Telematics
- Powertrain
- Comfort and convenience technologies
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