The supply industry loses

The supply industry loses

With the decline in sales, suppliers are in step with the world's leading car manufacturers, whose sales fell by 13% in the same year. This is proven by the results of the current “automotive supplier study” by Strategy&, PwC’s strategy consultancy. In absolute numbers, sales in the global supplier market of the top 80 suppliers fell from 893 billion euros (2019) to 783 billion euros (2020). European suppliers (excluding Germany) are also severely affected: their sales fell by 16.4% to 134 billion euros in 2020 compared to the previous year. German suppliers were able to cushion the crisis better with a 10.8% decline in sales to 199 billion euros. The share of German suppliers in the world market remained at a strong level at 26%, but for the rest of Europe the world market share fell from 21% (2015) to 17%. Competition with Asian suppliers is also intensifying: They were able to take global market shares from suppliers from other regions and now had a share of 43% in 2020.

Asia wins

An international comparison shows that the effects of the Covid-19 crisis on the annual results of automotive suppliers vary greatly across regions. In Europe (excluding Germany), the operating profit margin fell by 4.5 percentage points from 7.3% (2019) to 2.8% (2020). The Americas region was even more severely affected (-4.7 percentage points). In Germany the decline was -2.1 percentage points, whereas the leading suppliers from Asia hardly suffered any significant declines (-0.7 percentage points) and achieved the highest operating profitability with an EBIT margin of 4.4%. “The slump was less than feared at the beginning of the year because the government support measures and the experience from the financial crisis meant that the industry remained profitable,” comments Henning Rennert, study author and partner at Strategy& Deutschland. “However, a lack of cost focus among many suppliers could lead to an expensive mortgage in global competition,” says Rennert. European companies in particular have lost sight of their competitive cost structure. Rationalization is therefore now the order of the day in order to optimize processes, reduce costs and be able to survive in the face of transformational change.

Investments in R&D

Despite the tense cost situation, European suppliers invested heavily in their future even in the crisis year and thus secured an undisputed top spot in R&D spending across all regions. On average, in Europe (excluding Germany) they invested 4.8% of their sales in research and development projects, in Germany even 6.1% (Americas: 3.6%; Asia: 3.8%). In particular, manufacturers with business in the powertrain sector are actively driving forward their own transformation through high investment expenditure and developing new products for the future. At the same time, however, the share of equity in total assets for European suppliers fell by 3 percentage points in 2020 compared to the previous year and now reaches a ratio of only 15%.