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It’s difficult to make a step-change to achieve profit leadership in the auto supplier industry. Comparing two healthy periods before Covid-19 (2003 to 2007 and 2010 to 2018) against the post–Covid-19 years (2021 to 2023), we uncovered a tough truth: Fewer than 10% of suppliers successfully climbed from below-average to above-average profitability within their segments. What’s more, over the last 20 years, roughly a quarter of suppliers fell into below-average territory.
We found that typical indicators such as size, outgrowing the competition, or aggressive R&D spending don’t have a strong correlation with profitability leadership. Companies hoping to improve their placement pursue a different approach.
What sets consistent leaders and the rare few that have improved apart is their relentless focus on operational and commercial excellence, from cost structures to cash management. These companies maintain their competitive edge, regardless of market conditions.
For suppliers aiming to break through, the key is a steadfast commitment to strategic focus and excellence, not simply chasing growth for growth’s sake. This disciplined approach, rather than conventional tactics, is the defining factor in achieving and maintaining healthy returns, no matter the segment.
The authors are grateful for the support Torben Frenk and Ingo Stein provided to this study.
Auto Supplier Viewpoints
First published in décembre 2024