The automotive industry has seen continuation of growth on a global scale throughout 2017. The growth does show some signs of slowing down, however, particularly in China, Europe and the US.

In an environment that remains overall favorable, the global supplier industry has increased revenue by three percent compared to 2016, and maintained its profitability level with an average EBIT margin of more than seven percent. European and NAFTA suppliers – largely based on a strong technology position – are currently more profitable than the global average. Exterior, chassis and interior suppliers are expected to further improve their average EBIT margin in 2017. Powertrain suppliers continue to see their margins under pressure due to intensified competition and the cost of innovation.

In order to succeed in the new automotive environment, suppliers will have to transform their existing business models. It is necessary to rethink the overall strategy, in order to either capture new growth opportunities or consolidate the market around the existing portfolio. A long-term technology roadmap and strategic positioning in the value chain when it comes to both product and service offering needs to be defined. At the same time, an efficient cost base and sufficient financing for the upcoming transition should be implemented. Additionally, the organizational structure and governance model are required to successfully manage new emerging technologies and competencies alongside old declining technologies under one roof. Furthermore, it is about creating a new company mindset and culture to foster innovation, which is of paramount importance to compete in the new technology areas. Finally new partnerships need to be built up, in order to start thinking in open innovation ecosystems and find new ways to innovate.

The "Global Automotive Supplier Study 2018" by Lazard and Roland Berger examines the challenges for suppliers to transform their existing business models.