Automotive Supplier – Future Readiness Report

Cost-out management & becoming future ready often seem to be contradictory, but they are not in fact, both embody the central demands of our time.

The influences of a world gone off the rails are increasingly being felt in various business sectors, especially in the automotive industry.

As the market evolves by the transformation from conventional combustion to all-electric drives, companies are having to navigate stringent emission standards, tackle economic and commercial hurdles caused by the global pandemic, and innovate faster than ever before to stay ahead in a fiercely competitive environment. Decision-makers are now under pressure to act. The question is: What are the right decisions in these uncertain times?

With our “Automotive Supplier – Future Readiness” business report we aim to provide decision makers with the necessary information to answer these success-critical questions. Focusing on cost-out management and being future-ready, we have identified the most important business aspects being decisive for long-term competitiveness.

In this context, we have assessed the current maturity level of automotive suppliers and derived the main action fields that need to be addressed.

The pace and impact of current changes require bold action today more than ever. We hope you enjoy reading our insights and thoughts on the future readiness.

Key findings

The Automotive Industry considers itself as innovator and technology leader. However, reality in the automotive supply chain looks different. Future readiness is highly endangered.

1. Purchasing: Automotive suppliers suffer from striking deficits when it comes to new, adapted purchasing approaches due to disruptive market situations. It lacks adjusted part family and sourcing strategies, expanded supplier and risk management and end-to-end digitization of core procurement processes.
2. Cost-Out: Transformation and digitization are reshaping product and cost structures in today’s product development process. Many suppliers struggle to implement a centralized management approach to fully govern all cost-out activities from target setting though tracking to benchmarking.
3. Sustainability: Most Tier N suppliers are neither advanced in terms of sustainability strategy nor in terms of implementation, entailing future cost risks. The delayed realization of sustainability initiatives is often characterized by poor focus on the entire value chain and missing central control.

Understand the levers

TSETINIS-EFESO insight shows that suppliers' future maturity in terms of new business and market requirements depends on their ability to adapt in the following categories:

Maturity level rating

TSETINIS-EFESO’s Future Readiness Assessment is tailored to identified core categories & successfully proven at multiple suppliers.

Insights: Cost-out

Although Cost-out is considered as a well establish topic, the automotive suppliers are far below industrial best practice.

Results at a glance

Automotive suppliers struggle severely to cope with the challenge of adapting to new requirements.

Insights: Fit for Future

While Automotive suppliers are struggling on transformational tasks, the new issue SUSTAINABILITY has not even reached the automotive supply chain.

Credit climate tightens

Several automotive suppliers have been downgraded from investment grade to non-investment grade in recent months.

• Future sales and profit growth in automotive business can only be achieved in combination with new technologies
• Associated investments are considerable, but indispensable to overcome transformation process unscathed
• Required capital to finance transformation challenges is significant and access to equity is often limited for traditional automotive suppliers
• Significant risk from higher refinancing costs as a result of key interest rate increases in times of inflation, combined with crisis-related volatility in production volumes and potential downgrading of company's own credit rating.

Megatrend-driven, rising number of requirements and an aggravated financial market situation force suppliers to self-optimization, leading to new challenges.

What's next

Tomorrow's future readiness relies on you today. Let's turn these challenges jointly at your advantage.