The shift towards electric cars and digital technologies, combined with global economic uncertainty, is placing pressure on smaller and weaker automotive suppliers.
Evolving consumer habits, increasing adoption of e-mobility and technologies such as autonomous driving are changing the future of the automotive industry. While it is unclear what that future will be exactly, global estimates for investment in the electric vehicle segment for the next five to ten years currently stand at about USD 300 billion.
For smaller suppliers, the challenges are not confined to the cost of investing in the development of new technology. Many new players – and potential competitors – are entering the industry, in particular businesses with a technological pedigree. What’s more, much of the new technology, electric cars for example, don’t need the same range of parts. So suppliers of exhaust systems or gearboxes may find their business models are put under increasing pressure.
Further challenges come from the economic environment. Global car sales are forecast to decline 5% in 2019 and erratic Sino-US relations combined with political issues such as Brexit are causing economic uncertainty.
We expect the automotive industry to experience an increase in the number of payment delays, strained liquidity and business failures over the coming five years. However the speed of change experienced by the industry will heavily depend on government intervention in areas such as charging infrastructure and R&D subsidies.
Further details can be found in the Atradius Market Monitor: Focus on automotive performance and outlook 2019.