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Decisions in uncertain times – consequences for suppliers

Munich, July 2023

Berylls x Automotive Suppliers

Decisions in uncertain times – consequences for suppliers

Munich, July 2023
W

hy Europe’s suppliers must move fast as OEMs shift their global production footprintThe days when suppliers could plan for a certain, steady-growth future are over. As Europe’s carmakers transfer manufacturing capacity to North America and China, suppliers must abandon static planning models and be prepared to change their strategic direction rapidly.

“Pandemic”, “semiconductor shortages” and “rising energy and finance costs” are just a few of the reasons heard over and over to explain the crises in the global car industry in recent years. Even in 2022, managers at automobile companies were still in permanent crisis mode, making decisions and taking action in an atmosphere of continuing uncertainty the new normal.  For the time being, the prospect of returning to steady growth in high single-digit percentages, as a linear updating of past growth trends, seems to have vanished.

The prevailing uncertainty affecting suppliers’ plans are reflected in auto manufacturers’ sales figures. Globally, the number of vehicles produced worldwide is still considerably less than pre-pandemic. In Germany, for example, 3.4 million vehicles were produced in 2022, by far the lowest annual volume since 1990. Meanwhile, German production forecasts for the rest of the decade are being revised downwards. Accordingly, it is expected that by 2030 only 34 million vehicles will be manufactured in Germany, a fall of 14% compared with earlier forecasts.

A similar picture is emerging for the rest of Europe, where production volumes have been revised downwards by 18%.  The clear winners are North America and China; here, forecasts have been revised significantly upwards, with almost 10 million additional vehicles projected to be manufactured in these two markets by 2030. Meanwhile, government initiatives, such as the US Inflation Reduction Act, and a focused industry policy have created additional incentives for Europe’s OEMs to shift more production capacity out of the region. 

Sharp increases in production prices are another factor undermining business confidence across Europe’s auto supplier industry.  German suppliers have been especially hard hit by price rises of 33% for wages, energy and raw materials in 2022, compared with the previous year. Suppliers have tried to pass on at least part of these additional costs to manufacturers, but negotiations have proved extremely difficult over the past year. As a result, the average profitability of German suppliers in 2022 was 3.5%, compared with 4% in 2021 – a meagre yield when set against the global industry average of 5.7%. Meanwhile, the bleak mood among

German suppliers seems likely to persist, given continuing uncertainty over whether negotiations with the manufacturers can be concluded successfully.

Throughout Europe, banks and financial investors are also losing confidence in auto suppliers due to the downward pressure on margins and volatile sales forecasts, which in turn are increasing refinancing costs with stricter loan terms. This higher investment risk is reflected by returns on European automobile bonds, which had risen by 197% since the end of 2021.

Against this crisis-ridden backdrop, few European suppliers have sufficient liquidity to pre-finance the new developments required by the accelerating transition to electric mobility. This shortage of capital also means they lack the means to expand their own networks in North America and China as OEMs shift production out of Europe. In both cases the stakes are extremely high and even existential for suppliers, adding to the prevailing mood of uncertainty. 

European suppliers with the best chance of success will be those which analyse their planning assumptions early, keep them constantly under review, and are ready to change their strategic direction rapidly at short notice. Static planning models were the model for success when forecasts were still in effect a linear updating of past growth trends. Adjustment of strategic planning assumptions within the financial year is the new order of the day.

Author
Dr. Alexander Timmer

Partner

Dr. Alexander Timmer

Dr. Alexander Timmer (1981) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, as a partner in May 2021. He is an expert in market entry and growth strategies, M&A and can look back on many years of experience in the operations environment. Dr. Alexander Timmer has been advising automotive manufacturers and suppliers in a global context since 2012. He has in-depth expert knowledge in the areas of portfolio planning, development and production. His other areas of expertise include digitalization and the complex of topics surrounding electromobility.
Prior to joining Berylls Strategy Advisors, he worked for Booz & Company and PwC Strategy&, among others, as a member of the management team in North America, Asia and Europe.
After studying mechanical engineering at RWTH Aachen University and Chalmers University in Gothenburg, he earned his doctorate in manufacturing technologies at the Machine Tool Laboratory of RWTH Aachen University.

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Pressemitteilung

Pressemitteilung: Mit Berylls Know-How und Expertise – WisdomTree erweitert ETF-Palette

München, September 2022

Berylls x Automotive Suppliers

Pressemitteilung: Mit Berylls Know-How und Expertise - WisdomTree erweitert ETF-Palette

München, September 2022
D

er WCAR genannte ETF ist der erste Index, der ausschließlich Unternehmen der globalen Wertschöpfungskette innerhalb der Mobilitäts- und Automobilindustrie zusammenfasst.

München, Frankfurt, 27.September 2022: Berylls, LeanVal Research und WisdomTree, der Sponsor börsengehandelter Fonds (ETF) und börsengehandelter Produkte (ETP), geben die Einführung des WisdomTree Global Automotive Innovators NTR UCITS ETF (WCAR) Index be-kannt.
Der WCAR ist der erste Index, der das gesamte globale Ökosystem der Automobilindustrie abdeckt und die zukunftsorientierten Strategien der Unternehmen berücksichtigt, indem er die 100 relevantesten und vielversprechendsten börsennotierten Unternehmen weltweit um-fasst. Der Index ist damit sortenrein und umfasst die folgenden Sektoren innerhalb der Auto-mobilindustrie: OEMs, Zulieferer, Autohändler, Mobilitätsdienstleister und Infrastrukturanbie-ter. Dadurch kann der ETF auch alle Megatrends erfassen, die den Wandel der globalen Auto-mobilindustrie prägen. Diese sind Konnektivität, autonomes Fahren, geteilte Mobilität und Elektrifizierung.

Bei der Entwicklung des WCAR ist WisdomTree eine Partnerschaft mit Berylls und LeanVal Research (LeanVal) eingegangen. Berylls, im Jahr 2011 gegründet und bis heute auf nahezu 200 Mitarbeiter gewachsen, hat einen klaren Fokus auf die Trends, die die Zukunft der Mobilitätsbranche prägen. Damit besitzt Berylls einen einzigartigen und vollumfassenden Überblick über das Universum der Unternehmen, die von den Megatrends der Mobilität profitieren werden. Die Auswahl, der für den WCAR selektierten Unternehmen basiert dabei auf einer automatisierten Analyse von mehr als 20 unabhängigen, quantitativen, proprietär durch Berylls entwickelten Kennzahlen, die die Strategie, Wertschöpfung, und Wahrnehmung der einzelnen Unternehmen erfassen und vergleichbar machen. Bei der Unternehmensauswahl für den WCAR arbeitet Berylls eng mit LeanVal zusammen. Das Equity-Research-Unternehmen, gegründet im Jahr 2017, verfügt über eine umfängliche Expertise in der Analyse, Bewertung und Auswahl von Aktien sowie in der Entwicklung von Aktienstrategien auf Basis hochwertiger Daten.

 

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Christian Bangemann

Head of PR & Media Relations

Dr. Jan Burgard

Dr. Jan Burgard (1973) ist CEO der Berylls Group, einer internationalen und auf die Automobilitätsindustrie spezialisierten Unternehmensgruppe.
Sein Aufgabengebiet umfasst die Transformation von Luxus- und Premiumherstellern, mit besonderen Schwerpunkten auf Digitalisierung, Big Data, Start-ups, Connectivity und künstliche Intelligenz. Dr. Jan Burgard verantwortet bei Berylls außerdem die Umsetzung digitaler Produkte und ist ausgewiesener Spezialist für den Markt China.
Dr. Jan Burgard begann seine Karriere bei der Investmentbank MAN GROUP in New York. Die Leidenschaft für die Automobilitätsindustrie entwickelte er während Zwischenstopps bei einer amerikanischen Beratung und als Manager eines deutschen Premiumherstellers.
Im Oktober 2011 komplettierte er die Gründungspartner von Berylls Strategy Advisors. Die Top-Management-Beratung ist die Basis der heutigen Group und weiterhin der fachliche Nukleus aller Einheiten.
An das Studium der Betriebs- und Volkswirtschaftslehre, schloss sich die Promotion über virtuelle Produktentwicklung in der Automobilindustrie an.

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Standpunkt

Pandemie, Chipmangel und politische Unruhen – kommt jetzt eine Rohstoffkrise?

Munich, November 2021
D

ie Automobilunternehmen mussten in den letzten Jahren auf zahlreiche externe Herausforderungen in den Lieferketten reagieren. Ein Mangel an ausgewählten Rohstoffen könnte die nächste Krise herbeiführen - Nickel, Kobalt und Magnesium sind mögliche Kandidaten.

In den letzten Jahren sah sich die Automobilindustrie mit einer Reihe schwerwiegender Herausforderungen in den Lieferketten konfrontiert. Die Covid-19 Pandemie, der Halbleiter-Mangel und nun die Unruhen in Osteuropa haben enormen Schaden angerichtet. Die Fahrzeugproduktion ist infolge um 8 Prozent von 90 Millionen Einheiten im Jahr 2019 auf 83 Millionen im Jahr 2021 zurückgegangen.

Automobilhersteller und -zulieferer haben wiederholt schnelle Eingreiftruppen zur Lösung dieser Probleme eingesetzt. So musste der Volkswagen Konzern Anfang 2020 in rascher Folge verschiedene Task Forces einrichten, um die Markteinführung des ID.3 zu unterstützen, den Chipmangel zu beheben und die Auswirkungen der Pandemie zu bewältigen. Das Dilemma von Volkswagen steht stellvertretend für ein strukturelles Problem der gesamten globalen Automobilindustrie.

Bisher hat die Branche auf diese scheinbar endlose Reihe von Herausforderungen in der Lieferkette meist nur reaktiv reagiert. Die aktuelle Situation in Osteuropa ist das jüngste Beispiel dafür. Einige Hersteller müssen beispielsweise Zweitlieferanten für Kabelbäume aufbauen, die vorher in der Ukraine hergestellt wurden.

Rückblickend wird deutlich, dass eine strategische Analyse neuer proaktiver Ansätze erforderlich ist, um die Risiken in der Lieferkette zu reduzieren. Daher sind die Zulieferer gut darin beraten die durchgängige Transparenz und Früherkennung von Problemen in ihren Lieferketten zu erhöhen und die Lieferketten so auszulegen, dass der Zugang zu wichtigen Märkten und Rohstoffen sichergestellt ist. Ferner wird es zunehmend wichtiger werden Investitionsentscheidungen zwischen ökonomisch präferierten und Risiko minimierenden Optionen auszubalancieren. In Konsequenz brauchen Zulieferer, aber auch Fahrzeughersteller, ein umfassendes Verständnis der aktuellen und zukünftigen Herausforderungen in der Lieferkette, um diese Ansätze umsetzen zu können.

Der Weg in die Zukunft – Engpässe bei Nickel, Kobalt und Magnesium sind die nächste Gefahr für die Lieferkette

Der Mangel an ausgewählten Rohstoffen bietet Potential die nächste große Herausforderung für die globalen Automobilzulieferketten zu werden (vgl. Abbildung 1). Steigende Energiekosten erhöhen die Kosten für die Produktion und den Transport von Rohstoffen, während der Übergang zur Elektromobilität die Zulieferer zwingt, die Risikoprofil für kritische Rohstoffe zu überprüfen. Beispielsweise zeigt eine Analyse von 53 Rohstoffen, die für Elektro- und Hybridfahrzeuge benötigt werden, dass für 41 dieser Rohstoffe ein erhöhtes Beschaffungsrisiko besteht. Nickel, Kobalt und Magnesium gelten dabei als besonders risikoreich.

Nickel ist ein wichtiger Bestandteil von Lithium-Ionen-Batterien, wobei ein höherer Nickelanteil die Energiedichte und damit die Reichweite von Elektrofahrzeugen erhöht. Da sich der Wandel der Elektromobilität beschleunigt, wird die Nickelnachfrage zwischen 2021 und 2030 voraussichtlich um rund 48% steigen. Russland ist der weltweit größte Nickelproduzent. Angesichts der ungewissen Dauer, des Ausgangs und der unklaren Auswirkungen auf die künftigen Handelsbeziehungen mit Russland, erhöht sich das Beschaffungsrisiko drastisch.

Kobalt ist ein weiterer wichtiger Bestandteil von Lithium-Ionen-Batterien. Seit 2019 hat sich der Kobaltpreis verdreifacht, und die Nachfrage wird sich zwischen 2021 und 2030 voraussichtlich verfünffachen. Bei diesem Tempo werden die weltweiten Kobaltreserven bis 2033 erschöpft sein. Das sich abzeichnende Beschaffungsrisiko für Kobalt konzentriert sich dabei auf zwei Länder: Einerseits die Demokratische Republik Kongo (DRK), die über etwa 60 % der weltweiten Reserven verfügt und anderseits China, das durch aggressive Investitionen in einheimische Kobaltförderer, derzeit mehr als 50 % der Kobaltproduktion der DRK kontrolliert. Infolgedessen findet etwa 70 % der raffinierten Kobaltproduktion in China statt, was zu einer starken Abhängigkeit der Automobilindustrie von dieser dominanten Lieferkette führt.

China deckt gleichzeitig etwa 90 % der globalen Magnesiumnachfrage ab und nimmt dadurch eine Quasi-Monopolstellung ein. Die Automobilindustrie ist dabei einer der größten Verbraucher von Magnesium, das hier vor allem im Leichtbau verwendet wird und gleichzeitig für die Herstellung von Aluminium unerlässlich ist. So wird der Magnesiumverbrauch der Branche zwischen 2021 und 2030 voraussichtlich um durchschnittlich 7,6 % pro Jahr steigen. Der Grund liegt in der Notwendigkeit leichtere Fahrzeuge herzustellen, um die Emissionen fossiler Brennstoffe zu verringern sowie die Reichweite von Elektro- und Hybridmodellen zu erhöhen. Eine kontinuierliche Versorgung mit chinesischem Magnesium ist daher für die Automobilhersteller von existenzieller Bedeutung, zumal Magnesium nur für kurze Zeit gelagert werden kann.  Im vergangenen Jahr wurde das Beschaffungsrisiko in China deutlich, als das Land seine Produktion drastisch drosselte, um die Emissionsvorschriften einzuhalten. Die Magnesiumexporte aus China brachen ein und trieben die Weltmarktpreise um bis zu 700 % in die Höhe.

Autoren
Dr. Ralf Walker

Partner

Peter Trögel

Principal

Christian Grimmelt

Principal

Eren Duygun

Consultant

Drei Schritte, um der nächsten Krise in der Lieferkette einen Schritt voraus zu sein  

Die alarmierenden Beschaffungsrisiken insbesondere bei Magnesium, Kobalt und Nickel unterstreichen, warum die Automobilzulieferer aktiv und entschlossen handeln müssen. Proaktive und strategische Antworten gilt es zeitnah zu entwickeln, um die Herausforderungen in der Lieferkette antizipieren zu können.

Zulieferer wie Hersteller sollten zunächst die durchgängige Transparenz und Früherkennung in den Lieferketten erhöhen. Neben der allgemeinen Transparenz, werden datengetriebene und KI-gestützte Risiko-Radarsysteme benötigt. Dieses bietet nicht nur Transparenz über die gesamte Lieferkette bis zu den untersten Ebenen, sondern ermöglichen durch den Einsatz von KI auch Vorhersagen über mögliche Verfügbarkeitsengpässe.

Zudem sollten Zulieferer ihre Lieferketten so gestalten, dass der Zugang zu wichtigen Märkten und Rohstoffen gesichert ist. Dies ist von entscheidender Bedeutung für die Verbesserung der Produktionsflexibilität, indem eine rohstoffspezifische oder komponentenspezifische Strategie entwickelt wird, die festlegt, welche Komponenten lokal oder global beschafft werden. Ebenso sollte eine Entscheidung für eine Single- oder Dual-Source-Strategie getroffen werden, die auf einer Risikobewertung von Lieferanten und Rohstoffen beruht.

Abschließend sollten Investitionen und Risiken gegeneinander abgewogen werden. Sie müssen beurteilen, ob sie für zusätzliche Versorgungssicherheit ein Premium zahlen wollen oder ein Risikofond für die Finanzierung von möglichen „Was-wäre-wenn-Szenarien“ (z.B. Ausfällen, Anlaufschwierigkeiten etc.) aufbauen müssen.

Der schlechteste Weg wäre, sich weiterhin auf die bisherigen, traditionellen Systeme und Prozesse des Risikomanagements in der Lieferkette und der Beschaffung zu verlassen. Seit 2020 navigieren Hersteller und Zulieferer durch ein globales Umfeld, in dem Kriege, Handelskonflikte, COVID-19, neue Technologien und der Übergang zur Elektromobilität an der Tagesordnung sind. Sie sorgen dafür, dass Risiken schnell aus dem nichts entstehen und ein Engpass in der Lieferkette direkt auf den nächsten folgt. Durch proaktive strategische Lösungsansätze können die Automobilzulieferer den Herausforderungen erfolgreich entgegenwirken und die Risiken effektiv minimieren.

Über den Autor
Peter Trögel

Peter unterstützt Unternehmen bei komplexen strategischen und operativen Herausforderungen in der Automobilindustrie. Er ist Experte für Operations und kann auf eine langjährige Erfahrung im Transformations-Umfeld blicken. Seine fachlichen Schwerpunkte liegen in den Bereichen Entwicklung, Industrialisierung und Produktion. Zusätzlich verantwortet Peter die digitale Task Force Lösung von Berylls Digital Ventures – elyvate.

Peter leitet zudem das Nachhaltigkeit Service Offering bei Berylls by AlixPartners (ehemals Berylls Strategy Advisors). Dabei unterstützt er Klienten nachhaltige Geschäftsmodelle in der Automobilindustrie zu entwickeln und umzusetzen.

Vor seinem Einstieg bei Berylls war Peter unter anderem für Booz & Company und PwC Strategy als Mitglied der Geschäftsführung tätig. Er hält einen Diplomabschluss in Wirtschaftsingenieurwesen vom Karlsruher Institut für Technologie (KIT) und von der University of Technology Sydney (UTS).

Dr. Ralf Walker

Dr. Ralf Walker (1969) ist seit September 2021 als Partner bei Berylls by AlixPartners (ehemals Berylls Strategy Advisors) tätig, einer internationalen und auf die Automobilitätsindustrie spezialisierten Strategieberatung. Seine Expertisen liegen in den Bereichen Operations und Task-Forces.
Er berät seit 2008 Automobilhersteller und -lieferanten im globalen Kontext. Des Weiteren verfügt er über ein fundiertes Expertenwissen in den Bereichen Launch & Ramp up Management, Turnaround Management, Produktions- & Supply Chain-Optimierung, Lean Management sowie Strategieentwicklung & Footprint-Optimierung.
Vor seinem Einstieg bei Berylls Strategy Advisors war er unter anderem 18 Jahre bei PwC Strategy&, Booz & Co, Management Engineers und dem Fraunhofer IPT sowie 5 Jahre bei GKN als Leiter des europäischen Teams und Mitglied des globalen Teams zur Einführung von Lean- und Business Excellence-Prinzipien, Produktionsleiter und Leiter Industrial Engineering tätig.
Er studierte an der RWTH Aachen Maschinenbau und promovierte am Fraunhofer IPT in Aachen.

Christian Grimmelt

Christian Grimmelt (1985) ist seit Februar 2021 fester Bestandteil des Berylls by AlixPartners (ehemals Berylls Strategy Advisors) Teams. Zuvor hat er bereits umfangreiche Berufserfahrung in Topmanagementberatungen und in der Automobil-Zuliefererbranche gesammelt.

Während seiner Zeit bei dem weltweit größten Automobil-Zulieferer hat er den Aufbau einer Zentraleinheit zur Optimierung des weltweiten Logistik- und Produktionsnetzwerkes des Unternehmens vorangetrieben.

Christian Grimmelts Beratungsschwerpunkte sind die Themen Logistik- und Produktionsnetzwerkoptimierung, Einkauf und (digital) Operations inklusive Anlauf- und Turnaround-Management für OEMs und insbesondere Zulieferer.

Christian Grimmelt besitzt ein Diplom für Wirtschaftsingenieurwesen vom Karlsruher Institut für Technologie.

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Private Equity

Private equity in the car industry – present and future investment approaches

Munich, June 2022

Berylls x Automotive Suppliers

Private equity in the car industry – present and future investment approaches

Munich, June 2022
S

trong competition from strategic investors including OEMs and suppliers, and banks’ pullback from the car industry, are preventing large-scale growth investments and buyouts by private equity investors. Only turnaround investors seeking restructuring cases have been active. But a new generation of car manufacturers can change this in the future.

Seldom has there been so much wealth circulating, in search of attractive investment opportunities. Private equity remains one of the most lucrative investment classes; however the success story does not currently include the car industry. Private equity investments in automotive companies are at present far below average, and falling. That raises questions: why have private equity investors stopped trusting the sector they once loved, and will they return to the auto industry in the future?

Turbulent times restrict access to borrowing

Technological change, new business models and macro-economic trends are turning the car industry on its head, leading to a redistribution of profit pools along the value chain. Traditional car manufacturing companies’ profit margins are coming under pressure and strategic investors find themselves forced to restructure their portfolios, in order to remain competitive in the new age of mobility. The car industry is also dependent on highly complex global supply chains and as a result has been more severely affected by production losses caused by wars, pandemics and raw material shortages than other sectors.

More than three years of low returns have resulted in increased debt ratios and tight liquidity positions. Small and medium-sized suppliers have increased their net debts by an average of more than a third in the last few years. Even the major Tier 1 suppliers such as Continental, Bosch, ZF and Schaeffler have had their credit ratings reduced. Consequently, lenders are limiting their exposure to the car industry.

Available loan capital volumes have fallen and interest rates have risen. Traditional banks are cutting back investment in the sector, and alternative loan capital sources do not look much better. Debt funds can invest with a higher risk profile than banks and also sometimes make unsecured commitments. But for these, they need good financial planning and reliable cashflows. Instead, they are confronted with an uncertain outlook and will only get involved on favourable terms, if at all. Asset-based lenders are seen as the most expensive – and therefore the most unpopular – loan capital source.

Berylls Insight
Private Equity in the automotive industry - are investors still interested?
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Authors
Andreas Rauh

Executive Partner

Johannes Auch

Investment Analyst

Growth and buyout transactions almost impossible but turnaround holds attractive opportunities

Due to the synergy potential and longer investment horizons, strategic investors are currently prepared to pay higher purchase prices than financial investors. When prices are at a premium and lenders are unwilling, the value model of buyout funds (purchase price financing through additional debt (leverage) and dividend payments) is no longer sustainable. Other sectors currently provide better returns for private equity because lending conditions are more favorable.

However, carve-outs, succession situations and insolvencies have created many attractive opportunities for turnaround investors in the automotive sector. Strategic investors are put off turnaround companies because of the risk, time and management capacity involved. As a result, turnaround investors find themselves faced with limited competition for target companies.

Reassessing company structures and transferring manufacturing expertise into sustainable and growing product areas sets turnaround companies up for long-term growth. Bolt-on acquisitions and order volumes taken over from insolvent competitors also create economies of scale and improve the negotiating position with customers and suppliers.

For all these reasons, in the private equity space, the automotive sector is currently only attractive to turnaround investors with the necessary expertise. The ability to differentiate between attractive target companies in a fast-changing market, and develop their long-term potential, is essential for investments to succeed. Bringing in the right management capability to realize a company’s operational potential and improve the cost structure, accompanied by a reliable network in the car industry and in the turnaround community, facilitates targeted and efficient restructuring measures and sustainable relationships with all stakeholders.

What does the future hold for private equity investments in the car industry?

Venture capital investors are already widely involved with automotive start-ups focused on new technologies and alternative business models, including Vehicle-as-a-Service and shared mobility ventures. As soon as this new generation of companies scales up and their cash flow turns positive, they will be an great fit for growth and buy-out investors’ investment criteria. In this respect venture capital investments can be seen as a precursor to private equity interest.

With greater clarity on what the future of the car industry will look like as time goes on, we expect lenders to regain their confidence and increase their engagement with the mobility industry. Loan-financed investment models will become lucrative again, and growth and buy-out investors will return. For turnaround investors, the intense competition in the car industry and the tremendous pace of development mean there will be no shortage of companies that are left behind and in need of external expertise and capital.

About the author
Andreas Rauh

Andreas Rauh joined Berylls Equity Partners as co-founder and managing director in January 2020. Berylls Equity Partners, as the investment company of the Berylls Group, invests in companies in the mobility industry that are in special situations.

Andreas is an expert in private equity, mergers & acquisitions and corporate management.

After ten years in transaction advisory with a focus on medium-sized companies, Andreas moved to the investment sector in 2014. There, he has since accompanied a double-digit number of company acquisitions and sales in a leading role.

Andreas is a business graduate with a diploma from the University of Trier and holds a Master of Science in Business degree from Handelshøyskolen BI.

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Perspective

Standpunkt

After the pandemic and microchip shortages, is there a raw materials crisis on its way?

Munich, June 2022
C

ar manufacturers have had to react to numerous external challenges in supply chains in the last few years. A shortage of key raw materials could bring about the next crisis – nickel, cobalt and magnesium are possible candidates

Over the last few years the car industry has found itself confronted with a range of major challenges in its supply chains. The Covid-19 pandemic, semiconductor shortage and now the war in Ukraine have done enormous damage. Vehicle production has fallen by 8%, from 90 million units in 2019 to 83 million in 2021.

Car manufacturers and suppliers have rapidly and repeatedly deployed their forces to solve these problems. The Volkswagen group, for example, had to organize various task forces in quick succession to support the market introduction of the electric ID.3, address the chip shortage and tackle the effects of the pandemic.

Volkswagen’s dilemma is representative of a structural problem for the whole of the global car industry: so far, companies have mostly taken only a reactive stance toward this seemingly endless series of challenges in the supply chain. The current situation in Eastern Europe is the latest example of this: some manufacturers are having to arrange second suppliers for wiring harnesses because these used to be produced in Ukraine.

With hindsight, it is obvious that a strategic analysis of new proactive approaches is necessary to reduce risks in the supply chain. So suppliers would be well advised to increase continuous transparency and early recognition of problems and configure supply chains so as to secure access to important markets and raw materials. Furthermore, it will become increasingly important to balance investment decisions between economically preferred options and minimal risk options. Suppliers and vehicle manufacturers need comprehensive knowledge of current and future challenges in the supply chain to put these approaches into practice.

The next challenge – nickel, cobalt and magnesium supplies

A shortage of important raw materials could potentially be the next major challenge for global automotive supply chains (see Figure 1). Rising energy prices increase the costs of production and transport of raw materials, while the transition to electromobility is forcing suppliers to examine the risk profile for critical raw materials. An analysis of 53 raw materials needed for electric and hybrid vehicles shows an increased procurement risk for 41 of them, in particular nickel, cobalt and magnesium.

20220505_Top 100_Pandemie, Chipmangel und politische Unruhen_vf

Nickel is an important component of lithium-ion batteries, and a higher proportion of nickel increases the energy by volume and in turn the cruising range of battery electric vehicles. As the change to e-mobility accelerates, demand for nickel is forecast to rise by around 48% between 2021 and 2030. Russia is the biggest producer of nickel worldwide. In view of the uncertain duration and outcome that the invasion of Ukraine will have on future trade relations with Russia, the procurement risk rises dramatically.

Cobalt is also an important component of lithium-ion batteries. The price of cobalt has tripled since 2019, and demand is forecast to increase five-fold between 2021 and 2030. At such a rate, worldwide cobalt reserves will be exhausted by 2033. The looming procurement risk for cobalt is concentrated on two countries: the Democratic Republic of the Congo (DRC), which holds approximately 60% of global reserves, and China, which currently controls more than 50% of the DRC’s cobalt production by investing aggressively in domestic cobalt promoters. As a result around 70% of refined cobalt production takes place in China, which explains the car industry’s heavy dependence on this dominant supply chain.

China also meets around 90% of global magnesium demand and could be said to hold a monopoly. The car industry is one of the largest consumers of magnesium, where it is used mainly for lightweight construction and is essential for aluminum production. The industry’s magnesium consumption is expected to rise by an average of 7.6% per year between 2021 and 2030. The reason for this is the need to produce vehicles that are more lightweight in order to minimize emissions of fossil fuels, as well as increasing the cruising range of electric and hybrid models. A continual supply of Chinese magnesium is therefore absolutely crucial for car manufacturers, especially as the substance can only be stored for a short time. In the past year the procurement risk became clear when China reduced its production dramatically to keep within emissions regulations. Magnesium exports from China nose-dived and drove global market prices up by around 700%.

Authors
Dr. Ralf Walker

Partner

Peter Trögel

Principal

Christian Grimmelt

Principal

Eren Duygun

Consultant

Three steps needed to keep ahead of the next supply-chain crisis

These alarming procurement risks – particularly for magnesium, cobalt and nickel – underline why car suppliers need to take positive and decisive action. It is important to develop proactive and strategic answers promptly to stay on the front foot when it comes to challenges in the supply chain.

Suppliers and manufacturers should first of all increase transparency and early recognition of problems in their supply chains. Data-driven and AI-supported risk-radar systems are necessary. These not only offer transparency through the whole supply chain down to the lowest levels, but they also facilitate forecasts about possible availability shortages through the use of AI.

Suppliers should also configure their supply chains to ensure access to important markets and raw materials. This is of decisive importance for the improvement of production flexibility, as a raw material-specific or component-specific strategy is then developed that determines which components are procured locally or globally. Similarly, a decision should be made on whether to use a single- or dual-source strategy, on the basis of a risk assessment of suppliers and raw materials.

Finally, investments and risks should be balanced against each other. Suppliers need to make a judgment on whether they want to pay a premium for extra supply security, or set up a risk fund to finance “what-would-happen-if” scenarios (for example stoppages or start-up difficulties).

The worst possible option would be to continue to rely on traditional systems and risk management processes in the supply chain and procurement. Since 2020, manufacturers and suppliers have been navigating a global environment in which wars, trade disputes, Covid-19, new technologies and the transition to electric vehicles are the order of the day. Risks have appeared quickly and out of nowhere, and one shortage in the supply chain leads directly to the next. Car suppliers can successfully counter these challenges and effectively minimize the risks through proactive strategic approaches to solving the problems.

About the Authors
Dr. Ralf Walker

Dr Ralf Walker (1969) has been a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specialising in the automotive industry, since September 2021. His expertise lies in the areas of operations and task forces.
He has been advising automotive manufacturers and suppliers in a global context since 2008. He also has in-depth expertise in the areas of launch & ramp-up management, turnaround management, production & supply chain optimisation, lean management and strategy development & footprint optimisation.
Before joining Berylls Strategy Advisors, he spent 18 years at PwC Strategy&, Booz & Co, Management Engineers and the Fraunhofer IPT, as well as 5 years at GKN as head of the European team and member of the global team for the introduction of lean and business excellence principles, production manager and head of industrial engineering.
He studied mechanical engineering at RWTH Aachen University and completed his doctorate at the Fraunhofer IPT in Aachen.

Peter Trögel

Peter supports companies with complex strategic and operational challenges in the automotive industry. He is an expert in operations and can look back on many years of experience in the transformation environment. His areas of expertise include development, industrialization, and production. Peter is also responsible for Berylls Digital Ventures’ digital task force solution – elyvate.

Peter also heads the Sustainability service offering at Berylls by AlixPartners (formerly Berylls Strategy Advisors). He supports clients in developing and implementing sustainable business models in the automotive industry.
Prior to joining Berylls, Peter worked for Booz & Company and PwC Strategy&, among others, as a member of the management team. He holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT) and the University of Technology Sydney (UTS).

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

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Digitalisierung

Digitalization

Battery technology start-ups: Which direction are future business models moving in?

Munich, June 2022

Berylls x Automotive Suppliers

Battery technology start-ups: Which direction are future business models moving in?

Munich, June 2022
A

t present we are experiencing a worldwide shift from conventional combustion engines into buzzing battery-electric vehicles.

New car registrations paint a clear picture of the trend: while worldwide the number of new registrations across all drive systems is set to increase by 5% by the year 2030, the traditional combustion engine is expected to lose significant market share and new registrations for battery-electric vehicles (BEVs) are expected to increase by a global average of more than 30%.

The fundamental building block and prerequisite for this growth will be the availability of sufficient battery cells. In 2021, the annual production capacity for lithium-ion batteries in the U.S., Europe and China was just under 700 GWh. By 2030, annual demand of up to 2,600 GWh is expected in these areas; meeting this would necessitate a 16% annual increase in production capacity. The rapid growth in battery cell demand and accompanying production capacity confronts the supplier industry with some core questions: which structures and business models will enable this growth? Will established market participants react quickly and innovatively to the trend – or will new market participants be able to capitalize on the gaps before existing suppliers are able to close them?

Established suppliers have taken various approaches to the shift to e-mobility, but in the last 10 years we have seen real hype around start-ups focused on battery technology and production. Out of 700 battery-related start-ups founded since 2010, 279 are connected to the car industry. Alongside great market potential and the buzz around EVs, low interest rates in the capital markets have supported this development. The number of EV battery start-ups reached a peak in 2016 and 2017, but has since slowed. As Figure 1 below shows, the majority of such start-ups come from North, Central and South America, although large companies from other regions have successfully been established, especially in the field of cell production. The Chinese supplier CATL, for example, was founded as a start-up in 2011, and by 2019 had tripled its turnover, reaching an impressive €18.1 billion in sales by 2021.

Folie1

Figure 1: Battery start-ups connected to the car industry, 2010-2021

Authors
Fritz Metzger

Principal

Hendryk Pausch

Senior Associate

Sven Zellner

Consultant

If we look at the financing of these start-ups, we see a trend toward large financing rounds, particularly in the last few years. Out of more than 200 financing rounds for the start-ups in our analysis, 53 happened in 2021 with an average volume of €119 million. The amount raised has increased seven-fold since 2020, from €900 million to more than €6 billion. Large financing volumes are to be found particularly for the investment-intensive battery producers. The capital raised is needed to expand production capacities in line with the rapidly increasing demand from car manufacturers.

Folie2

Figure 2: Start-up financing before public first issue after years

As EV battery producers increase in size, it is becoming more difficult for start-ups to break into the market. Entrepreneurs seem to be trying their luck in new and different segments of the battery value chain, and in the last few years start-ups have been founded in fields such as recycling, remanufacturing and services. Both the absolute number and the share of start-ups in the field of battery production have been declining in the last three years (Figure 3).

Figure 3: Automotive battery start-ups by year and value-chain segment

Areas which still offer potential for start-ups are field monitoring of batteries and production, and closing of material cycles. Artificial intelligence is increasingly used in these fields and contributes to quality assurance in field and production monitoring, as well as addressing unresolved sustainability challenges to create customer benefits. One example is the start-up Accure Battery Intelligence from Aachen in Germany.

The question remains: what options do established automotive suppliers have in the EV battery space? The battle for ever-larger production volume is in full cry and market share is distributed between the existing players. As a result, conventional suppliers as well as young start-ups should focus on peripheral areas and build targeted skills there, to drive forward the whole battery ecosystem and solve problems arising along the value stream. They can do this by creating their own capabilities or through acquisition from outside.

About the author
Fritz Metzger

Fritz Metzger (1986) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, in February 2021. He is an expert on automotive operations.

Since 2011, his focus has been on strategic alignment and operational efficiency improvement of automotive manufacturers and suppliers. He also advises top management in critical situations, including R&D and industrialization task forces and relocation and restructuring initiatives of plants and complete suppliers. The challenges of e-mobility are always in focus.

Before joining Berylls, he was a director at international strategy consultants PwC Strategy&, as well as a sales and project manager at a medium-sized supplier and mechanical engineering company.

Fritz Metzger is a trained industrial engineer with a degree from ESB Business School Reutlingen. He also holds an MBA from the University of Salzburg.

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Software & OS

Given up for dead, yet still alive and kicking

Munich, December 2021
T

he death knell has been sounding louder and louder for the classic (German) automotive industry in the last few years. The reason behind this? Outdated product ranges, as well as mobility solutions which by-passed customer needs, a complete lack of sustainability in its business model, and slow, inflexible company structures and procedures. No feature of a failing industry was missing in the state of Germany’s most important industry. However, the reality is turning out to be completely different.

Author
Dr. Jan Dannenberg

Partner

The majority of OEMs and suppliers have been successful in riding out the economic consequences of Covid-19. The predicted wave of bankruptcies has (so far) not materialized. Lessons have been learned from the finance crisis of 2009, in which more than 120 prominent suppliers went bankrupt. Even if supply chains are not yet running smoothly, automotive companies were able to come up with peak values in turnover and profits in the final quarter of 2020. 

Even the field of electromobility is far from a lost cause. It is true that the present stock market capitalization of the electro pioneer Tesla stands at a good 500 billion euros, just about double that of the three German OEMs BMW, Daimler and Volkswagen. However, Tesla is launching a mere five new models/derivatives onto the market in 2020/21, whereas the German OEMs are producing a veritable flood of models: 88 new vehicles with electric drive (BEV and hybrid). And the Mercedes Benz EQS sets the standard for battery-powered electric cars. Audi has become the first German brand to announce a complete phasing-out of combustion engines. Competitors are racing to catch up. 

German OEMs and suppliers are playing an active role in transforming the automotive industry as a whole. One third of worldwide research and development expenditure by automotive manufacturers comes from Wolfsburg, Munich and Stuttgart; in the next 10 years more than 300 billion euros will be spent on innovation. Most of the funds are being directed towards building up software skills, automatic driving, emission-free (electric) drive and connectivity, in order to guarantee attractive car travel in future. Currently, increasingly strict emissions standards can be met: in 2020 the European fleet of new cars just met the limit of 96 grams per vehicle, with 97 grams of CO2 per kilometer. And even the new EU7 regulations will be met thanks to electro-offensives and improved combustion technologies.

Even challenges from the “big tech players”: Google, Apple, Microsoft, Huawei or Samsung, are being confronted and not left to chance. The “software-defined car” has arrived in the higher echelons of suppliers and OEMs. Volkswagen, Bosch, Conti and co. are already employing hundreds of thousands of software developers. And in line with the motto “If you can’t beat them, join them”, new partnerships with big tech companies are continually being established. 

The transformation of the automotive industry is by no means complete. German automotive suppliers and manufacturers are, however, doing their homework step by step, and they will be standing among the winners.

Berylls Strategy Advisors would be happy to support you in this key decision process.

Arthur Kipferler complements the expertise of the Berylls partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.

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DACH Automotive Industry

Are automotive companies old news?

Munich, December 2021

Berylls survey of M&A transactions in the automotive industry (DACH)

T

he Covid year 2020 has had a significant effect on company takeovers by automotive companies in German-speaking countries. This is shown by Berylls Strategy Advisors‘ annual survey of M&A transactions in the mobility industry. The number of transactions has fallen by 23 per cent in comparison with the previous year and stood at 226 deals (293 in 2019).

Author
Dr. Jan Dannenberg

Partner

Benjamin Bierl

Consultant

Chapter
1. Are automotive companies old news?
2. Buying was favourable in 2020
3. Digital business models work better
4. Chinese buyers stay away
5. 2021 is ready for the recovery
Current Topic

Buying was favourable in 2020

The structure of transactions has changed in just about all dimensions, and this is clearly reflected in the attitudes of buyers and sellers in the crisis year and towards the automotive industry in general. On the supply side (sellers) there was little willingness to sell (one’s) company. The “current trading“ and expectations of growth and results were bad in 2020, with the result that even for attractive companies a seller would obtain a bad selling price. Supply was increased by “forced“ purchases: in 2020 the number of companies purchased from insolvency nearly doubled (11 per cent of all company sales), compared with the average in the previous three years. Furthermore, a good 10 to 15 per cent of companies were offered on the market under pressure from investors. Admittedly the average size of mobility companies sold increased, but the prices (equity value) were considerably lower: about 25 to 30 per cent below the long-term average of previous years.

Digital business models work better

Automotive companies with a “classic” business model were more difficult to sell (-34 per cent) than those with “digital“ (-13 per cent). Classic engineering service providers, automotive suppliers or mechanical engineering companies could be sold more rarely than in previous years. Start-up companies and players which focus on e-mobility, are internet based, offer innovative mobility concepts or are focused on digital infrastructure, were considerably easier to sell.

The financial investors’ share has decreased slightly in 2020, by around -5 per cent. Also fewer private equity investors have contributed growth strategies in acquisitions. As ever, when it comes to classic buy-outs the automotive industry is known to be very difficult terrain. On the other hand, PE institutions with clear focus on special acquisitions are going places, on the one hand with takeovers of insolvent players, on the other with suppliers, mechanical engineering companies and the downstream sector, which are supported by banks‘ workout departments.

Chinese buyers stay away

The field of buyers from abroad has also become considerably smaller. In 2020, 75 per cent of buyers came from German-speaking countries, another 10 per cent from the rest of Europe, and the rest from the Far East or US. Most notably, Chinese, Japanese, and US Americans have stayed away from the German market during the past year. The number of Chinese buyers has halved since  peak value was reached in 2016 (19 transactions and 9 takeovers).

2021 is ready for the recovery

Interest in mobility companies has been growing since the 4th quarter of 2020. Both financial investors and strategic buyers are active again on the market. A complete recovery is not yet in sight. Berylls is anticipating a peak year for sales in 2023 at the latest. The transformation will result in numerous carve-outs for suppliers who were pushed into the background by the Covid crisis. Prices are rising again slightly, and above all the financial investors, who account for about 20 per cent of all takeovers, will be thinning out their automotive portfolios and focusing on new acquisitions.

Berylls Strategy Advisors would be happy to support you in this key decision process.

Arthur Kipferler complements the expertise of the Berylls partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.

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double interview

Double interview, Dr Alexander Timmer/ Dr Jan Dannenberg, both partners with Berylls Strategy Advisors

Munich, December 2021
1.

How did the supplier industry weather the Covid-19 year? Is the trend towards a two-tier society continuing?

The start of 2020 saw a massive drop in vehicle sales, a double-digit percentage fall due to Covid. So for example, in the first two quarters an average of 35% fewer vehicles were sold in Europe than in the equivalent quarter in 2019. 

The world’s largest automotive suppliers generated 11% less turnover than in the previous year. 

Operative profit also fell substantially and stood at around -8% in the second quarter. OEM business development showed a similar picture during the same period. Since autumn 2020 we have been experiencing marked signs of recovery in the supplier industry. Both turnover and profits were gaining considerable momentum by the end of the year; some profits with a double-digit percentage. We are expecting a recovery for the period between 2023 and 2026, reaching the levels of the pre-crisis years 2018 and 2019, boosted by the growth in South Asian and South American markets. China and Europe will remain the largest markets by far, but with substantially smaller growth rates.

All this has sharpened the trend towards a two-tier society. The big players are quickly returning to their previous profitability and good growth rates, while the mid tiers get left behind.

Authors
Dr. Jan Dannenberg

Executive Partner

Dr. Alexander Timmer

Partner

Chapter
1. The Covid-19 year
2. Austerity and restructuring programs
3. OEMS back in the supply chain
4. German fund for hard hit suppliers
5. Software organizations in the automotive industry
6. Hitachi Astemo - New mega-supplier
7. Aptiv - a role model?
8. The revenue share of Asian suppliers
Current Chapter
2.

Some suppliers started austerity and restructuring programs before the pandemic. Were the impact of these programs already evident in 2020, in the middle of the global crisis?

Indeed. A majority of suppliers reacted early in the first quarter of 2020 when the first signs of the crisis were coming from China, along with the associated falls in sales. Either performance programs which were already running had their requirements sharpened up, or new programs were launched at short notice.

Suppliers’ austerity programs focused mostly on indirect areas and concentrated more on increasing their efficiency. The focus was on optimizing business procedures supported by automation, as well as adapting organizational structures in central areas. Not infrequently, potential efficiencies in double-digit percentages were identified during the crisis and prepared for implementation. We are expecting to see the full effectiveness and visibility of these in the German supplier industry in the next two years.

3.

In some places the pandemic has disrupted supply chains. This means that more and more OEMs have stepped back in to take their place in the supply chain. What sort of middle to long-term consequences are you expecting to see – taking account of a supply chain law as well?

The pandemic has highlighted global interdependence alongside automotive added value and the importance of robust supply chains. Not infrequently, OEMs have to coordinate more than 10,000 direct suppliers in more than 50 countries, a task which has become considerably more challenging in the context of the past year. 

Production stops caused by Covid have severely shaken the OEM’s fragile supply chains, followed by a gradual acceleration lasting several weeks. We are anticipating that OEMs will invest 20 to 30 percent more in their supply chain excellence in the next few years. This will include AI-supported optimization of supply chains in order to improve transparency throughout all stages of the value chain and make a contribution to sustainability. This is becoming more important, as sustainability is a critical factor in the purchasing decisions of more than half of all customers. 

The increased use of AI in supply chain management by OEMs also requires active participation on the part of the suppliers, as for example in the carrying out of self-assessments. We are also anticipating that suppliers will make increasing use of tool-supported solutions to master the complexity of global supply chains.

4.

What progress is being made by the German fund for hard hit suppliers? (key word: Best Owner Group)

The Best Owner Group is taking an interesting approach to manage the transformation of selected German suppliers in an ordered and structured way. By streamlining activities in the traditional drivetrain area, efficiency and volume models can be realized and this is intended to give both hard hit suppliers and investors potential returns of 12 to 15 per cent. 

Unfortunately, for over a year now we have only got as far as announcements. Above all, the tension between investors for the fund and the (IG Metall) employers’ interests is yet to be solved. It is also unclear how a business which suffers from continual market decline is supposed to generate such high long-term returns. Moreover, the structuring of the fund as “evergreen” – so that no companies from the portfolio are sold, is a high risk in such a market field. Who invests money in a sinking ship, even if it is going down very slowly? If the “funding” does not come to fruition in the coming months, the Best Owner Group will get off to a false start.

5.

Some large software organizations are trying to get into the automotive industry. Would a minimum tax rate ensure more equal opportunity between the old and new economy?

The big tech players such as Google, Apple, Microsoft or Nvidia, have already installed their software solutions in a large number of vehicles. Interest is continuing to increase due to the growing importance of automotive off-board software. The value of software amounts to just about 700 euros per average vehicle, and by the year 2030 this will rise to over 2,500 euros, three quarters of which will be generated in the off-board field. As well as the Californian tech giants, Chinese players such as Huawei and Baidu, and the Korean electronics entertainment companies Samsung and LG are entering the “software-defined car” market.

However, tax rates are not the problem when it comes to equal opportunity. It is true that in 2020 the three tech players Apple, Alphabet (Google’s parent company) and Microsoft are only paying between 14.4 and 16.5 per cent income tax, whilst Volkswagen, Daimler and BMW are contributing taxes of between 24.4 and 36.8 per cent of their taxable income. The three German OEMs together would have a higher profit of only around 3 billion euros at a tax rate of 15 per cent. The real problem lies in the pre-tax result, i.e. in the profit itself, not in the taxes. The tech giants are simply much more profitable. They draw an almost 6 times higher pre-tax result than the three German OEMs: 28.1 per cent as opposed to 4.8 per cent. Pre-tax profit for Apple alone is more than double that of the three German OEMs put together.

6.

Hitachi Astemo is a new mega-supplier with a turnover of 13 billion euros. What can we expect from this organization? What role will they play in Europe?

Hitachi Astemo, created from a merger between Hitachi Automotive Systems, Keihin, Showa and Nissin Kogyo, is a new leading supplier which will certainly appear in the top 20 for the year 2020. Its focus is very clearly the Japanese OEMs, above all Honda (which holds a third of the shares), as well as Nissan, Mitsubishi, Mazda and Subaru. European or North American customers are so far hardly represented. However, the new company has good opportunities in the field of e-mobility in Europe (traction motors, lithium ion cells and battery modules, water pumps and inverters) and autonomous driving (ADAS control devices, camera systems incl. object recognition). Hitachi has for example supplied the inverters for both the Audi e-tron and the Porsche Taycan. But beyond that further scope is unknown.

7.

Aptiv has completed a large-scale reorganization. Now this supplier is highly profitable. Are they a role model for Conti and other suppliers in a similar situation?

Delphi sold its “Powertrain”/motor business including e-mobility activities to Borg Warner three years ago for around $3.3 billion. Aptiv’s spin-off, completed in 2018, has been an outstanding development: they were able to double their share price, their market capitalization stands at around 40 billion euros, and all financial figures have improved. Aptiv is a success story. And yes, it serves as a role model for other automotive supplier companies. In the same period, Continental’s market capitalization has fallen by 35 per cent, its returns have dropped and Conti has lost its long-standing position as the second-largest supplier in the world to Denso. The legal spinning-off of Vitesco does mean that a first step has been taken; however Vitesco is still a part of Continental. 

The German suppliers in particular are going to have to follow suit, in order to separate themselves from the classic combustion engine business, and focus on the forward-looking CASE business. So far the large European supplier companies have been much too hesitant in their transformation. Valeo, Bosch, ZF, Mahle, Faurecia or Benteler ought to tackle this in a similar way to Aptiv: on the one hand a clean break from the powertrain business, and on the other hand a focus on future business.

8.

The revenue share of Asian suppliers under the Top 100 (without Japan) has been rising for years. Most of these companies are Chinese or Korean. Can this be explained exclusively by the growing Chinese market? Are these suppliers gaining market share outside of China as well?

China’s classic players, such as Weichai, Huayu, BHAP, NBHX, Joyson or Yangfeng, will be expanding their European presence step by step in the fields of powertrain, interior or vehicle electronics. However, much more interesting are the new players in the Car OS Operating System (e.g. Huawei Harmony OS), connected services (AliPay and Tencent Integration), autonomous driving (Baidu), e-mobility components, V2X, vehicle platforms and contract manufacturing (Foxconn with the MIH EV platform). 

Chinese OEMs will also be increasing their export to (Western) Europe in the coming years and expanding their activities in these markets; how far the Chinese suppliers do the same should be monitored attentively. In China itself, suppliers like Bosch, Conti and ZF must take care not to be overtaken. For this reason they must increase their local activity in the short and medium term and build up local know-how and capacities, especially in the fields of connectivity and autonomous driving. The Chinese government is focusing on “intelligent connected vehicles”, and so interesting opportunities are arising.

Berylls Strategy Advisors would be happy to support you in this key decision process.

Arthur Kipferler complements the expertise of the Berylls partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.

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