Crisis in the Automotive Industry Boston Consulting Examines Sentiment in the Supplier Industry

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By 2035, the demand for vehicle components is expected to increase by 3.5 percent per year. This is generally positive news for automotive suppliers. However, not all companies will benefit from this, as revealed by the study "How Auto Suppliers Can Rebuild and Rise Again" by the Boston Consulting Group.

Automotive suppliers are facing a severe crisis, which is primarily due to a combination of structural change and economic problems: the pressure to transform to electromobility is leading to high investments in new technologies on the one hand and a slump in profits for components for the combustion engine on the other. Weak demand for new vehicles, strong competition from China, geopolitical crises, trade conflicts and supply chain problems are also contributing to the situation.

Although demand for automotive components is expected to increase by 3.5 percent annually until 2035, not all companies will benefit from this. The winners are the manufacturers of vehicle software, batteries and electric vehicle components. They can expect growth rates of between 13 and 16 percent per year. Producers of components for combustion engines will lose significantly - on average between three and eight percent per year until 2035. This is the conclusion of the study "How Auto Suppliers Can Rebuild and Rise Again" by the Boston Consulting Group. For the study, the management consultancy analyzed the financial situation of more than 750 suppliers and around 50 vehicle manufacturers worldwide, as well as interviewing 127 C-level executives.

New Business Areas Offer Opportunities

In those areas that are central to the transformation from combustion to electric vehicles, suppliers tend to have greater opportunities than in traditional domains: "Electrification, electronics and software are fast-growing business areas in which, with the right strategy, significantly higher profit margins can be achieved than in traditional segments," explains Alex Brenner, automotive expert at Boston Consulting and co-author of the study. At 5.7 percent, traditional component suppliers generated higher EBIT margins than car manufacturers for the first time in five years in 2025. In growth areas such as batteries and semiconductors, EBIT margins were significantly higher again - at over 7% and over 20% respectively. In semiconductors, batteries and other non-core business areas, suppliers generated higher EBIT margins than car manufacturers for the first time in five years in 2025, at 5.7 percent. For 2027, the authors forecast a stabilization of the margin at six percent for traditional component suppliers.

Transformation to Electromobility Fraught with Problems

Nevertheless, there is great uncertainty in the industry. The reason: the transformation to electromobility is progressing much more unevenly than expected. In the first half of 2025 alone, electric vehicle programs deviated from the original sales forecasts by more than a factor of three in some cases - both upwards and downwards. For suppliers, this means that investments in the billions will be met with a high level of capacity utilization uncertainty. This is a risk that can no longer be controlled with traditional capacity management. "The acute crisis is behind us, but normality has not returned. Higher interest rates, geopolitical tensions and volatile demand for BEVs are no longer a transitional phenomenon - they define the new background noise in the industry," emphasizes Albert Waas, Head of Automotive and Mobility in Europe, the Middle East, South America and Africa. "Suppliers need to structurally lower their break-even points by simplifying their portfolio, consolidating plants and locations where size is insufficient and rigorously reducing indirect costs and overheads. The goal is not a one-off cost reduction, but a reshaped profit base that remains robust even when demand fluctuates."

Pressure on Europe is Growing - Especially from China

The global comparison is putting additional pressure on Europe: suppliers from China overtook their European competitors in terms of profitability in 2024. The capital markets are following the growth: between 2019 and 2025, China increased the stock market value of suppliers more than any other region. According to the BCG analysis, Chinese suppliers also show the clearest growth orientation - with a focus on expansion, partnerships and new products and technologies.

The mood in the industry is correspondingly tense: every second manager expects the market to deteriorate. The assessment is most negative in Europe. Executives point above all to strong economic pressure, uncertain rules and more insolvencies. Boston Consulting has identified five levers that pave the way to a new rise: Successful suppliers are tapping into a new revenue base, increasing their resilience and going on the offensive in targeted areas with high growth potential that are adjacent to existing competencies. Artificial intelligence as an operational nervous system and strong change management make it possible. (se)