Analysis Tough Price Negotiations Are Ahead for Suppliers

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Despite all the negative headlines, the year 2025 has developed well for suppliers, with their margin slightly increasing while it has decreased for OEMs. Berylls by AlixPartners now expects even tougher price negotiations in 2026.

Export bans on rare earths, supply shortages for chips, declining registration numbers in key global markets, geopolitical tensions – the automotive world is groaning under this multiple disruption. As a result, tens of thousands of jobs have been cut or are slated to be cut at major suppliers worldwide this year. Nevertheless, 2025 is not a lost year for the industry. Amid all the dark shadows, there are also bright spots.

At suppliers, the operating margin has risen from 5.5 percent to 5.8 percent compared to the previous year. Alexander Timmer, Partner at Berylls by AlixPartners, assesses the situation as follows: "The operating margin of OEMs drops from 6.3 to 4.5 percent. In contrast, it slightly increases for suppliers. We haven’t seen it exceed OEM margins since the pre-COVID era."

In fact, the OEMs have a profitability problem, but they are still robust in terms of liquidity. The situation is quite different for suppliers. Suppliers face significant difficulties with their liquidity, and their level of debt is high, both of which are real problems in times of rising interest rates.

This development is overlaid by declining revenues. Among the top 25 suppliers, revenues drop to 400 billion euros (~$464 Billion), while for the ten largest automakers, they shrink to 1,265 billion euros (~$1,47 Billion). The decline amounts to approximately 1.5 percent compared to the 2024 figures, and revenue decline was also recorded in the previous year.

The next year will prove to be challenging for the supplier industry — to put it mildly. OEMs will negotiate particularly hard on procurement. Stefan Schneeberger, supplier expert and Associate Partner at Berylls by AlixPartners, states: "The challenges faced by OEMs are leading to even tougher price negotiations and a stronger so-called pain-share demand. While the top 25 suppliers may be able to partially cushion this, the situation for mid-sized suppliers or non-listed German companies will heighten tensions further and create an urgent need for action."

Confidence Too Pronounced

Suppliers do not expect a significant deterioration in their position, as revealed by a survey from Berylls by AlixPartners in the summer of 2025. It shows that suppliers are generally optimistic about the future. While 60 percent rate the current situation as "mixed," more than 50 percent expect a positive development over the next twelve months. However, an analysis of the results of the top 25 suppliers and top 10 OEMs suggests that this optimism may be somewhat overly pronounced. Berylls experts anticipate that 2026 will be as critical for suppliers as the pandemic crisis, with an increased risk of insolvency, especially for SMEs.

According to Berylls, the coming year will mark a turning point for the industry. The focus on global efficiency will be replaced by increasingly regulated, regionalized, but also transparent supply chains. Localization, in particular, is an important part of a risk minimization trend fueled by U.S. policies and regulations for domestically created content (e.g., software). As a result, so-called reshoring has begun, bringing globally distributed development and production capacities back to individual countries or world regions such as the U.S. or Europe. At the same time, old alliances are losing significance while new ones are emerging, including for the procurement of raw materials, which are expected to be sourced more from Africa, Australia, or South America.

Build Trust with OEMs

Especially when it comes to the raw materials needed for e-mobility, it becomes evident how dependent Europe currently is on China and that substituting its supply of rare earths, graphite, or lithium before 2030 is not realistic. China's recent export restrictions on these raw materials highlight the necessity for supply chains to move away from rigid just-in-time or just-in-case models towards regionality, redundancy, and thus resilience.

"This resilience will develop away from being a cost factor and toward a differentiator for companies," explains Fabian Piontek, Partner and Managing Director at AlixPartners. "The industry must massively improve its resilience and thus its flexibility. This will enable it to build trust with OEMs and make long-term collaborations possible."

To secure a strong position in international comparison, suppliers should not only focus on operational resilience but also keep sustainability in mind, according to Piontek. Some of the new trends are indeed playing into the industry's hands: localized production, for instance, reduces transport emissions, both for raw materials and finished products. The traceability of the supply chain also shows positive effects. It supports compliance with CO₂ regulations and ethically oriented procurement policies. If sustainability and resilience improve simultaneously, companies could present a new value proposition—and thereby enhance their chances of increasing revenues and margins in the long term.

The Question is How Things Will Continue in and with China

It is not expected that global vehicle production will increase over the next twelve months—quite the opposite. Christian Grimmelt, Partner at Berylls by AlixPartners, summarizes the situation: "Supply chains and customs policies have the potential to necessitate a short-term downward revision of global vehicle production. Strong dependence on raw materials from China plays a decisive role here." In addition to the supply of raw materials from China, such as rare earths, graphite, and cobalt, access to Chinese component suppliers also has a significant impact, as demonstrated by the example of Nexperia. To strengthen the resilience of supply chains, companies should therefore focus not only on regionality but also on the qualification of new production technologies.

This Crisis Also Has Winners

No relief is expected from the U.S. either. "Import tariffs will lead to higher costs or reduced sales volumes for companies without U.S. production sites," says Fabian Piontek. However, manufacturers with their own production capacities in the U.S. will also face higher costs due to production relocations from the EU. This development, of course, also impacts suppliers. Overall, he assumes that revenues will continue to stagnate. Additionally, margins for suppliers are expected to come under pressure over the course of 2026—albeit to a lesser extent than for OEMs.

In fact, the development does not appear equally negative for all product groups. Stefan Schneeberger states: "Semiconductor manufacturers like Infineon, NXP, or ST Micro will continue to be the winners of the crisis, as they have been this year. Revenues and margins will reach record levels. Battery manufacturers also remain in the fast lane, driven by the increasing market penetration of electric vehicles. We expect a 32 percent BEV market share in new registrations worldwide by 2030." This is likely to bring significant revenue growth to battery manufacturers in 2026 and beyond.