Booklet of a Supplier Profitability Study

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Supplier Profitability at Record Lows: How Automotive Suppliers Can Regain EBIT Strength

<h2>The Perfect Storm: Structural Pressure and Cost Challenges</h2><p>Automotive suppliers are facing an unprecedented combination of inflation, regulation, electrification impact, and geopolitical instability. These dynamics are reshaping the industry:</p><p>&nbsp;</p><ul style="list-style-type:disc;"><li style="tab-stops:list 36.0pt;">Margins are under historic stress</li><li style="tab-stops:list 36.0pt;">Transformation efforts are outpacing financial resilience</li><li style="tab-stops:list 36.0pt;">Many suppliers are “riding two horses” — stuck between the old ICE world and the EV future</li><li style="tab-stops:list 36.0pt;">Despite growing revenues in some areas, true profitability remains elusive</li></ul><p>&nbsp;</p><p>On top of this, Asian competition — particularly from China and Korea — is accelerating, creating a divide between resilient winners and struggling survivors.</p>

<h2>Whats Inside?</h2><ul><li><strong>Supplier profitability is structurally weakened:</strong> EBIT margins remain below pre-COVID levels, especially for small and mid-sized automotive suppliers</li><li><strong>Growth does not equal resilience:</strong> Only a small number of players qualify as “Winning Champions” with sustainable EBIT</li><li><strong>10–20% of product portfolios are value-destructive: </strong>These “bleeder” programs drain more margin than the rest can recover</li><li><strong>3–5% EBIT is no longer enough: </strong>Modelling shows that a long-term viable EBIT margin must be ~7%</li><li><strong>Refinancing risk is rising: </strong>Low equity ratios and increased capital costs mean strong margins are now essential</li><li><strong>Asian suppliers are gaining ground: </strong>Fast go-to-market cycles, BEV focus, and cost advantages drive their lead</li><li><strong>The BEV trap is real: </strong>Electrification impact can inflate the top line while compressing profit margins</li></ul>

Read the full Study and Unlock Strategies to Regain Supplier Profitability

<h2>Four Supplier Archetypes: Where Do You Stand?</h2><p>&nbsp;</p><p>H&amp;Z categorises companies into four archetypes — each with its own risk profile and transformation urgency. Understanding where your company stands is the first step towards a realignment strategy.</p>

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    Winning Champions
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      <h3>Winning Champions</h3>
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        <li>Best-in-class performers combining profitability and strong growth</li>
        <li>Suppliers successful scaling while maintaining strong financial performance, likely through innovation, efficiency, and pricing power</li>
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    Stable &amp; Selective
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      <h3>Stable &amp; Selective</h3>
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        <li>Focused on profitability, but lacking growth momentum</li>
        <li>Suppliers maintaining solid margins through efficiency and pricing discipline but struggle with expanding market presence</li>
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    Struggling Survivors
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      <h3>Struggling Survivors</h3>
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        <li>Cost inefficiencies, pricing pressures, or market position with commoditised products may be key factors</li>
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    Growth at any Cost
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      <h3>Growth at any Cost</h3>
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        <li>Expanding aggressively while sacrificing profitability</li>
        <li>Suppliers prioritise market share over margins, often relying on price concessions or high investment in unprofitable projects</li>
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Publications

<h2>Publications</h2><p>&nbsp;</p><p>&nbsp;</p>

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Insights

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Supplier Profitability at Record Lows: How Automotive Suppliers Can Regain EBIT Strength

The Perfect Storm: Structural Pressure and Cost Challenges

Whats Inside?

Read the full Study and Unlock Strategies to Regain Supplier Profitability

Four Supplier Archetypes: Where Do You Stand?

Winning Champions

Stable & Selective

Struggling Survivors

Growth at any Cost

Connect with Our Experts to Learn More

Albert Neumann

Tobias Stahl

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