automotive supplier industry – general overview · streams (export opportunities and aftersales)...
TRANSCRIPT
Presentation @ TAYSADAssociation of Automotive Parts and Components Manufacturers
Istanbul, May 2017
AutomotiveSupplier Industry –General Overview
220170526_Roland Berger_TAYSAD_vF.pptx
Contents
This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation.
It may not be passed on and/or may not be made available to third parties without prior written consent from and .
© Lazard/Roland Berger
Record profits, but at slower growth
Looking back
Four main challenges in the supplier industry
Looking ahead
Key actions for automotive suppliers
Conclusions
@ Roland Berger
Contact
A B C D
320170526_Roland Berger_TAYSAD_vF.pptx
Record profits, but at slower growth
Looking back
Four main challenges in the supplier industry
Looking ahead
Key actions for automotive suppliers
Conclusions
@ Roland Berger
Contact
A B C D
420170526_Roland Berger_TAYSAD_vF.pptxSource: Company information; analyst forecasts; Roland Berger/Lazard
2015 was another excellent year for suppliers with record profits –However, at increased volatility and slower revenue growth globally
1) EBIT after restructuring items 2) EBIT after restructuring items/capital employed
Key supplier performance indicators, 2007-2015e (n=~600 suppliers)
130122
11411099
82
98100
134
151413121110090807 15
7.4
14
7.3
13
7.2
12
6.8
11
6.5
10
6.9
09
1.6
08
2.1
07
6.4
15
13.5
14
13.1
13
13.7
12
13.0
11
13.0
10
13.8
09
2.7
08
3.1
07
12.7
Revenue growth EBIT1) margin [%] ROCE2) [%]
Indexed [2007=100]
Y-o-Y [%]
367
4
11
21
-16
-2
520170526_Roland Berger_TAYSAD_vF.pptx
Cross-industry comparison shows that automotive suppliers still generate far lower margins than other industry sectors
EBIT margin across selected industries1)
3.9
6.2
Healthcare
13.7
15.515.7
12.9
15.6
Energy
4.7
10.0
8.28.4
Airlines
9.7
Machinery
10.4
6.76.55.8
Automotive
Suppliers
Automotive
OEMs
6.4
9.2
6.57.4
10.3
Aerospace
& Defence
2015e20112007
1) Up to top 100 publicly traded companies worldwide of each sector (except for automotive suppliers)
Source: Capital IQ; Roland Berger/Lazard
620170526_Roland Berger_TAYSAD_vF.pptx
Key driver of these results was growing vehicle production in the main markets – Although growth rate lower than in the past
1) Incl. light commercial vehicles 2) CAGR 2011-2015 3) Excluding CIS and Turkey 4) Greater China
2015201420132011 2012
+3%
17.517.016.215.413.1
World
NAFTA Europe3) China4)
South America Japan/Korea
2014 20152011 2012 2013
18.118.0 19.316.9
+7%
17.1
20142011 2013 20152012
17.623.0 23.7
+3%
21.318.6
2011 20142012 20152013
3.04.54.34.3
-20%
3.8
2011 20132012 20152014
76.9 81.5
+1%
87.484.7 88.3
20122011 20142013 2015
13.2
-3%
12.5 13.714.0 13.5
Source: IHS; Roland Berger/Lazard
Global light vehicle production volume1) by region, 2011-2015 [m units]
CAGR2): 7.4% CAGR2): 1.8% CAGR2): 7.7%
CAGR2): -8.3% CAGR2): 3.5% CAGR2): 1.4%
720170526_Roland Berger_TAYSAD_vF.pptx
-30
-20
-10
0
10
20
30
2411109876543210
USUK
Turkey
Thailand
Spain
S. Korea
Slovakia
Russia
Mexico
Japan
Indonesia
India
Germany
FranceCz.Rep.
Iran
Canada
Brazil
China
-30
-20
-10
0
10
20
30
109876543210
Tata
FCA
Ford
GM
Hyundai
BMW
SAIC
Mazda
Changan
Mitsubishi
Geely
BAIC
Fuji Heavy
Great Wall
Daimler
Suzuki
PSA Honda R-N VW
Toyota
Major decline in Brazil and Russia – Chinese manufacturers and premium OEMs keep on fueling the growth – Turkey as Winner
Top 20 by country and by OEM group, light vehicle production1)
Source: IHS; Roland Berger/Lazard
1) Incl. light commercial vehicles 2) Year-on-year growth rate
Production ∆∆∆∆ 2015 vs. 2014 [%] 2)
Avg. 1.0%
By production country By OEM group
Total production 2015 [m units]
Winners
Losers
Winners
Losers
820170526_Roland Berger_TAYSAD_vF.pptx
Financial performance of suppliers varies greatly depending on region, company size, product focus and business model
Profitability trends in the global automotive supplier industry – 2015 vs. 2007
Source: Company information; Roland Berger/Lazard
> NAFTA-based suppliers currently achieve the highest margins with >8% EBIT
> Europe-based suppliers con-tinue to show a strong perfor-mance due to their leading technology positioning
> Chinese supplier margins have dropped to industry average due to intensified local competition
> Japanese suppliers remain at a low margin level of ~6% EBIT
> Large suppliers with >EUR 10 bn revenues maintain strong margins of ~8% EBIT
> Lower midsized suppliers (EUR 0.5 to 2.5 bnrevenues) have improved and remain above average
> Upper midsized suppliers (EUR 2.5 to 5 bn revenues) remain below average
> Small suppliers (below EUR 0.5 bn revenues) have the lowest margins at ~5% EBIT
> Chassis suppliers clearly improved margins to almost 8% EBIT driven by ADASand active safety
> Tire suppliers maintained strong margins based on their aftermarket business
> Powertrain suppliers gradually lost ground and achieve below-average margins in the meantime
> Interior suppliers still trail their peers, but have shown signs of recovery recently
> Product innovators are generating stable above-average margins of ~8% EBIT based on technology leadership translated into higher prices
> Process specialists continue to face below average margins of ~6% EBIT due to a lower innovation level and higher competitive pressure
Region Company size Product focus Business model1 2 3 4
920170526_Roland Berger_TAYSAD_vF.pptx
However, top performance is not necessarily related to (product) innovation only
Key performance indicators of top vs. low performing suppliers1)
1) Top (low) performance based on above- (below-) average revenue growth 2007-2014, ROCE 2007-2014 and ROCE 2014 2) EBIT after restructuring items
Source: Company information; Roland Berger/Lazard
Revenues CAGR 2010-2015e
0
1
2
3
4
5
6
7
8
9
10
11
12
13
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Low product
innovators
Top process
specialists
Low process
specialists
Top product
innovators
Avg. EBIT2) margin 2010-2015e
> Product innovators lead process specialists in terms ofaverage profitability – no real difference in terms of growth
> Top process specialists, though, achieve average margins close to those of the top product innovators
> Large difference in growth rates between top and low performing process specialists indicates the relevance of scale economies
Ø = 6.3%
Ø = 7.0%
Revenues 2014
1020170526_Roland Berger_TAYSAD_vF.pptx
Record profits, but at slower growth
Looking back
Four main challenges in the supplier industry
Looking ahead
Key actions for automotive suppliers
Conclusions
@ Roland Berger
Contact
A B C D
1120170526_Roland Berger_TAYSAD_vF.pptxSource: Company information; Roland Berger/Lazard
Supplier global revenue and margin outlook, 2016/2017e
09
82
08
98
07
100 99
114
11 12
110
10
122
17e16e15
134
14
130
13
Revenue growth [2007=100] EBIT1) margin [%]
12 17e16e15
7.4
14
7.3
13
7.2
6.4
1.6
1109
6.86.9
08 10
2.1
6.5
07
Short term, we expect even slower growth and margins still at a high level – Due to increased volatility, risks outweigh opportunities
1220170526_Roland Berger_TAYSAD_vF.pptx
A potential market cool-down in 2016 and future technology changes stay at the top of the supplier CEO agenda
Source: Roland Berger/Lazard
Note: Excluding product segment specific technology and operational issues
Supplier CEO radar screen for 2016 and beyond
Car buyers
OEMs
Competition Supply base
Capital markets/financing
Technology/legislation
Long-termShort-term
Volatility of capital markets
"Zerocasualties"
Rising energy costs
Availabilityof skilledworkforce
Supplierinsolvencies
Factor costinflation
Selective consolidation
BRA/RUSdownturn
"Rising star OEMs"
China cool-down
Globallocalization
Price pressure
Volumebundling
Emerging market
investors
New growth regions
Continued outsourcing
ADAS/ automated
driving
Further reduced
emissions
Comfort featuresNew players
(hardware and software)
Volatility ofexchange
rates
Demotorization
Connected vehicle
Triad stagnation
Investors' and banks' view
on auto suppliers
New mobility
concepts
Terms & conditions
Further reduced CO2 targets
Global recession
Diesel
Industry 4.0
1
23
4
New customers(IT/tech space)
Brexit
1320170526_Roland Berger_TAYSAD_vF.pptx
Development of global hotspot markets is drifting apart – China maturing, Brazil struggling, Iran revitalizing and EU faced with Brexit
Source: Roland Berger/Lazard
United States Europe China
Brazil
> Sales of SUVs and pickups at high level driven by low fuel prices
> Vehicle emissions receive new attention due to COP21 and diesel controversy
> New mobility business models emerge with the US being a frontrunner
> Unexpectedly high growth of sales volumes across most markets in first months of 2016
> Controversy about emissions (and diesel in particular) in the public debate
> EV sales still not picking up yet
> Uncertainty arising from Brexit decision
> SUV and MPV boom continues, but overall growth slows down
> Chinese OEMs reinforce their market position as quality increases
> EV market starting to evolve
> Competition remains high in budget and premium segments
> Sales volume risks lead to profitability concerns of OEMs
> OEMs seek alternative profit streams (export opportunities and aftersales)
Iran
> Sanctions lift promotes growth of economy and vehicle demand
> Demand for high-quality cars increases
> Demographics develop in a beneficial manner
Overview of global "hotspots" 2016
1 Sales volume challenge
1420170526_Roland Berger_TAYSAD_vF.pptx
Most recent M&A deals were driven by technology and customer/ market access – Economics-driven consolidation still not picking up
Rationale
Empirical evidence in recent deals
Major types of M&A motivation
Dominant acquirers/ domains
Source: Roland Berger/Lazard
Technology access
> Gain access to new or strengthen existing technology/material or process capabilities to secure/establish USP (horizontal and vertical)
> Easiest to communicate sustainable "value add"to investors
> Driver of many Chinese transactions
> Established, larger suppliers
> Recently, also OEMs in the field of autonomous driving
Market/customer access
> Gain access to regions or customers not served to date – via existing business or asset deals (e.g. capacity of production locations)
> Pure "expansion" deals without technology focusare rare
> Driver of many cross-border transactions, e.g. from Japan
> In the past, typically driven by established market players, today primarily led by emerging market players
Economics-driven consolidation
> Optimize highly fragmented and inefficient marketstructures
> Not favored by the OEMs in many cases
> Buyers often cautious about restructuring activities required
> Typically occurring in process-focused segments with pressure on revenues, margin and utilization
Financial value creation
> Due to healthy sector environment, rather muted deal activity in this area
> Create value by turning around under-performing or distressed assets and/ or divestments
> Manufacturing-focused financial buyers, mainly private equity firms
2 M&A challenge
1520170526_Roland Berger_TAYSAD_vF.pptx
Emission regulations increase pressure on automotive OEMs to improve CO2 emissions, fuel efficiency and exhaust gas emissions
GHG emissions/fuel consumption [CO2] Toxic emissions (NOx, PM, HC)
Passenger car GHG emissions/fuel consumption [g/km] and toxic emission regulations
> CO2 emissions target1)
> Fuel efficiency targets3)
> Inovar–Auto incentive program5)
> CAFC4) (phase IV)> Add. potential fleet
xEV target share
> CAFE2)
> Additional ZEV regulation CARB
≙ 2.01 MJ/km
≙ 1.82 MJ/km≙ 44.8 mpg
1) Weight-based corporate average 2) Footprint-based corporate average; converted to NEDC 3) Weight-class based corporate average; showing JC084) Weight-class based per vehicle and corporate average 5) Weight-class based corporate average; converted to NEDC
> 2014: Euro 6b emission standard
> 2017: Euro 6c with implementation of RDE, WLTP
> 2015: CARB LEV III
> 2017: EPA Tier 3 Standards
> 2009: Post new long-term (PNLT)
> 2018: Post-PNLT (PPNLT)
Source: Press research; ICCT; Roland Berger/Lazard
95
127
-25%
2025
68-78
tbd
20212013
121
-1%
2025
tbd
2020
115
2012
171
-32%
2025
95
2020
117
2013
tbd
154
-10%
2025
tbd
2017
138
2013
97
2013
159
125
20252020
≙ 19.4 km/L
≙ 20.3 km/L
≙ 36.0 mpg
≙ 5 L/100km
≙ 7.3 L/100km
> 2016: China 5 and Beijing 5
-21%
3 Emission challenge
1620170526_Roland Berger_TAYSAD_vF.pptx
Launch horizon for AD functions
Market indicates that the first level 3 systems would be availableby 2017
~2013 ~2020~2016~2014 ~2015 ~2017 ~2018 ~2019 ~2025 >2025
Parking assistant (steering only) Valet parking
"Parking with app"
Emergency steering assistant
Lane change assistant City pilotIntersection assistant
Lane departure warning Traffic jam pilot Fully automated driving
Parking
Safety
Driving
Emergency cut-offConstruction area assist
Level 3 Level 4
Highway pilotTraffic jam assist Exit2Exit
Source: Press research; conference papers; Bosch; Roland Berger/Lazard
Emergency braking assistant and pedestrian detection
4 Automated driving challenge
1720170526_Roland Berger_TAYSAD_vF.pptx
Record profits, but at slower growth
Looking back
Four main challenges in the supplier industry
Looking ahead
Key actions for automotive suppliers
Conclusions
@ Roland Berger
Contact
A B C D
1820170526_Roland Berger_TAYSAD_vF.pptx
261
171 858
Revenue
pool 2025e
Net price-
downs
-167
"Losing"
components
-112
"Winning"
components
Volume
growth2)
Revenue
pool 2015
~705
Global automotive component market development 2015 vs. 2025
The market for auto suppliers is expected to yield substantial further growth opportunities – Innovation will be key to capturing them
Component market value1) [EUR bn] Winning and losing components
1) Light vehicle OE market, excluding commercial vehicle and aftermarket portion 2) Change driven by vehicle production volume (volume per car at 2015 level)3) Additional growth/decline caused by change in product/technology content per car
Po
wer
trai
n/
xEV
H2 tanksBSG 48VFuel cellBattery cells Large e-motors
Diesel - Unit injectorDiesel - Indirect injectorsAT (3/4 stage)StarterGenerators
Ext
erio
r
A-Pillar - CompositeB-Pillar - CompositeRoof cross member - Composite Rear cross member - Composite Tunnel - Composite
Longitudinal beam - Steel Front wall cross beam - Steel Hood - Steel Rear lamps - Conventional Trunk lid - Steel
Inte
rio
r
AC compressor - ElectricPedals - ElectronicHVAC EVPTC heater - xEV heaters Seat structure (lightweight)
HVAC module (w/o AC)Parking heaterWindow lifter - Mechanical AC compressor - Conventional HVAC control - Manual
Ch
assi
s/
AD
AS
Electric/mechanical caliperCoil springs - Composite Leaf spring - Composite ADAS/HAD Electric parking brake
Power pack e-hydraulic Power pack hydraulic Power pack pinion EPS Brake booster (passive)Leaf springs conventional
Source: Roland Berger/Lazard
Product mix3) Losers Winners
up to -10% up to -20% more than -20%
up to +20% up to +40% more than +40%
1920170526_Roland Berger_TAYSAD_vF.pptx
Record profits, but at slower growth
Looking back
Four main challenges in the supplier industry
Looking ahead
Key actions for automotive suppliers
Conclusions
@ Roland Berger
Contact
A B C D
2020170526_Roland Berger_TAYSAD_vF.pptx
Thank you!
Source: Roland Berger
Alexander Brenner
PARTNER
Am Sandtorkai 41
20457 HamburgGermany
Source: Roland Berger
Phone: +49 40 37631 - 4318
e-Mail: [email protected]
Mobile: +49 160 744 - 4318