OESA KPMG
2018 AutoPulse SurveyAutomotive industry insights from the suppliers’ perspective
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2018 OESA KPMG AutoPulse Survey
ForewordDear Readers,
The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry is today, how it is evolving and where it is headed. The data within was provided by OESA supplier members from March to May 2018.
We anticipate that the results of the survey will be the basis for an ongoing dialogue between you and your employees, your customers and others inside and outside of the industry. Nobody can predict the future with precision, but hopefully this tool helps you better navigate the uncertainties that lay ahead.
If you were one of the nearly 200 members that responded to the survey, thank you for your participation. Enjoy the read. We hope it leads to engaging conversations and stimulates rigorous debate about the exciting future of the automotive industry.
Sincerely,
Julie Fream
OESA, President
Gary Silberg
KPMG, Automotive Practice Lead
3© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2018 OESA KPMG AutoPulse Survey
Table of Contents
Overview 4
About the AutoPulse Survey – Demographics of Respondents 5
Industry Outlook 6
Megatrends 7
CAFE Mandates and Enhancements 8
Talent Remains Constrained 9
U.S. has the Highest Talent Shortage 10
Views on the Supply Chain 11
Regional Attractiveness 12
KPMG Thought Leadership 13
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2018 OESA KPMG AutoPulse Survey
OverviewRapid industry transformation, uncertain trade agreement and policies
The technological and business model disruptions have already impacted the industry significantly. As the mobility ecosystem and autonomous/electric vehicle technologies mature, the automotive industry will be forever transformed but with many uncertainties and questions –what’s tomorrow’s traditional way of doing business and how do we prepare for it? Furthermore, the recently negotiated USMCA and potential trade disruptions add more uncertainty to the industry.
66%Industry transformation
66% of respondents believe that a major tech company will enter the Auto Market as an OEM in the next ten years
46%Industry Talent Shortage Outlook
46% of respondents believe the industry talent shortage will worsen, compared to 35% in the previous survey
52%Disruption expected
52% of respondents believe a supply chain disruption is likely to occur in the next twelve months, compared to 31% in the previous survey
87%CAFE Mandate & Enhancements
Already, 87% of respondents believe electric vehicle programs are or will be part of their companies’ revenue streamsKPMG Global Automotive Executive
Survey 2018www.kpmg.com/gaes2018
5© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2018 OESA KPMG AutoPulse Survey
About the AutoPulse SurveyRespondents by Job Title Respondents by Primary Customer Type
Respondents by Region Respondents by Company Revenue
The Respondents
Nearly 200 respondents provided their views on the topics covered in the 2018 AutoPulse survey.
The depth of participation provides for a robust global data set from which to identify perspectives and formulate conclusions about how OESA members view the current automotive industry.
Click hereto access
interactive data
37%
31%
28%
4%
Director
Executive
Manager
Associate
2%
2%
20%
75%
Non-Automotive
Tier II or Lower
Tier I
OEM
United States38%
Western Europe
30%
Japan15%
Canada6%
Rest of World
8%
China1%
Mexico3%
> $5B41%
$1B - $5B25%
$250M - $1B19%
$50M - $250M11%
< $50M5%
6© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2018 OESA KPMG AutoPulse Survey
Industry Outlook
6%
74%
19%
8%
71%
21%
9%
56%
35%
5%
79%
16%
Sales will increase by5% or more
Sales will remainabout the same
Sales will decreaseby 5% or more
North American Light Vehicle Sales Outlook20182017.520172016.5
Survey responses suggest a gradual industry transformation, with suppliers focused on new products to keep pace with the future technology roadmap. While the majority of respondents expect a relatively constant sales outlook, a potential rise in interest rates, along with high vehicle inventory levels could result in slowed vehicle sales.
44%
53%
3%
87%
12%
1%
66%
33%
0%
79%
21%
0%
Interest rates likelyto increase
Interest rates likelyto stay the same
Interest rates likelyto decrease
12-Month View on Interest Rates20182017.520172016.5
28%
21%
18%
14%
12%
4%
3%
1%
0%
Develop new products/services
Improve on what we currently do
Acquire new technologycompany/companies
Seek new customers
Hire new talent
Divest underperforming/non-corebusiness lines
Enter new geographic markets
Relocate manufacturing
Outsource non-core products/services
To be a relevant supplier in ten years, what actions does your firm need to take?
4%
16%
34%
46%
No opinion
Shift is detrimental
Little or no impact
Shift is beneficial
How is the consumer shift in the US from sedans to utility vehicles impacting your company?
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2018 OESA KPMG AutoPulse Survey
MegatrendsThe timing and impact of electric & autonomous vehicles are impossible to predict. Given recent examples of disruptions (e.g. Tesla production issues and OEM announcements of switching to EV), trends indicate a major industry transformation is coming, with potentially various co-existing drivetrain technologies (BEVs, FCEVs, ICEs, and hybrids)
70%
30%
73%
27%
73%
27%
66%
34%
Yes
No
Will a major tech company enter the Auto Market as an OEM in the next ten years?
2018
2017.5
2017
2016.5
1%
4%
44%
50%
1%
9%
53%
37%
0%
9%
45%
46%
0%
9%
45%
46%
Never
Less than 5years
5 - 10 years
More than 10years
2018
2017.5
2017
2016.5
Expected Commercial Availability of Self-Driving Cars
54% of respondents believe self-driving cars will be commercially available in 10 years or fewer
8© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2018 OESA KPMG AutoPulse Survey
CAFE Mandate & Enhancements
5%
4%
11%
80%
11%
6%
15%
69%
7%
5%
12%
76%
No opinion
Repealed
Maintained
Reduced or delayed
2018 2017.5 2017 11%
1%
22%
66%
8%
1%
27%
64%
8%
1%
32%
58%
No opinion
Decrease
Remain unchanged
Increase
2018 2017.5 2017
6% 2% 5%
20% 24%
43%
4% 6% 6%14%
21%
49%
1% 6% 8%14%
33% 38%
1% 1% 7%17%
43%31%
Smaller vehicles Crash avoidancesystems to reducestructure weight
Vehicle sales mix Lightweighting Alternative fuel Powertrainenhancement
2016.5 2017 2017.5 2018
Recent developments in the auto industry may have accelerated plans to electrify cars in order to meet the European and Chinese emissions and electric-car requirements. Respondents ranked alternative fuel 10 percentage points higher than the previous survey, supplanting powertrain enhancement as the expected change with the greatest impact on CAFE in the next 10 years.
Under the current administration, do you believe CAFE mandates will be:
In the next five years, do you expect your company’s level of investment in light-weighting and emission technologies to:
Rank the following vehicle changes/enhancements in terms of impact on CAFE over the next ten years Alternative fuel appears to be gaining momentum amongst respondents
87% of respondents companies’ are gearing up in anticipation of increased demand for electric vehicles, with 64% either already supplying or expecting new business from electric vehicle programs in the next 12 months.
9© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2018 OESA KPMG AutoPulse Survey
4%
48%46%
3%6%
55%
35%
5% 6%
42%
49%
3%
9%
60%
31%
Getting betterStaying the sameGetting worseNo opinion
2018
2017.5
2017
2016.5
Talent Remains Constrained
In which ways is your company being impacted by a shortage of “the right” talent?
Talent shortage and industry perception are worsening. Industry transformation may face challenges46% of the respondents believe the industry talent shortage will worsen over the next 12 months, representing an 11% increase from the previous survey. As the traditional automotive industry continues to transform and competition with other non-traditional auto companies intensifies, the talent shortage may cause lagging innovations, production inefficiencies, and a slow down in new product developments.
How do you view the industry’s talent shortage issue trend over the next 12 months?
4.8%
6.8%
4.1%
3.4%
4.8%
4.8%
3.4%
4.1%
5.4%
38.8%
22.4%
34.7%
36.7%
19.0%
13.6%
27.9%
19.7%
18.4%
33.3%
40.1%
31.3%
30.6%
44.9%
36.7%
29.9%
31.3%
36.7%
17.0%
23.8%
21.1%
18.4%
24.5%
34.0%
28.6%
37.4%
27.9%
6.1%
6.8%
8.8%
10.9%
6.8%
10.9%
10.2%
7.5%
11.6%
Delivery issues
Cost increases
Launch delays
Quality issues
Slow down in performance improvement
Slow down in new product development
Production inefficiencies
Lagging or lacking innovation
Lower employee morale
No Opinion No Impact Slight Impact Moderate Impact Significant Impact
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2018 OESA KPMG AutoPulse Survey
U.S. has the Highest Talent Shortage
Industry Talent Shortage Regions61% of the respondents indicated the United States has the most acute industry talent shortage amongst all regions surveyed, followed by Mexico (29%), both of which worsened compared to the previous survey. Recent OESA Supplier Barometer results echoed this, indicating that most suppliers are having difficulty finding qualified skilled workers in the U.S. and Mexico, and more suppliers in the U.S. and Mexico are running on alternate shift schedules compared to last year.
AutoPulse respondents believe the primary causes of the industry’s talent shortage to be the perception of the industry by millennials and other industries attracting specific talent types.
Primary Cause of Industry’s Talent Shortage
16%
24%
25%
61%
66%
Intensity of global competition
The "automotive culture"
Talent flight caused by the Great Recession
Other industries/start-ups/locations attractingspecific talent types
Perception of the industry by Milennials
0.5%
1.0%
1.5%
4.0%
5.5%
7.0%
12.5%
12.5%
18.0%
37.5%
0.8%
1.6%
0.0%
1.6%
4.9%
8.1%
13.0%
18.7%
16.3%
35.0%
South Korea
South America
Other
India
Japan
Canada
China
Europe
Mexico
United States
2018 2017.5
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2018 OESA KPMG AutoPulse Survey
Views on the Supply Chain
The top three factors considered by respondents to pose the biggest threat to supplier profit margins have remained consistent with prior surveys
The Three Biggest Threats to the Supply Chain
Compared to the previous survey, the percentage of respondents believing a supply chain disruption occurring in the next year is at least somewhat
likely has increased from 31% to 52%
Extremely likely 10%
Somewhat likely 42%
Neutral 29%
Somewhat unlikely 15%
Not likely at all 4%
42%
38%
51%
46%
49%
31%
38%
62%
65%
67%
48%
41%
57%
50%
71%
Trade policies and tariffs
Talent availability
Program launches - frequency andshortened time frame
Quality and delivery requirements
Capacity availability
2018 2017.5 2017
Likelihood of a Disruption Occurring in the next Twelve Months
1st 2nd 3rd
Level of investment needed to win and
retain businessPeer competition
Expected price-downs
86%
65%
34%
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2018 OESA KPMG AutoPulse Survey
Regional Attractiveness
Unchanged
Revenue Growth Potential in the Next Ten Years
1
64%22%
2
China ASEAN
Greatest… Least…
Japan
24%
Expected Return on Invested Capital in the Next Ten Years
1
51% 25%
2
China Mexico
Greatest… Least…
India
21%9
9
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2018 OESA KPMG AutoPulse Survey
KPMG Thought LeadershipThe Clockspeed Dilemma The Future of the Car
Me, My Car, My Life Metalsmith or Grid Master
Global Automotive Executive Survey 2018
Click on picture of cover to launch thought leadership
Your Connected Car Is Talking. Who’s Listening?
I see. I think. I drive.(I learn)
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Gary SilbergThe Americas Head of Automotive200 E. Randolph DriveChicago, IL [email protected]
Joseph A. RadeckiManaging Director, Deal Advisory1225 17th Street, Suite 800Denver, CO [email protected]
Jack WilliamsManager, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]
Anthony Y. LoManager, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]
William G. DiehlManaging Director, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]
Vince PavlakPartner, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]
Timm KuechleDirector, Deal Advisory200 E. Randolph DriveChicago, IL [email protected]
Dan YuManager, Data & Analytics20 Pacifica, Suite 700Irvine, CA [email protected]
Julie A. FreamPresident & CEO25925 Telegraph Road, Suite 350Southfield, MI [email protected]
Mike A. JacksonExecutive Director, Strategy & Research25925 Telegraph Road, Suite 350Southfield, MI [email protected]
April BufordSenior Director, Communications25925 Telegraph Road, Suite 350Southfield, MI [email protected]