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OESA KPMG2017 AutoPulse Survey
Automotive industry insights
from the suppliers’ perspective
2© 2017 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.
2017 OESA KPMG AutoPulse Survey
ForewordDear Readers,
The AutoPulse survey was developed by KPMG and OESA to provide the OESA membership with unique
insights and perspectives on where suppliers view the industry is today and where it is headed. The data
within was provided by OESA members from March to April 2017. We will issue the survey twice a year
to highlight the evolution of industry trends. This report represents the first half survey for 2017.
We have prepared this 2017 report as a means to efficiently share the data and some interesting
perspectives that can be garnered from it. We hope that it provides the OESA membership with helpful
points of view, an understanding of how the industry is evolving, and insights into where it may be
heading.
We anticipate that the results of the survey will be the basis for an ongoing dialogue between you and
your fellow 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 more than 500 members that partook in the survey, we thank you for your
participation. If you missed taking part, please take the time to participate in the next survey that will be
available in the second half of 2017. The invitation to participate will come in a correspondence from
OESA and KPMG this summer. The more responses we receive, the more rich the data set, and the
more beneficial it will be for our membership.
Enjoy the read. We hope it leads to valuable insights, initiates engaging conversations, and stimulates
rigorous debate about the exciting future of the automotive industry.
Sincerely,
Julie Fream Gary Silberg
OESA, President KPMG, Automotive Practice Lead
3© 2017 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.
2017 OESA KPMG AutoPulse Survey
Executive Summary 4
About the AutoPulse Survey – Demographics of Respondents 5
Industry Trends: Changing Business Model…? 6
… Disruption by Self-Driving Cars? 7
CAFE Mandates: Evolutionary vs. Revolutionary 8
NAFTA: Changes Unwelcome 9
Views on the Supply Chain 10
Bracing for the Talent Crisis 11
Regional Attractiveness 12
KPMG Global Automotive Thought Leadership 13
4© 2017 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.
2017 OESA KPMG AutoPulse Survey
Executive SummaryA Dynamic Global Industry with Disruption Looming
Strong Data PoolData collected from over 500 OESA
members. The 2017 AutoPulse survey
covers diverse topics, including: industry
mega trends, supply chain visibility and
viability, talent shortage, and global
views.
Evolving IndustryAdvancing autonomous and increasing
adoption of mobility technologies are
threatening to disrupt the traditional
automotive business model. 73% of
respondents believe a major technology
company will enter the market as an OEM
in the next ten years, and 61% expect
commercial availability of self-driving cars
in under 10 years.
Talent ShortageA lack of the right human capital is a
concern to the supply base. The areas
impacted the most from lack of talent
remain: employee morale, innovation, and
new product development.
Supply Chain RiskWhile Tier I and Tier II suppliers rank
supply chain risks differently, they agree
that the frequency and shortened time
frame of program launches are one of the
top two supply chain risks. Capacity
availability and quality & delivery
requirements are also top concerns.
Profits Threatened71% of respondents listed OEM price
downs as the op threat to profit margins.
57% of respondents listed the level of
investment needed to win and retain
business as the second top threat to
profits.
Placing Global BetsChina and the U.S. remained on top in
terms of revenue growth potential and
return on invested capital. South America
came in last in both categories.
Reaching CAFE MandatesAlmost half of respondents ranked
evolutionary powertrain enhancements
higher on the agenda than other
revolutionary and demand driven
changes (in terms of meeting future
mandates), while other strategic and
disruptive innovations are considered less
likely to drive fuel economy improvement.
Plateaued Sales71% of respondents believe that the
North American light vehicle sales outlook
for 2017 will remain about the same as
2016. However, the latest U.S Bureau of
Economic Analysis indicated that SAAR
Light Vehicle Sales has dropped to 16.5
million from a peak of 18.3 million in
December.
NAFTA Changes UnwelcomeOver half of respondents expect the
current administration’s NAFTA policies to
negatively impact the automotive supply
chain and their company’s growth
agenda. Nearly half plan to make
investments in Mexico in the next 5-10
years. The majority of the respondents
are not optimistic.
5© 2017 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.
2017 OESA KPMG AutoPulse Survey
About the AutoPulse SurveyRespondents by Job Title Respondents by Customer Type
Respondents by Region Respondents by Company Revenue
The RespondentsOver 500 respondents
provided their views on
the topics covered in the
2017 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 here
to access
interactive data
31%
34%
30%
6%
Director
Manager
Executive
Associate
1%
4%
27%
68%
Non-Automotive
Tier II or Lower
Tier I
OEM
United States45%
Western Europe
25%
Japan12%
Canada8%
Rest of World
6%
China2%
Mexico2%
Over $5 billion35%
$1-5 billion29%
$250 million - $1
billion19%
$50-250 million12%
Less than $50 million
5%
6© 2017 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.
2017 OESA KPMG AutoPulse Survey
Current value drivers have to be reevaluated as the automotive industry continues to
evolve and sales have plateaued. As discussed in KPMG’s Global Automotive Executive
Survey 2017, executives are increasingly more aware of a possible business model
disruption in the automotive industry. Furthermore, by 2025, more than half of all car
owners today will no longer want to own a car. Combined with an outlook of interest rate
increase, consumers may be inclined to shift towards a mobility-as-a-service (MaaS)
model as opposed to a traditional car ownership model.
Industry Trends: Changing Business Model…?
North American Light Vehicle Sales Outlook
Mobility-as-a-
service
Ride sharing and
ownership sharing
OEMs in
competition with
new entrants?
71% of respondents expect sales to plateau, recent statistics
show SAAR light vehicle sales have dipped to 16.5 million.
What does the future hold for the industry?
Industry Barometer
12-Month View on Interest Rates
SAAR Light Vehicle Sales
16.5
5
7
9
11
13
15
17
19
21
23
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: U.S. Bureau of Economic Analysis
OEMs in
cooperation with
new entrants?
KPMG ViewpointKPMG’s Global Automotive Executive Survey
2017 assesses the current state and future
prospects of the global automotive industry, visit
the homepage for the report and the interactive
online dashboard to derive your individualized
analyses.
Future
PresentIndividuals own
cars
6%
19%
74%
8%
21%
71%
Sales will increase by 5%or more
Sales will decrease by 5%or more
Sales will remain about thesame
2017
2016.5
3%
53%
44%
1%
12%
87%
Interest rates likely todecrease
Interest rates likely to staythe same
Interest rates likely toincrease
2017
2016.5
7© 2017 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.
2017 OESA KPMG AutoPulse Survey
… Disruption is Coming
73%Of respondents
believe a tech
company will
become an OEM in
the next 10 years
Last summer, 48% of respondents believed that self-driving cars
would be in the market within 10 years. In just six months, that
number has jumped to 62%.
Autonomy is coming… and fast.
Amazon Forms Team to Focus on
Driverless TechnologyWall Street Journal, April 24, 2017
With an increasing number of tech companies participating in autonomous vehicle
development, 73% of respondents believe a major tech company will become an OEM in the
automotive industry in the next 10 years.
Autonomous driving will revolutionize the industry and the way consumers will use cars.
Many of our respondents already agree. In addition to our findings in this survey, according
to KPMG’s Global Automotive Executive Survey 2017, two out of three executives absolutely
or partly agree that traditional purchasing criteria will become irrelevant with the emergence
of self-driving cars.
Indeed, KPMG’s Gary Silberg in “I see. I think. I drive. (I learn).” expects the new mobility
services segment would be worth $1 trillion dollars by 2030 and expects the transformation of
transportation into a new-age entertainment hub – adding $65 billion of operating profits to
the overall industry value chain from 2016 to 2025. Autonomous driving will also bring a
$300 billion potential economic savings from the elimination of driver errors – the cause of
94% of accidents according to NHTSA, as well as a relief of congested urban infrastructure,
increase in labor productivity, reduction of capital and resources trapped in the car parc, and
improvement in urban land use.
Self-Driving Technology Development in the Press
KPMG ViewpointPlease visit the “I see. I think. I drive. (I learn)”
homepage for KPMG’s insights on the deep
learning technology in the new era in
automotive product development and
manufacturing and key developments for
automakers to contemplate.
Check Out the Lexus That Apple's Using
to Test Self-Driving Car TechnologyBloomberg, April 27, 2017
Samsung steps up its driverless car
challenge to Google, Uber, AppleCNBC, May 2, 2017
Alphabet’s Waymo Teams Up With Lyft to
Test Autonomous CarsBloomberg, May 14, 2017
62% of respondents expect commercial availability of self-driving cars in 10 years or
fewer, representing a significant shift in respondents’ view from “>10 years” in the
previous survey just six months prior.
1%4%
44%
50%
1%
9%
53%
37%
Never Less than 5 years 5 - 10 years More than 10 years
2016.5
2017
8© 2017 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.
2017 OESA KPMG AutoPulse Survey
CAFE Mandates: Evolutionary vs. Revolutionary
KPMG ViewpointGiven the time needed for revolutionary electric drivetrains to be fully implemented, it is expected that traditional
combustion engines will continue to be relevant for quite some time.
Although strategic and disruptive innovations are currently considered least likely to drive the fuel economy
improvement, we expect that an electrified powertrain and crash avoidance features will lead to the desired
significant long-term improvements in fuel economy.
Under the new 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
Almost half of
respondents rank
evolutionary powertrain
enhancements higher
on the agenda than
other revolutionary and
demand driven changes
4%
5%
11%
80%
Repealed
No opinion
The same
Reduced or delayed
1%
11%
22%
66%
Decrease
No opinion
Remain unchanged
Increase
6%2% 5%
20%24%
43%
4% 6% 6%
14%21%
49%
Smaller vehicles Crash avoidancesystems to reducestructure weight
Vehicle sales mix Lightweighting Alternative fuel Powertrainenhancement
2016.5 2017
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International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2017 OESA KPMG AutoPulse Survey
60%
23%
16%
NAFTA: Changes Unwelcome
If the U.S. withdraws from or negotiates NAFTA, how
would it impact your company?
Does your company rely on suppliers or
manufacturing bases in Canada and/or Mexico?
Negative
Neutral
Positive
KPMG ViewpointComplex NAFTA renegotiation issues such as the
border adjustment tax and rules of origin could
create unintended consequences for OEMs and
suppliers. However, despite the uncertainty
surrounding the looming NAFTA negotiations,
almost half of respondents expect their companies
to make significant supply chain investments in
Mexico in the next 5-10 years.
While the renegotiation topics are still being
considered, the majority of respondents are not
optimistic.
60% of respondents expect the current administration’s
NAFTA policies to negatively impact the automotive
supply chain and their companies’ growth agenda
65% of respondents expect to be negatively impacted by a U.S. withdrawal from or renegotiation of NAFTA.
However, nearly half expect to make significant supply chain investments in Mexico in the next 5-10 years.
Do you expect your company to make significant supply
chain investments in Mexico in the next 5-10 years?
Yes
No
No opinion
48%31 %20%
2%
9%12%
44%
21%
11%
Significantpositiveimpact
Positiveimpact
No impact NegativeImpact
Significantnegativeimpact
No opinion
Yes84%
No16%
10© 2017 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.
2017 OESA KPMG AutoPulse Survey
Views on the Supply Chain
2%
27%
40%
23%
8%
Extremely likely
Somewhat likely
Neutral
Somewhat unlikely
Not likely at all
Respondents remain uncertainrelative to their views on the longer-term
chance of a supply chain disruption
1st 2nd 3rd
52.3%
45%51.5%
71%
57%
30%
Program launches –
frequency &
shortened time frame
Capacity
availability
Quality & delivery
requirements
Expected
Price-downs
Level of investment
needed to win &
retain business
Peer
competition
Top three factors considered by respondents to
pose the biggest threat to supplier profit margins
Top three factors considered to pose the biggest threat
to respondents’ supply chain
1st 2nd 3rd
48%
43%47%
Program launches –
frequency &
shortened time frame
Trade policies &
tariffs
Quality & delivery
requirements
Supply chain threats are ranked differentlydepending on respondents’ position in the automotive
supply chain
Tier Is
Tier IIs &
below
71% of respondents rank expected price
downs as the biggest threat to supplier profit
margins
11© 2017 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.
2017 OESA KPMG AutoPulse Survey
10%
38%
51%
64.2%
58.2%
58.0%
56.5%
56.1%
55.0%
51.1%
46.6%
44.4%
27.9%
32.6%
32.1%
30.6%
32.6%
35.7%
36.4%
39.6%
36.6%
7.9%
9.2%
9.9%
12.9%
11.3%
9.2%
12.5%
13.8%
19.0%
Delivery issues
Production inefficiencies
Slow down in performance improvement
Quality issues
Launch delays
Cost increases
Slow down in new product development
Lagging or lacking innovation
Lower employee morale
Slight impact Moderate impact Significant impact
Bracing for the Talent Crisis
9%
60%
31%
6%
42%49%
Getting better Staying the same Getting worse
2016.5 2017
How do you view the industry’s talent shortage issue
trend over the next 12 months?
In which ways is your company being impacted by a shortage of “the right” talent?
While the overall percentage of respondents believing the talent shortage will stay the
same or get worse over the next 12 months remained constant at 91%, the
respondents believing it will worsen has grown to nearly half of the respondents (from
31% to 49%) in the past six months. With all of the potential disruptors on the horizon,
we expect talent shortage to be a significant challenge for the foreseeable future.
KPMG Viewpoint
Worse
Unchanged
Better
51% of respondents expect access to
highly skilled/technical labor in the
U.S. to worsen
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International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2017 OESA KPMG AutoPulse Survey
Regional Attractiveness
Unchanged
Revenue Growth Potential in the Next Ten Years
1
45% 30%2
China United States
Greatest… Least…
South America
31%
Expected Return on Invested Capital in the Next Ten Years
1
34% 32%
2
China United States
Greatest… Least…
South America
39%9
9
Respondents rank China and the United States as the most attractive regions in terms of revenue growth
and return on invested capital, over the next ten years. Meanwhile, South America remains the least
attractive with respect to both categories.
13© 2017 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.
2017 OESA KPMG AutoPulse Survey
KPMG Global Automotive Thought LeadershipConnected and Autonomous Vehicles – The UK Economic Opportunity
The Clockspeed Dilemma The Future of the Car
Me, My Car, My Life Metalsmith or Grid Master
Global Automotive Executive Survey 2017
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)
KPMG Insights
KPMG’s knowledge base of
research demonstrates our
understanding of complex
business challenges faced by
companies around the world.
Will autonomous vehicles put the brakes on the collision parts business?
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KPMG LLP OESA
Gary Silberg
The Americas Head of Automotive
200 E. Randolph Drive
Chicago, IL 60601
Joseph A. Radecki
Managing Director, Deal Advisory
1225 17th Street, Suite 800
Denver, CO 80202
Jack Williams
Manager, Deal Advisory
150 West Jefferson, Suite 1900
Detroit, MI 48226
Anthony Lo
Senior Associate, Deal Advisory
150 West Jefferson, Suite 1900
Detroit, MI 48226
William J. Wildern, IV
Managing Director, Deal Advisory
150 West Jefferson, Suite 1900
Detroit, MI 48226
William G. Diehl
Managing Director, Deal Advisory
150 West Jefferson, Suite 1900
Detroit, MI 48226
Timm Kuechle
Director, Deal Advisory
200 E. Randolph Drive
Chicago, IL 60601
Dan Yu
Senior Software Engineer
20 Pacifica, Suite 700
Irvine, CA 92618
Julie A. Fream
President & CEO
25925 Telegraph Road, Suite 350
Southfield, MI 48033
Mike A. Jackson
Executive Director, Strategy & Research
25925 Telegraph Road, Suite 350
Southfield, MI 48033
April Buford
Senior Director, Communications
25925 Telegraph Road, Suite 350
Southfield, MI 48033