Auto Parts Manufacturers
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 3,800 auto parts manufacturers in the US produce components, modules, and systems for auto manufacturers (also known as original equipment manufacturers or OEMs), other parts suppliers, and the aftermarket. About 70% of automotive parts are for OEMs, while 30% are destined for the repair/modification market (aftermarket).
Vulnerability to Commodity Prices
Auto parts manufacturers are vulnerable to variability in costs of raw materials, particularly steel, oil, copper, resins, and rubber.
Dependence on Auto Industry
The auto industry is highly cyclical and sensitive to changes in economic conditions.
Industry size & Structure
The average auto parts manufacturer employs 140 workers and generates $68 million in annual revenue.
- The auto parts manufacturing industry consists of about 3,800 companies that employ 535,000 workers and generate $260 billion annually.
- Breakeven production for auto parts manufacturers is estimated to be between 13.5 million and 15 million units, according to the Original Equipment Suppliers Association.
- The five major component systems in an average car include the body exterior (25% of total costs), interior (24%), electronics and electrical (18%), powertrain (18%), and chassis (15%), according to Munro & Associates.
- Large companies include Adient (spin-off of Johnson Controls), Delphi Automotive (BorgWarner), and Lear.
Industry Forecast
Auto Parts Manufacturers Industry Growth
Coronavirus Update
May 4, 2022 - EVs Reshape Auto Industry
- Soaring sales of electric vehicles (EVs) are a sign that the internal combustion engine (ICE) is on the road to obsolescence, according to a recent article in CleanTechnia. As a result, makers of mufflers, fuel injection systems, and other auto parts in ICE-powered vehicles won’t be needed. Instead, EVs require new types of car components like electric motors, lithium batteries, chargers, and controllers. Moreover, because EVs have fewer moving parts and require less maintenance than ICE-powered vehicles, overall demand for replacement parts and the labor to make them will decline, posing a threat to the auto parts industry’s 535,000 employees.
- Automotive suppliers are having a hard time finding and retaining enough workers to keep their plants running at full capacity, according to a recent blog post on the top legal issues facing the automotive industry in 2022 by law firm Foley & Lardner, LLP. Suppliers are facing surging costs for labor, if they can find it, and trouble retaining workers. Production disruptions caused by parts shortages have created uncertainty among employers about how many of their workers will return once production resumes. To attract applicants and encourage employees to remain with the company, many employers have increased financial and other incentives like signing and attendance bonuses and other financial incentives.
- The US and Japan have reached an agreement on tariffs to allow imports of up to 1.25 million metric tons of steel to enter the US duty-free. Additional shipments are still subject to tariffs. The US auto parts manufacturing industry is likely to benefit from the greater steel volume and lower priced products enter the market. The US has also reached a trade deal with the UK that allows a limited volume of steel to enter the US market duty-free.
- The Q1 2022 Automotive Supplier Barometer Index by the Original Equipment Suppliers Association registered “marginally optimistic” at 52. A reading over 50 indicates optimism. The Q1 result was up from the negative reading of 34 in Q3 2021. Small and medium suppliers were more optimistic but large suppliers remained pessimistic. Top threats to industry improvement include production slowdowns, supply chain shortages, labor availability, backlogs, cost pressures, a pandemic resurgence, and rising interest rates.
- Demand from auto makers may remain below pre-pandemic levels during 2022 due to ongoing semiconductor shortages. Semiconductor chip shortages are believed to have cut global auto output by 3.9 million vehicles in 2021, or 4.6%, according to Time magazine. The auto manufacturing industry lost around $210 billion in revenue in 2021, according to business management consultancy AlixPartners. While chip supplies are increasing, they’re far from back to normal, and production may be down well into 2022. The industry faces other shortages like tires, interior plastics, and seat foams.
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