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

                                    Oct 2, 2021 - Auto Production Estimates Cut
                                    • AlixPartners forecasts that automakers will lose production of 7.7 million vehicles this year. The company had forecast a production loss of 3.9 million vehicles for the year in May. “Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.
                                    • Auto manufacturer Toyota, the company which most experts agree developed the just-in-time manufacturing system that is now often cited as a key contributor to pandemic-related supply chain issues, said that it is cutting global auto production by 40% due to supply chain issues. North American production is expected to decrease by up to 170,000 vehicles in August and September. Toyota Motor North America executive vice-president of sales Bob Carter said that the production issues are not limited to microchips, even though they're a big part of the problem.
                                    • Pandemic-related semiconductor chip shortages are now expected to lower global auto output by 3.9 million vehicles in 2021, or 4.6%, according to Time magazine. Ford alone expects to produce 1.1 million fewer vehicles, leading to a $2.5 billion earnings reduction.
                                    • GM officials said that chip usage is being shifted to higher-margin, high-demand vehicles such as pickups and full-size SUVs to minimize the impact of the chip shortage. US assembly plants that build those products won't take the traditional summer two-week shutdown this year, the company said.
                                    • Auto parts maker Dana raised its full-year earnings forecast after beating first-quarter estimates. The company now expects full-year adjusted earnings of between $2.10 and $2.60 per share, compared to a prior forecast of between $1.90 and $2.40 per share. "Dana realized higher sales... as a result of continued strength in the light-truck market, as well as growth in both the commercial-vehicle and off-highway markets," said Chief Executive Officer James Kamsickas. He warned, however, that despite a recovery in end-markets from last year's downturn, higher costs due to supply-chain disruptions and shipping constraints continue to challenge the industry.
                                    • Auto parts manufacturers are currently focusing on securing their supply chains due to pandemic-related shortages. Dana has begun sourcing key commodities including resin, castings, forgings, and some electrical components from multiple suppliers, is asking suppliers to hold in warehouses a backlog of critical inventory, and is building out its software network to better track suppliers. The company is also helping its smaller suppliers recruit workers and secure shipping space on containers to avoid any impact on its operations. Such approaches may cost more upfront, according to David Simchi-Levi, a professor of engineering systems at the Massachusetts Institute of Technology, but they are likely to pay for themselves if they help companies avoid the higher cost of parts shortages.
                                    • Industry experts cite a combination of pandemic-related issues as major contributors to the semiconductor chip shortage that is spreading across all aspects of the auto industry. The roots of the shortage lie in the early weeks of the pandemic, when auto plants worldwide abruptly shut down amid widespread stay-at-home orders and plummeting auto sales, according to consulting firm AlixPartners. Car companies and parts suppliers drastically cut their semiconductor purchases just as computer and consumer electronics manufactures increased purchases due to increasing sales that were also caused by the abrupt shutdown and widespread stay-at-home orders. “Semiconductor manufacturers weren’t getting orders from auto manufacturers. They were getting orders from other industries, so they started to reallocate production,” said Shawn DuBravac, chief economist of IPC, an electronics industry association. Auto sales recovered faster than expected, and automakers trying to increase chip orders found their suppliers busy making different, more advanced components for computer and consumer electronics manufacturers. Switching manufacturing lines from one type of chip to another is a lengthy process, and many chip manufacturers are reluctant to switch from producing the higher-margin advanced chips ordered by computer and consumer technology manufacturers to low-margin chips needed by the auto industry.
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