The automotive industry is undergoing a massive transformation as it shifts towards electric powertrains and digitization. But what does this mean for automotive suppliers?
According to McKinsey & Company, while some components will change, many will remain the same. This means that suppliers must focus on their core competencies to create value. As electrification rolls out, demand for electric vehicle components such as batteries and electric motors will surge. However, core vehicle components, including the axle system, suspension, body in white, and front and rear structure, will remain a critical part of the equation. In fact, McKinsey predicts that core vehicle components will represent 55% of the revenue pool in 2030, compared to 69% at present. Therefore, suppliers that continue to focus on their core competencies will be able to unlock new opportunities and succeed in the EV transition.
In the age of electrification, the two critical subcategories in the core component market are chassis and body structure, accounting for 24% and 21% of revenues in 2022, respectively. The chassis market encompasses axles, suspension, braking, steering, and wheels, and demand for these components is projected to be in line with that of vehicle production. Body structure components, on the other hand, are more complex and expensive to produce. However, the trend towards electrification provides an opportunity for suppliers to innovate and create lighter and more efficient body structures. Therefore, suppliers that focus on their core competencies, including chassis and body structure components, will be able to thrive in the age of electrification.