The Future of the Automotive Value Chain: Supplier Industry Outlook 2025

Deloitte AVC Industry Model

Starting point of this analysis is the breakdown of a vehicle into its modules and components. We investigate how electrification, autonomous driving and other trends evoke changes to the vehicle cost base. The Deloitte AVC Industry Model provides outputs for different scenarios for 2025 and looks specifically at the German, Chinese and NAFTA markets.

Main Results

The AVC Industry model yields the following key results (excluding spare part businesses and inflation effects):

• Overall material cost volume in Germany, NAFTA and China together will grow slightly by 6%
• 15 out of 19 vehicle component clusters will likely see a decline in market volume
• The biggest losers will be components related to the conventional ICE vehicle, dropping up to -36% in volume by 2025, e.g. transmissions, exhaust and fuel systems
• Likely winners must prepare to manage and cater for growing demand of up to 15 times their current volume, e.g. suppliers with stakes in the fields of electric drivetrains and battery technology as well as autonomous driving feature development
• Regional projections show that material cost volumes in Germany are facing a general decline, whereas volumes in China will increase due to general strong vehicle sales forecasts
• Each vehicle component cluster must be viewed along its scenario-specific projections: e.g. for Infotainment & Communications scenarios spread from a 25% growth to a decline of almost 60%

Transformation Paths

Results from the Deloitte AVC Industry Model shed light on substantial, in some cases even burning, needs for change. Modelling results trigger and support discussions about re-prioritizing product portfolios and market exposure. The Automotive Value Chain study discusses six strategic fields of action which should be assessed by every automotive supplier in anticipation of future industry shifts. As a part of this – and since many suppliers are and will be faced with large scale transformation programs – we simulate an exemplary supplier’s profit & loss statement and highlight long-term challenges on profitability.

Disruptive change will affect all players along the automotive value chain. In order to navigate successfully towards 2025 bold moves are just as necessary as thorough analysis and constant monitoring of current market trends. As Deloitte, we support our clients along this journey with both in-depth customer and technology trend knowledge as well as quantitative market forecasts for the automotive supplier industry.