Management consultancy Roland Berger presented in early September the results of its study "Turning Point. How the automotive SMEs want to grow again," for which more than 200 decision-makers from automotive suppliers in the DACH region were surveyed. According to the study, price and competitive pressure continue to put mid-sized automotive suppliers from Germany, Austria and Switzerland under pressure. At the same time, the question arises where and how the companies can grow again in the future, according to a press release. Although today every second of the surveyed mid-sized suppliers is already active outside the automotive industry, they usually account for only a small share of revenue. Roland Berger expects this to change soon: in particular the defense sector offers, in the view of the majority of executives, good opportunities to unlock new sources of revenue.
“In the midst of their most severe crisis with high competitive pressure and geopolitical uncertainties, the suppliers have little hope that a turning point will be reached in the near term. Cost-cutting programs are part of everyday
life in most companies. The individuals responsible want to turn their gaze forward again and actively shape their future through diversification into growth areas outside their own industry,” summarizes Thomas Schlick, Senior Partner at Roland Berger, the results.
The study concludes that the immense price pressure from customers, cited by 66 percent (with high or very high priority) – as in previous years – is the most important topic on the management agenda. This is followed by six out of ten executives noting a lack of growth prospects in the automotive markets. In this context, three quarters of suppliers believe that diversifying the business portfolio beyond the automotive sector offers a promising future option. Forty-six percent consider it the best way to tap into new growth areas, while nearly a third (31 percent) hope for better utilization of existing capacities.
Automotive Dependencies Reduce
Already today, according to the study, every second company is active outside the automotive industry. Almost one in three companies active in other sectors plans to expand these activities further. The
main reasons for engaging outside the struggling automotive industry are named by two-thirds as a lower dependence on the automotive cycle, about the same number of respondents want to unlock new revenue sources in growth areas. More than 60 percent hope that by broadening the business base they will become more resilient to geopolitical and regulatory risks.
Technological Expertise for the Defense Sector
Nearly two-thirds of respondents see the defense sector as offering the best opportunities for new revenues. Behind this are medical technology with 38 percent of mentions and the aerospace industry with 36 percent.
The strong prioritization of the defense sector can, among other things, be explained by the geopolitical tensions that have been rising for years and the resulting increase in defense budgets, according to the study authors. Because the planned investments are likely to exceed the available capacities of national companies significantly, it is natural to draw on additional capacities from the civilian industry to reach the required deterrence level—the industrial production necessary to deter potential aggressors from an attack.
“In the defense sector, capacity will, in the long term, be 부족 to process the orders. With its process and product competence, the automotive SMEs can provide optimal support here. The focus could be on mass-produced, software-defined defense systems. These must be produced to meet the desired requirements, at affordable prices and in large quantities,” says Felix Mogge, Partner at Roland Berger.
Notably, the technological proximity of the defense industry to the automotive sector—for example in the areas of sensors, manufacturing or system integration—suggests a closer collaboration, according to Roland Berger. Potential new customers in the defense sector offer the supplier industry a lot: especially for electronic and mechanical components (78 and 71 percent of mentions) the study participants see important starting points. Also with modules for propulsion and for power supply (64 percent) as well as in software solutions (48 percent) the supplier industry can score, in their own assessment.
Respondents see challenges in building appropriate sales structures and customer networks (52 percent) as well as in complying with political and regulatory frameworks
