The number of automotive suppliers is likely to fall dramatically as the worldwide trend towards consolidation in the car industry continues, the European Association of Automotive Suppliers (Clepa) has warned.
Mergers and acquisitions will lead to a decline in the number of tier one suppliers from 2,000 to 150 by 2008, while the number of tier two and three suppliers will drop from 6,000 to approximately 2,000, Clepa predicts.
Ian Robertson, automotive analyst at the Economist Intelligence Unit, said a significant rationalisation and consolidation process was taking place among automotive components suppliers looking for global reach and economies of scale.
The trend is also being driven by a squeeze on prices from automotive manufacturers. While niche suppliers such as GKN had boomed by establishing a unique place for themselves in the market, in the main the big suppliers were getting even bigger and were swallowing smaller companies, he said.
This trend is likely to be exacerbated by the trend towards component makers supplying car makers with entire systems, requiring more technological development work, as opposed to individual parts, he added.
Clepa said that while the number of tier one suppliers was declining, their technological portfolios were expanding as vehicle makers delegated more responsibility.
But this responsibility may come at too high a price for some of the smaller companies. `It’s a question of being able to mobilise enough resources into research and development, as a lot of this work was previously undertaken by the car manufacturers themselves,’ Robertson said.
The automotive supply sector itself is not shrinking, however. According to Clepa, the value of the global industry grew by 13% to $1,050bn (£700bn) last year, up from $930bn (£620bn) in 1998.
Robertson added that even the decline in supplier numbers will not be universal, as the rise of in-car internet-based technology adds a new dimension to the market. `The mature sectors supplying conventional parts will be the focus for enormous rationalisation, but, conversely, the emerging sectors in electronics and multimedia components will grow,’ he said.
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