Suppliers under pressure \u2013 declining margins despite strong sales growth<\/h1>\n\n Munich, July 2023<\/span>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n\n\n \n \n\n S<\/span>\n ales of the world\u2019s 100 largest suppliers are up again in 2022 and confirm that the industry is recovering from the impact of the pandemic, semiconductor shortages and other major disruptions. Yet many companies are still struggling to regain pre-Covid levels of profitability due to high material and energy costs, among other factors.<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tAs already noticeable at the end of 2021, the recovery from the pandemic and semiconductor shortages continued in 2022. However, with the war in Ukraine, inflation and the high raw material prices, the industry was further burdened. Despite all these challenges, global vehicle production still increased by 6.6% compared with 2021.<\/span><\/p>Admittedly, production has not yet returned to pre-pandemic levels. Nonetheless, it was still sufficient in 2022 to allow the combined total annual turnover of the TOP 100 suppliers to break through the \u20ac1,000bn barrier, growing 18.3% from \u20ac899bn in 2021 to \u20ac1,064bn. All but five suppliers recorded sales growth.<\/span><\/p>In particular, the 11 newcomers to the TOP 100 entered the rankings as a result of year-on-year sales growth of as much as 127%. Profitability was another matter, falling from a TOP 100 average of 6.3% in 2021 to 5.6% last year.<\/span><\/p>Looking back, four developments dominated 2022:<\/span><\/p>- Renewed increase in turnover<\/em><\/strong> across the TOP 100, driven by (among other factors) higher vehicle production and price increases<\/span><\/li>
- Lower margins<\/em><\/strong>, despite higher sales, due to increased costs which could not be fully passed on to manufacturers<\/span><\/li>
- Exceptionally strong<\/em><\/strong> sales growth by Korean and Chinese suppliers<\/em><\/strong>, driven primarily by the increasing importance of electrified powertrains<\/span><\/li>
- Changing composition of the TOP 100 rankings<\/em><\/strong> due to the industry dynamic<\/span><\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t
Vehicle production and inflation drive sales growth<\/strong><\/h2>In 2022, several factors contributed to strong turnover growth among the world\u2019s leading suppliers, including6.6% sales growth due to vehicle production increasing to 82 million. Rising inflation affected sales prices, with suppliers trying to pass on increased costs to manufacturers. Yet, a simple extrapolation makes it clear that the TOP 100 suppliers collectively did not quite succeed in this effort. Their total combined turnover should have been \u20ac1.071bn in 2022, rather than the actual figure of \u20ac1.064bn, assuming the same average level of profitability as in 2021. This estimation includes 6.6% sales growth due to increased vehicle production, 8.9% due to producer price increases that were passed on to OEMs and 2.6% price increases based on labor cost increases.<\/p>
The difference of \u20ac7m was directly reflected in the suppliers\u2019 margins and was mostly due to them being unable to pass on fully to manufacturers increased producer prices for energy, materials and higher wage costs. \u00a0<\/p>
In some cases, exchange rates had a significant effect on sales growth. For example, the Brazilian real rose more than 17% against the euro in 2022, partially explaining the year-on-year 48.4% sales growth registered by lochpe-Maxion, the country\u2019s only TOP 100 representative. Iochpe-Maxion\u2019s growth would have been 26.6% without this exchange-rate effect, removing the company from the TOP 100. On average, however, currency movements only boosted sales growth by 0.35% across all 100 companies and is therefore negligible.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tDeclining margins widen the gap between OEMs and suppliers<\/strong><\/h2>On the one hand, inflation and corresponding increases in producer prices ensured higher turnover where suppliers were able to pass on some of these costs to manufacturers. On the other hand, these factors reduced suppliers\u2019 ebit margins where they could not pass on the additional costs. The widening gap in average profitability between the TOP 10 OEMs and the TOP 100 suppliers since the crisis year of 2020 is revealing (see Figure 1<\/em>). In 2021, the average margin difference was around 1.1 percentage points, but it more than doubled in 2022 to 2.4 percentage points, when the TOP 10 OEMs reported an average margin of 8%, compared with 5.6% for the TOP 100 suppliers. The trend since 2020 is therefore not only continuing, but intensifying.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tHistoric ebit margins of TOP 10 OEMs vs. TOP 100 Suppliers
<\/strong>(in % of turnover)<\/span><\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/07\/Historic-ebit-margins.png\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tLess than half of the TOP 100 suppliers were able to improve their margins in 2022. In some cases, they were less exposed to higher producer prices, while in others they were able to pass on some or all of the price increases to manufacturers. Higher materials and energy costs and supply-chain disruption are expected to continue into 2023, with energy prices in particular substantially increasing suppliers\u2019 costs. In 2022, energy prices shot up as the war in Ukraine and Western sanctions against Russia disrupted gas deliveries, especially from Russia to Europe.<\/p>
The impact on German suppliers was particularly marked, with producer prices rising on average by 32.9% compared with 2021, mostly driven by an average increase in energy prices of 86.2%. These included year-on-year price rises of 133% for natural gas, 95% for electricity and 40% for oil. The effect was noticeably less severe for suppliers based in other regions and countries; in China, for example, producer prices rose by an average of 4.1%, while in the US they increased by 16.3%.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tTOP 100 suppliers\u2019 changes in annual sales growth and margins, 2020-22
<\/strong>(in %)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/07\/Annual-Sales-growth.png\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n 1 Only companies within the margin and sales development range.\u00a0
Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIn the medium term, energy prices in Germany are expected to remain high. Due to long-standing contracts, German suppliers will have little scope to pass on the increased costs to manufacturers in future, putting them at a disadvantage compared with international competitors. \u00a0\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tChinese and Korean suppliers continue to gain ground<\/strong><\/h2>The sales shifts that have been visible in the past few years between Asian, European and US suppliers continued in 2022. Since 2012, the global market shares of Japan, Germany and the US, the world\u2019s three leading supplier countries, have steadily declined. Japan\u2019s share as the largest supplier, measured by total sales, fell eight percentage points from 29.8% in 2012 to 21.8% last year. In the same period, the decline for German and US suppliers was respectively 3.1 and 6.7 percentage points.<\/p>
These declines are reflected by the changed regional composition of the TOP 100, with 22 fewer companies from Japan, Germany and the US in the 2022 rankings compared with 2012. Companies that have dropped out of the TOP 100 include NHK Spring (Japan) and Cooper Standard (US), with Germany\u2019s representation falling in the past decade from 23 to 17 companies and Japan losing nine suppliers. The companies that have left the TOP 100 variously deliver drive systems for combustion engines, seats or suspension systems.<\/p>
In contrast, Korean and Chinese suppliers have increased their market shares by 4.2 and 8.3 percentage points since 2012, with the total number of companies from these countries rising by 14. From China, only Weichai Power made it into the TOP 100 in 2012, but in 2022 seven other companies were represented. Meanwhile, there are now 10 companies from Korea in the TOP 100.<\/p>
Given this trend, it is not surprising that the total average turnover of Chinese suppliers in the TOP 100 has increased by 31.3% annually since 2012. Many of these TOP 100 Chinese and Korean companies, including CATL, Johnson Electric and SK, produce components such as batteries, semiconductors and electric motors.<\/p>
Chinese suppliers are in a particularly favorable position regarding their profitability. Between 2012 and 2022, the average profitability of Chinese suppliers was 7.8%, significantly above the global industry average of 6.8%. Only US TOP 100 suppliers outshone their Chinese competitors, with an average margin of 8% for the same period. Suppliers from Japan, Korea and Germany could not keep up, with comparatively low average margins of 6.3%, 5.7% and 5.8% respectively. However, Japanese and German suppliers\u2019 margins have increased considerably since 2020, by 2.1 and 4.3 percentage points respectively. Nonetheless, the impact of the pandemic and increased producer prices mean their average profitability is still lower than in 2018.<\/p>
We expect that over the next few years there will be a further shift in global sales and profitability in favor of Chinese suppliers, largely driven by continuing vehicle electrification and digitalization.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tMarket share, turnover and profitability of leading supplier countries, 2012-22<\/span><\/strong><\/span><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/07\/Market-Share.png\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tBattery and semiconductor suppliers take the leading positions<\/strong><\/h2>The trend in the past few years for battery and semiconductor suppliers to act as the sector\u2019s central drivers of growth and main bulwarks of profitability continued in 2022. TOP 100 semiconductor manufacturers averaged year-on-year sales growth of 44.3% since 2015. Similarly, the TOP 100 battery manufacturers have achieved an average sales growth of 84.1% since 2017. In this context, it is striking that China\u2019s CATL, the world\u2019s leading battery manufacturer, only made the TOP 100 in 2018. Since then, it has increased its annual turnover by 72.7% and is now seventh in the overall rankings. The same trend is evident at major Korean battery manufacturers such as SK, Samsung SDI and LG Energy Solution. In 2022 alone, TOP 100 battery manufacturers achieved average profitability of 10.6%, almost double the supplier industry average of 5.6%. \u00a0<\/p>
The same pattern can be seen for semiconductor manufacturers. ST Micro, for example, ranked 112 among the world\u2019s largest car suppliers in 2021, with a turnover of \u20ac2.5bn. A year later it had climbed to 58 in the 2022 TOP 100, with turnover of \u20ac5.675bn \u2013 an increase of 127%. Other semiconductor manufacturers such as Texas Instruments, Infineon, NXP Semiconductors, Onsemi and Renesas also recorded increases in turnover of at least 30% between 2021 and 2022. Meanwhile, TOP 100 semiconductor manufacturers achieved a notable average margin of 25.9%, helped to a large extent by the continuing worldwide shortage of chips since the start of the pandemic.<\/p>
By comparison, suppliers specializing in areas such as seats and interiors, energy supply and metal processing have not been able to increase their profitability to nearly the same extent as battery and semiconductor manufacturers since 2020. Overall, batteries and semiconductors are the most profitable product group in the automobile value chain, having overtaken tire suppliers among TOP 100 companies a few years ago. \u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tTurnover and profitability of different supplier sectors, 2012-22<\/span><\/strong><\/span><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/07\/Turnover.png\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tThe growing importance of batteries and semiconductors in future vehicle design is clear from the changed composition of the TOP 100 compared with a decade ago, reflecting the industry\u2019s increasingly technology-driven dynamic. For example, in the decade since 2012 there have been 12 new entrants to the rankings through the technological shift towards electric, digital vehicles, accounting for 9% of the TOP 100\u2019s total turnover by 2022. This strong performance illustrates the sheer speed at which technological innovation is transforming the car industry, bearing in mind that their total turnover in 2017 was still only about 1%. \u00a0<\/p>
In addition, 12 other suppliers from traditional product groups such as glass, brakes and lights have moved into the TOP 100 rankings during the past 10 years. Examples include CIE Automotive (Spain), Fuyao Glass (China) and SL Corporation (Korea). Nine further new entrants include companies resulting from M&A activities such as Aptiv, Adient and Vitesco Technologies.<\/p>
Consequently, the composition of the TOP 100 has changed significantly in recent years and, due to the expected ongoing technological change in future vehicle generations, it is expected that the pace of change in the supplier industry will continue to intensify.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tChanges in the composition of the TOP 100 suppliers, 2012-22<\/span><\/strong><\/span><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2023\/07\/Changes-in-composition-1.png\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
ales of the world\u2019s 100 largest suppliers are up again in 2022 and confirm that the industry is recovering from the impact of the pandemic, semiconductor shortages and other major disruptions. Yet many companies are still struggling to regain pre-Covid levels of profitability due to high material and energy costs, among other factors.<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
As already noticeable at the end of 2021, the recovery from the pandemic and semiconductor shortages continued in 2022. However, with the war in Ukraine, inflation and the high raw material prices, the industry was further burdened. Despite all these challenges, global vehicle production still increased by 6.6% compared with 2021.<\/span><\/p> Admittedly, production has not yet returned to pre-pandemic levels. Nonetheless, it was still sufficient in 2022 to allow the combined total annual turnover of the TOP 100 suppliers to break through the \u20ac1,000bn barrier, growing 18.3% from \u20ac899bn in 2021 to \u20ac1,064bn. All but five suppliers recorded sales growth.<\/span><\/p> In particular, the 11 newcomers to the TOP 100 entered the rankings as a result of year-on-year sales growth of as much as 127%. Profitability was another matter, falling from a TOP 100 average of 6.3% in 2021 to 5.6% last year.<\/span><\/p> Looking back, four developments dominated 2022:<\/span><\/p> In 2022, several factors contributed to strong turnover growth among the world\u2019s leading suppliers, including6.6% sales growth due to vehicle production increasing to 82 million. Rising inflation affected sales prices, with suppliers trying to pass on increased costs to manufacturers. Yet, a simple extrapolation makes it clear that the TOP 100 suppliers collectively did not quite succeed in this effort. Their total combined turnover should have been \u20ac1.071bn in 2022, rather than the actual figure of \u20ac1.064bn, assuming the same average level of profitability as in 2021. This estimation includes 6.6% sales growth due to increased vehicle production, 8.9% due to producer price increases that were passed on to OEMs and 2.6% price increases based on labor cost increases.<\/p> The difference of \u20ac7m was directly reflected in the suppliers\u2019 margins and was mostly due to them being unable to pass on fully to manufacturers increased producer prices for energy, materials and higher wage costs. \u00a0<\/p> In some cases, exchange rates had a significant effect on sales growth. For example, the Brazilian real rose more than 17% against the euro in 2022, partially explaining the year-on-year 48.4% sales growth registered by lochpe-Maxion, the country\u2019s only TOP 100 representative. Iochpe-Maxion\u2019s growth would have been 26.6% without this exchange-rate effect, removing the company from the TOP 100. On average, however, currency movements only boosted sales growth by 0.35% across all 100 companies and is therefore negligible.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t On the one hand, inflation and corresponding increases in producer prices ensured higher turnover where suppliers were able to pass on some of these costs to manufacturers. On the other hand, these factors reduced suppliers\u2019 ebit margins where they could not pass on the additional costs. The widening gap in average profitability between the TOP 10 OEMs and the TOP 100 suppliers since the crisis year of 2020 is revealing (see Figure 1<\/em>). In 2021, the average margin difference was around 1.1 percentage points, but it more than doubled in 2022 to 2.4 percentage points, when the TOP 10 OEMs reported an average margin of 8%, compared with 5.6% for the TOP 100 suppliers. The trend since 2020 is therefore not only continuing, but intensifying.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Historic ebit margins of TOP 10 OEMs vs. TOP 100 Suppliers Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Less than half of the TOP 100 suppliers were able to improve their margins in 2022. In some cases, they were less exposed to higher producer prices, while in others they were able to pass on some or all of the price increases to manufacturers. Higher materials and energy costs and supply-chain disruption are expected to continue into 2023, with energy prices in particular substantially increasing suppliers\u2019 costs. In 2022, energy prices shot up as the war in Ukraine and Western sanctions against Russia disrupted gas deliveries, especially from Russia to Europe.<\/p> The impact on German suppliers was particularly marked, with producer prices rising on average by 32.9% compared with 2021, mostly driven by an average increase in energy prices of 86.2%. These included year-on-year price rises of 133% for natural gas, 95% for electricity and 40% for oil. The effect was noticeably less severe for suppliers based in other regions and countries; in China, for example, producer prices rose by an average of 4.1%, while in the US they increased by 16.3%.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t TOP 100 suppliers\u2019 changes in annual sales growth and margins, 2020-22 1 Only companies within the margin and sales development range.\u00a0 In the medium term, energy prices in Germany are expected to remain high. Due to long-standing contracts, German suppliers will have little scope to pass on the increased costs to manufacturers in future, putting them at a disadvantage compared with international competitors. \u00a0\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The sales shifts that have been visible in the past few years between Asian, European and US suppliers continued in 2022. Since 2012, the global market shares of Japan, Germany and the US, the world\u2019s three leading supplier countries, have steadily declined. Japan\u2019s share as the largest supplier, measured by total sales, fell eight percentage points from 29.8% in 2012 to 21.8% last year. In the same period, the decline for German and US suppliers was respectively 3.1 and 6.7 percentage points.<\/p> These declines are reflected by the changed regional composition of the TOP 100, with 22 fewer companies from Japan, Germany and the US in the 2022 rankings compared with 2012. Companies that have dropped out of the TOP 100 include NHK Spring (Japan) and Cooper Standard (US), with Germany\u2019s representation falling in the past decade from 23 to 17 companies and Japan losing nine suppliers. The companies that have left the TOP 100 variously deliver drive systems for combustion engines, seats or suspension systems.<\/p> In contrast, Korean and Chinese suppliers have increased their market shares by 4.2 and 8.3 percentage points since 2012, with the total number of companies from these countries rising by 14. From China, only Weichai Power made it into the TOP 100 in 2012, but in 2022 seven other companies were represented. Meanwhile, there are now 10 companies from Korea in the TOP 100.<\/p> Given this trend, it is not surprising that the total average turnover of Chinese suppliers in the TOP 100 has increased by 31.3% annually since 2012. Many of these TOP 100 Chinese and Korean companies, including CATL, Johnson Electric and SK, produce components such as batteries, semiconductors and electric motors.<\/p> Chinese suppliers are in a particularly favorable position regarding their profitability. Between 2012 and 2022, the average profitability of Chinese suppliers was 7.8%, significantly above the global industry average of 6.8%. Only US TOP 100 suppliers outshone their Chinese competitors, with an average margin of 8% for the same period. Suppliers from Japan, Korea and Germany could not keep up, with comparatively low average margins of 6.3%, 5.7% and 5.8% respectively. However, Japanese and German suppliers\u2019 margins have increased considerably since 2020, by 2.1 and 4.3 percentage points respectively. Nonetheless, the impact of the pandemic and increased producer prices mean their average profitability is still lower than in 2018.<\/p> We expect that over the next few years there will be a further shift in global sales and profitability in favor of Chinese suppliers, largely driven by continuing vehicle electrification and digitalization.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The trend in the past few years for battery and semiconductor suppliers to act as the sector\u2019s central drivers of growth and main bulwarks of profitability continued in 2022. TOP 100 semiconductor manufacturers averaged year-on-year sales growth of 44.3% since 2015. Similarly, the TOP 100 battery manufacturers have achieved an average sales growth of 84.1% since 2017. In this context, it is striking that China\u2019s CATL, the world\u2019s leading battery manufacturer, only made the TOP 100 in 2018. Since then, it has increased its annual turnover by 72.7% and is now seventh in the overall rankings. The same trend is evident at major Korean battery manufacturers such as SK, Samsung SDI and LG Energy Solution. In 2022 alone, TOP 100 battery manufacturers achieved average profitability of 10.6%, almost double the supplier industry average of 5.6%. \u00a0<\/p> The same pattern can be seen for semiconductor manufacturers. ST Micro, for example, ranked 112 among the world\u2019s largest car suppliers in 2021, with a turnover of \u20ac2.5bn. A year later it had climbed to 58 in the 2022 TOP 100, with turnover of \u20ac5.675bn \u2013 an increase of 127%. Other semiconductor manufacturers such as Texas Instruments, Infineon, NXP Semiconductors, Onsemi and Renesas also recorded increases in turnover of at least 30% between 2021 and 2022. Meanwhile, TOP 100 semiconductor manufacturers achieved a notable average margin of 25.9%, helped to a large extent by the continuing worldwide shortage of chips since the start of the pandemic.<\/p> By comparison, suppliers specializing in areas such as seats and interiors, energy supply and metal processing have not been able to increase their profitability to nearly the same extent as battery and semiconductor manufacturers since 2020. Overall, batteries and semiconductors are the most profitable product group in the automobile value chain, having overtaken tire suppliers among TOP 100 companies a few years ago. \u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The growing importance of batteries and semiconductors in future vehicle design is clear from the changed composition of the TOP 100 compared with a decade ago, reflecting the industry\u2019s increasingly technology-driven dynamic. For example, in the decade since 2012 there have been 12 new entrants to the rankings through the technological shift towards electric, digital vehicles, accounting for 9% of the TOP 100\u2019s total turnover by 2022. This strong performance illustrates the sheer speed at which technological innovation is transforming the car industry, bearing in mind that their total turnover in 2017 was still only about 1%. \u00a0<\/p> In addition, 12 other suppliers from traditional product groups such as glass, brakes and lights have moved into the TOP 100 rankings during the past 10 years. Examples include CIE Automotive (Spain), Fuyao Glass (China) and SL Corporation (Korea). Nine further new entrants include companies resulting from M&A activities such as Aptiv, Adient and Vitesco Technologies.<\/p> Consequently, the composition of the TOP 100 has changed significantly in recent years and, due to the expected ongoing technological change in future vehicle generations, it is expected that the pace of change in the supplier industry will continue to intensify.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tVehicle production and inflation drive sales growth<\/strong><\/h2>
Declining margins widen the gap between OEMs and suppliers<\/strong><\/h2>
<\/strong>(in % of turnover)<\/span><\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
<\/strong>(in %)<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Source: Berylls Strategy Advisors\u00a0<\/p> <\/div>\n <\/div>\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tChinese and Korean suppliers continue to gain ground<\/strong><\/h2>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tBattery and semiconductor suppliers take the leading positions<\/strong><\/h2>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t