Growth is being driven by new players, new technologies and a rapid change in suppliers and sales channels to the automotive OE and aftermarket. As North American light vehicle volumes moderate in comparison to recent years, corporate growth and profitability expectations will surely not.

Earlier this month (July 4) the NY Times reported, “Automakers said this week that sales dropped in June for a sixth consecutive month, falling by 3 percent from a year ago, a trend that analysts do not see letting up anytime soon.”

Source:Bureau of Economic Analysis, via Federal Reserve

Riding the wave of year-over-year increasing industry volumes will not be a significant means to achieve necessary growth rates over the next five years. Many companies have tightened their belts since the automotive crisis in 2008 and 2009, and may likely weather any uncertainty. However, some companies will find ways to prosper in this dynamic time, while others merely endure.

Flexibility, diversity, thinking broadly with speed and confidence is critical to driving above-average returns. To do this, in-depth research and analysis is essential. Required actions and investments take time and planning to materialize, and should be built on an intimate understanding of customers and markets. Driven by emerging technologies, new mobility solutions, regulatory push and consumer preferences, suppliers are changing quickly and dramatically.

Where are the largest opportunities: Which markets, products, materials, technologies, customers offer the greatest potential?

How do you get there: Organic investment, acquisition, commercial collaboration, or another way?

“We at DuckerFrontier have supported clients in and around the automotive OE and aftermarket space, providing market intelligence and critical insight on many recent transactions, enabling investments with confidence and speed that deliver growth and profit expansion for our clients,” said Scott Ulnick, DuckerFrontier Managing Principal.

Across the industry, suppliers are actively trying to capture the tailwinds in the market. For example, Samsung Electronics purchased Harman in Feb. 2017, with plans to leverage its position and capabilities to become a long-term leader in the growing area of automotive electronics. This includes navigation systems, infotainment, telematics and driver-assistance technologies, now estimated to account for at least 30% of current vehicle cost.

The Faurecia Automotive Exteriors business unit was sold to Plastic Omnium in July of 2016, to allow for accelerated investment and growth in other key areas like sustainable mobility and the cockpit of the future. This kind of action is driving strong profitable growth, per Patrick Koller, Faurecia CEO. “It will also move into adjacent and new markets such as high-horsepower and industrial applications, in particular using its breakthrough deNOx technology, which was acquired with Amminex,” Koller stated. “Our ambition is to provide clean mobility solutions for all our customers, as well as expand our digital services to cities.”

Source:“Faurecia Investor Day demonstrates strong profitable growth of its Clean Mobility Business driven by innovation and breakthrough technologies.” Faurecia. June, 2017

An interesting move by LKQ, which affected both its OE and aftermarket business, was the LKQ purchase of Pittsburgh Glass Works (PGW) and the turnaround selloff of the OEM automotive glass portion of the business to Vitro on March 17. This drove Vitro’s shares up 3.5% upon announcement. This deal supports not only the glass sales but the technology that utilizes it, such as heads-up display (HUD), advanced driver assistance systems (ADAS) that utilize cameras, etc. LKQ President and CEO Robert Wagman said in a statement, “PGW’s industry-leading OEM business fits well with Vitro’s long-term growth strategy within the automotive glass manufacturing industry, and this divestiture allows LKQ to focus on our aftermarket glass distribution operations and the synergies that exist with our core North American auto parts distribution business.”

Source: Huetter, John.”LKQ sells off OEM auto glass business of PGW to Vitro for $310M.” RDNRepairer Driven News. December, 2016

Thoughtful companies are evaluating what’s needed to increase market share, explore new markets, and propel their organizations past the challenges that lie ahead. These actions and strategies are crucial, and can set an organization apart by how it allocates resources.

As a leader in market research, DuckerFrontier can help identify areas of opportunity in current or adjacent markets, to help your organization quickly grow. Please reach out to us for more information on supporting strategic planning initiatives and market research needs.