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HOW TO SURVIVE THE TURMOIL IN THE AUTOMOTIVE INDUSTRY OF THE LATE 2020S
HOW TO SURVIVE THE TURMOIL IN THE AUTOMOTIVE INDUSTRY OF THE LATE 2020S
HOW TO SURVIVE THE TURMOIL IN THE AUTOMOTIVE INDUSTRY OF THE LATE 2020S
A TEN-POINT SURVIVAL GUIDE FOR AUTOMOTIVE SUPPLIERS IN THE BRUTAL NEW WORLD.
A TEN-POINT SURVIVAL GUIDE FOR AUTOMOTIVE SUPPLIERS IN THE BRUTAL NEW WORLD.
A TEN-POINT SURVIVAL GUIDE FOR AUTOMOTIVE SUPPLIERS IN THE BRUTAL NEW WORLD.
None of these ten actions is easy, and few can be executed in isolation. What separates the survivors from the casualties of this cycle is not access to a single silver bullet — it is the willingness to work all ten levers at once, with pace and conviction. The suppliers who do will emerge from the late 2020s leaner, more diversified, better financed, and structurally more valuable than they entered it.
None of these ten actions is easy, and few can be executed in isolation. What separates the survivors from the casualties of this cycle is not access to a single silver bullet — it is the willingness to work all ten levers at once, with pace and conviction. The suppliers who do will emerge from the late 2020s leaner, more diversified, better financed, and structurally more valuable than they entered it.
None of these ten actions is easy, and few can be executed in isolation. What separates the survivors from the casualties of this cycle is not access to a single silver bullet — it is the willingness to work all ten levers at once, with pace and conviction. The suppliers who do will emerge from the late 2020s leaner, more diversified, better financed, and structurally more valuable than they entered it.
S T R A T E G I C
S T R A T E G I C
S T R A T E G I C
RESHAPE THE BUSINESS BEFORE THE MARKET RESHAPES IT FOR YOU.
RESHAPE THE BUSINESS BEFORE THE MARKET RESHAPES IT FOR YOU.
RESHAPE THE BUSINESS BEFORE THE MARKET RESHAPES IT FOR YOU.
F I V E L E V E R S . O N E D E C A D E T O A C T .
F I V E L E V E R S . O N E D E C A D E T O A C T .
F I V E L E V E R S . O N E D E C A D E T O A C T .
Consolidate — buy a competitor or become part of a larger platform: Scale is no longer a nice-to-have; it is the price of admission for tier-1 relevance. Suppliers with subcritical revenue in their core technology should proactively pursue mergers or bolt-on acquisitions rather than wait to be picked off in distress. A well-timed transaction locks in customer share, doubles engineering firepower, and eliminates the weakest competitor from the pricing table.
If you cannot merge, partner — cooperate selectively with competitors: Where full consolidation is not achievable, structured cooperation on specific platforms, technologies, or regions is the next-best move. Joint development agreements, shared production footprints, and co-bidding on programmes let suppliers spread R&D burden, defend margins, and present a stronger face to OEMs. Pride is expensive; capital efficiency is not.
Win business with the new Asian OEMs: BYD, Chery, Geely, Xiaomi, and the next wave of Chinese and Korean champions are the growth pockets of the industry — and most Western suppliers are dramatically underexposed. Building dedicated account teams, localising in China and Southeast Asia, and adapting engineering cycles to Asian speed are no longer optional. The suppliers who ignore this will find themselves designed out of the fastest-growing platforms in the world.
Diversify beyond high-volume automotive: The pure-play automotive supplier is a structurally disadvantaged business model. Commercial vehicles, robotics, defence, aerospace, and medtech offer higher margins, longer product cycles, and customers who still pay for engineering value. Any supplier with credible manufacturing and quality systems should be aggressively repurposing capabilities into at least one adjacent vertical.
Sharpen governance and the management line-up: Turbulent markets expose weak boards and complacent management teams faster than any auditor. Suppliers need a governance model that installs sector-experienced independent directors, forces honest performance dialogues, and replaces executives who cannot operate under pressure. The best crisis playbook is a management team that saw the crisis coming.
Consolidate — buy a competitor or become part of a larger platform: Scale is no longer a nice-to-have; it is the price of admission for tier-1 relevance. Suppliers with subcritical revenue in their core technology should proactively pursue mergers or bolt-on acquisitions rather than wait to be picked off in distress. A well-timed transaction locks in customer share, doubles engineering firepower, and eliminates the weakest competitor from the pricing table.
If you cannot merge, partner — cooperate selectively with competitors: Where full consolidation is not achievable, structured cooperation on specific platforms, technologies, or regions is the next-best move. Joint development agreements, shared production footprints, and co-bidding on programmes let suppliers spread R&D burden, defend margins, and present a stronger face to OEMs. Pride is expensive; capital efficiency is not.
Win business with the new Asian OEMs: BYD, Chery, Geely, Xiaomi, and the next wave of Chinese and Korean champions are the growth pockets of the industry — and most Western suppliers are dramatically underexposed. Building dedicated account teams, localising in China and Southeast Asia, and adapting engineering cycles to Asian speed are no longer optional. The suppliers who ignore this will find themselves designed out of the fastest-growing platforms in the world.
Diversify beyond high-volume automotive: The pure-play automotive supplier is a structurally disadvantaged business model. Commercial vehicles, robotics, defence, aerospace, and medtech offer higher margins, longer product cycles, and customers who still pay for engineering value. Any supplier with credible manufacturing and quality systems should be aggressively repurposing capabilities into at least one adjacent vertical.
Sharpen governance and the management line-up: Turbulent markets expose weak boards and complacent management teams faster than any auditor. Suppliers need a governance model that installs sector-experienced independent directors, forces honest performance dialogues, and replaces executives who cannot operate under pressure. The best crisis playbook is a management team that saw the crisis coming.
Consolidate — buy a competitor or become part of a larger platform: Scale is no longer a nice-to-have; it is the price of admission for tier-1 relevance. Suppliers with subcritical revenue in their core technology should proactively pursue mergers or bolt-on acquisitions rather than wait to be picked off in distress. A well-timed transaction locks in customer share, doubles engineering firepower, and eliminates the weakest competitor from the pricing table.
If you cannot merge, partner — cooperate selectively with competitors: Where full consolidation is not achievable, structured cooperation on specific platforms, technologies, or regions is the next-best move. Joint development agreements, shared production footprints, and co-bidding on programmes let suppliers spread R&D burden, defend margins, and present a stronger face to OEMs. Pride is expensive; capital efficiency is not.
Win business with the new Asian OEMs: BYD, Chery, Geely, Xiaomi, and the next wave of Chinese and Korean champions are the growth pockets of the industry — and most Western suppliers are dramatically underexposed. Building dedicated account teams, localising in China and Southeast Asia, and adapting engineering cycles to Asian speed are no longer optional. The suppliers who ignore this will find themselves designed out of the fastest-growing platforms in the world.
Diversify beyond high-volume automotive: The pure-play automotive supplier is a structurally disadvantaged business model. Commercial vehicles, robotics, defence, aerospace, and medtech offer higher margins, longer product cycles, and customers who still pay for engineering value. Any supplier with credible manufacturing and quality systems should be aggressively repurposing capabilities into at least one adjacent vertical.
Sharpen governance and the management line-up: Turbulent markets expose weak boards and complacent management teams faster than any auditor. Suppliers need a governance model that installs sector-experienced independent directors, forces honest performance dialogues, and replaces executives who cannot operate under pressure. The best crisis playbook is a management team that saw the crisis coming.
W H E R E T H E M A R G I N L I V E S
W H E R E T H E M A R G I N L I V E S
W H E R E T H E M A R G I N L I V E S
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
WH E R E T H E MA R G IN L I V E S — A D J A C ENT V E R T I C A L S V S . L E G A C Y A U TO
WH E R E T H E MA R G IN L I V E S — A D J A C ENT V E R T I C A L S V S . L E G A C Y A U TO
WH E R E T H E MA R G IN L I V E S — A D J A C ENT V E R T I C A L S V S . L E G A C Y A U TO
Indicative EBIT-margin ranges. Automotive tier-1 suppliers who successfully adjacent-diversify typically operate 3–6 percentage points above legacy peers.
F I N A N C I A L
F I N A N C I A L
F I N A N C I A L
RUN THE COMPANY ON NUMBERS, NOT ON HOPE.
RUN THE COMPANY ON NUMBERS, NOT ON HOPE.
RUN THE COMPANY ON NUMBERS, NOT ON HOPE.
F I V E L E V E R S . M A N A G E D F R O M T H E C F O ’ S D E S K .
F I V E L E V E R S . M A N A G E D F R O M T H E C F O ’ S D E S K .
F I V E L E V E R S . M A N A G E D F R O M T H E C F O ’ S D E S K .
Diversify financing beyond the house bank: Relying on a single bank consortium in this cycle is a strategic vulnerability. Asset-based financing, factoring, and sale-and-leaseback structures together create a resilient capital stack. The right time to build these relationships is well before the covenant discussion, not after.
Sweat the capex — reuse before you buy: Every euro of new capex needs to be earned twice: once in the business case, and again by proving that existing equipment cannot be repurposed. Suppliers should systematically screen every awarded programme against installed capacity, retooling options, and second-life plans for lines coming off legacy platforms. Where reuse is possible, customers can and should be persuaded to accept it — the alternative is a supplier that cannot invest at all.
Take cost out of indirect functions with AI: Finance, HR, procurement, IT, legal, and sales support are the areas where AI is already delivering 20–40% productivity gains for suppliers who move decisively. This is not a technology project; it is a cost programme with a technology enabler, and it belongs on the CFO’s desk. Suppliers who wait for a perfect enterprise rollout will be undercut by peers who moved eighteen months earlier.
Manage the company through financial fundamentals: In a downturn, gut feel is a liability. ROCE by business unit, contribution margin by programme, working-capital days by plant, and project-level IRR need to be visible monthly and acted upon quarterly. A supplier that cannot name its three worst programmes and its three best customers on a value basis is flying blind.
Prepare claim negotiations with OEM discipline:Claims against OEMs — for volume shortfalls, engineering changes, raw-material pass-through, and tooling — are one of the largest untapped cash pools in the industry. They are also one of the hardest to collect, because OEMs have professionalised their defence. Winning requires meticulous documentation, cross-functional preparation, escalation discipline at C-level, and, where necessary, the credible willingness to litigate or halt supply.
Diversify financing beyond the house bank: Relying on a single bank consortium in this cycle is a strategic vulnerability. Asset-based financing, factoring, and sale-and-leaseback structures together create a resilient capital stack. The right time to build these relationships is well before the covenant discussion, not after.
Sweat the capex — reuse before you buy: Every euro of new capex needs to be earned twice: once in the business case, and again by proving that existing equipment cannot be repurposed. Suppliers should systematically screen every awarded programme against installed capacity, retooling options, and second-life plans for lines coming off legacy platforms. Where reuse is possible, customers can and should be persuaded to accept it — the alternative is a supplier that cannot invest at all.
Take cost out of indirect functions with AI: Finance, HR, procurement, IT, legal, and sales support are the areas where AI is already delivering 20–40% productivity gains for suppliers who move decisively. This is not a technology project; it is a cost programme with a technology enabler, and it belongs on the CFO’s desk. Suppliers who wait for a perfect enterprise rollout will be undercut by peers who moved eighteen months earlier.
Manage the company through financial fundamentals: In a downturn, gut feel is a liability. ROCE by business unit, contribution margin by programme, working-capital days by plant, and project-level IRR need to be visible monthly and acted upon quarterly. A supplier that cannot name its three worst programmes and its three best customers on a value basis is flying blind.
Prepare claim negotiations with OEM discipline:Claims against OEMs — for volume shortfalls, engineering changes, raw-material pass-through, and tooling — are one of the largest untapped cash pools in the industry. They are also one of the hardest to collect, because OEMs have professionalised their defence. Winning requires meticulous documentation, cross-functional preparation, escalation discipline at C-level, and, where necessary, the credible willingness to litigate or halt supply.
Diversify financing beyond the house bank: Relying on a single bank consortium in this cycle is a strategic vulnerability. Asset-based financing, factoring, and sale-and-leaseback structures together create a resilient capital stack. The right time to build these relationships is well before the covenant discussion, not after.
Sweat the capex — reuse before you buy: Every euro of new capex needs to be earned twice: once in the business case, and again by proving that existing equipment cannot be repurposed. Suppliers should systematically screen every awarded programme against installed capacity, retooling options, and second-life plans for lines coming off legacy platforms. Where reuse is possible, customers can and should be persuaded to accept it — the alternative is a supplier that cannot invest at all.
Take cost out of indirect functions with AI: Finance, HR, procurement, IT, legal, and sales support are the areas where AI is already delivering 20–40% productivity gains for suppliers who move decisively. This is not a technology project; it is a cost programme with a technology enabler, and it belongs on the CFO’s desk. Suppliers who wait for a perfect enterprise rollout will be undercut by peers who moved eighteen months earlier.
Manage the company through financial fundamentals: In a downturn, gut feel is a liability. ROCE by business unit, contribution margin by programme, working-capital days by plant, and project-level IRR need to be visible monthly and acted upon quarterly. A supplier that cannot name its three worst programmes and its three best customers on a value basis is flying blind.
Prepare claim negotiations with OEM discipline:Claims against OEMs — for volume shortfalls, engineering changes, raw-material pass-through, and tooling — are one of the largest untapped cash pools in the industry. They are also one of the hardest to collect, because OEMs have professionalised their defence. Winning requires meticulous documentation, cross-functional preparation, escalation discipline at C-level, and, where necessary, the credible willingness to litigate or halt supply.
T H E M A R G I N A R I T H M E T I C
T H E M A R G I N A R I T H M E T I C
T H E M A R G I N A R I T H M E T I C
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
ADJACENT VERTICALS REWARD SUPPLIERS WHO DIVERSIFY.
E A C H F INANC I A L L E V E R , WOR K E D IN CONC E R T, L I F T S T H E MA R G IN
E A C H F INANC I A L L E V E R , WOR K E D IN CONC E R T, L I F T S T H E MA R G IN
E A C H F INANC I A L L E V E R , WOR K E D IN CONC E R T, L I F T S T H E MA R G IN
Illustrative margin uplift when the five financial levers are worked in concert. A stressed supplier at 3% EBIT can plausibly rebuild to a resilient 7–8% band.
T H E B O T T O M L I N E
T H E B O T T O M L I N E
T H E B O T T O M L I N E
The late 2020s are the hardest environment automotive suppliers have faced in a generation. Volumes have not returned to pre-COVID levels, the EV transition has slowed in Europe, Chinese OEMs are rewriting the pecking order, and legacy customers are pushing pain onto the supply base with unprecedented rigour. Complaining about external factors is a losing game. The suppliers who will still be standing at the end of the decade are the ones who take radical action on the levers they actually control. What follows is not a substitute for continuous improvement and cost control — those remain the daily craft of every supplier — but a set of structural moves that reach further and cut deeper. Ten of them matter most.
The late 2020s are the hardest environment automotive suppliers have faced in a generation. Volumes have not returned to pre-COVID levels, the EV transition has slowed in Europe, Chinese OEMs are rewriting the pecking order, and legacy customers are pushing pain onto the supply base with unprecedented rigour. Complaining about external factors is a losing game. The suppliers who will still be standing at the end of the decade are the ones who take radical action on the levers they actually control. What follows is not a substitute for continuous improvement and cost control — those remain the daily craft of every supplier — but a set of structural moves that reach further and cut deeper. Ten of them matter most.
The late 2020s are the hardest environment automotive suppliers have faced in a generation. Volumes have not returned to pre-COVID levels, the EV transition has slowed in Europe, Chinese OEMs are rewriting the pecking order, and legacy customers are pushing pain onto the supply base with unprecedented rigour. Complaining about external factors is a losing game. The suppliers who will still be standing at the end of the decade are the ones who take radical action on the levers they actually control. What follows is not a substitute for continuous improvement and cost control — those remain the daily craft of every supplier — but a set of structural moves that reach further and cut deeper. Ten of them matter most.
August 2026
Patrick von Herz
August 2026
Patrick von Herz
August 2026
Patrick von Herz
AUTONOMY HOUSE
+49 · 172 · 6515412
AUTONOMY HOUSE
+49 · 172 · 6515412
AUTONOMY HOUSE
+49 · 172 · 6515412