First Research US Industry Profile

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Automobile Parts Manufacturing
SIC Codes: 3714
NAICS Codes: 3363
Last Quarterly Update: 4/29/2019
Companies in this industry manufacture automobile parts, including transmission and power train components, engines and engine parts, body parts and trim, electronics, braking systems, and steering and suspension components. Major companies include American Axle & Manufacturing, BorgWarner, Dana, Lear, and Tenneco (all based in in the US), along with Adient (Ireland), Robert Bosch and ZF Friedrichshafen (Germany); Aptiv (UK), DENSO and Aisin Seiki (Japan); Faurecia (France); and Magna International (Canada).
Economic expansion in emerging markets worldwide is expected to drive healthy growth in the auto manufacturing sector over the next several years, which should bolster demand for auto parts.
The US auto parts manufacturing industry consists of about 4,300 companies with combined annual revenue of about $265 billion.
Competitive Landscape
As the automotive industry adapts to a future that includes electric drivetrains, autonomous technology, connectivity, and mobility options outside traditional car ownership, suppliers must evolve to meet these new challenges. Technology content is increasing its share of overall vehicle value, while hard auto parts are expected to become more commoditized. New industry entrants including tech firms and consumer electronics companies also present challenges to established suppliers. To remain competitive, automotive suppliers must develop fresh strategies that address this wide array of emerging challenges and opportunities.
Demand for auto parts is driven by new car sales, which are strongly affected by interest rates, and by the replacement market. Company profitability depends partly on the difficulty of manufacturing products and partly on demand volume, since many costs are fixed. Small companies can compete successfully by focusing on a small number of products or some highly technical ones. The US industry is concentrated: the 50 largest companies account for more than half of industry revenue.
Competitive Advantages:
Being a One-Stop Shop - Industry consolidation has yielded a few large suppliers with the scale and geographic reach to offer OEMs comprehensive offerings that can account for large portions of vehicle content. However, industry watchers suggest that for this business model to remain viable, players must keep component costs low by maintaining massive economies of scale.
Shrinking to Grow - Several large suppliers recently have shifted away from a conglomerate model to a more focused, niche approach. Through spinoffs and divestitures some companies have split tech-driven products from hard parts to wring more value from both categories. This strategy can also reduce competition for R&D resources between various divisions. Smaller, more focused companies can be more agile in an increasingly complicated industry that is changing rapidly.
Focused Mobility Strategy - Shifting attitudes about mobility could lead to less car ownership and lower vehicle sales volumes. In this emerging environment, some parts suppliers may make investments to become mobility market leaders. Examples include interior suppliers that reimagine driverless cockpits as high-value extensions of the living space, and complementing electric drivetrain offerings by investing in EV charging stations or fleet management services.
Continuous Innovation - Transformation in the automotive industry will continue to require suppliers to develop innovative products that improve safety and efficiency at lower cost. Key areas of focus include stronger yet lighter materials, advanced production technologies (such as 3D printing), autonomous driving, and electric powertrains. Becoming a valued partner with OEMs to develop these technologies is a key competitive differentiator.
Companies to Watch:
Aptiv was created in 2017 when Delphi Automotive split into two companies. Aptiv now focuses on vehicle electrical architecture (connectors, cable management systems, and wiring assemblies and harnesses), along with advanced safety systems, autonomous driving software and technologies, and infotainment systems and displays.
DENSO's products include automotive powertrain systems, vehicle electronics, electrification systems and cockpit systems, as well as advanced safety and automated driving technologies. The company has expanded recently into industrial and consumer products such as bar code readers, industrial robots, and home energy management systems.
Faurecia is one of the world's largest automotive seat makers. In addition to car seats, it also manufactures emission control systems and vehicle interiors. The company recently sold its exterior trim business to free up resources to enhance its seats and interiors offerings.
Magna International makes just about everything needed to put together a motor vehicle. Besides being one of the world's largest automotive suppliers, Magna also considers itself a technology company delivering mobility solutions. The company makes body exteriors and chassis, power and vision technologies, seating systems, and lighting and mirrors.
Robert Bosch is one of the largest suppliers of OEM automotive parts in the world. In addition to gasoline systems, the company offers hybrid and electric powertrain components. Bosch is also investing heavily in driver assistance systems and autonomous driving technologies.
Products, Operations & Technology
Major product categories for the US industry are transmission and power train components, engines and engine parts, and metal stamping of body parts and ... plus:
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