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OESA KPMG 2018 AutoPulse Survey Automotive industry insights from the suppliers’ perspective
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Page 1: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

OESA KPMG

2018 AutoPulse SurveyAutomotive industry insights from the suppliers’ perspective

Page 2: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

2© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

ForewordDear Readers,

The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry is today, how it is evolving and where it is headed. The data within was provided by OESA supplier members from March to May 2018.

We anticipate that the results of the survey will be the basis for an ongoing dialogue between you and your employees, your customers and others inside and outside of the industry. Nobody can predict the future with precision, but hopefully this tool helps you better navigate the uncertainties that lay ahead.

If you were one of the nearly 200 members that responded to the survey, thank you for your participation. Enjoy the read. We hope it leads to engaging conversations and stimulates rigorous debate about the exciting future of the automotive industry.

Sincerely,

Julie Fream

OESA, President

Gary Silberg

KPMG, Automotive Practice Lead

Page 3: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

3© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

Table of Contents

Overview 4

About the AutoPulse Survey – Demographics of Respondents 5

Industry Outlook 6

Megatrends 7

CAFE Mandates and Enhancements 8

Talent Remains Constrained 9

U.S. has the Highest Talent Shortage 10

Views on the Supply Chain 11

Regional Attractiveness 12

KPMG Thought Leadership 13

Page 4: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

4© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

OverviewRapid industry transformation, uncertain trade agreement and policies

The technological and business model disruptions have already impacted the industry significantly. As the mobility ecosystem and autonomous/electric vehicle technologies mature, the automotive industry will be forever transformed but with many uncertainties and questions –what’s tomorrow’s traditional way of doing business and how do we prepare for it? Furthermore, the recently negotiated USMCA and potential trade disruptions add more uncertainty to the industry.

66%Industry transformation

66% of respondents believe that a major tech company will enter the Auto Market as an OEM in the next ten years

46%Industry Talent Shortage Outlook

46% of respondents believe the industry talent shortage will worsen, compared to 35% in the previous survey

52%Disruption expected

52% of respondents believe a supply chain disruption is likely to occur in the next twelve months, compared to 31% in the previous survey

87%CAFE Mandate & Enhancements

Already, 87% of respondents believe electric vehicle programs are or will be part of their companies’ revenue streamsKPMG Global Automotive Executive

Survey 2018www.kpmg.com/gaes2018

Page 5: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

5© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

About the AutoPulse SurveyRespondents by Job Title Respondents by Primary Customer Type

Respondents by Region Respondents by Company Revenue

The Respondents

Nearly 200 respondents provided their views on the topics covered in the 2018 AutoPulse survey.

The depth of participation provides for a robust global data set from which to identify perspectives and formulate conclusions about how OESA members view the current automotive industry.

Click hereto access

interactive data

37%

31%

28%

4%

Director

Executive

Manager

Associate

2%

2%

20%

75%

Non-Automotive

Tier II or Lower

Tier I

OEM

United States38%

Western Europe

30%

Japan15%

Canada6%

Rest of World

8%

China1%

Mexico3%

> $5B41%

$1B - $5B25%

$250M - $1B19%

$50M - $250M11%

< $50M5%

Page 6: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

6© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

Industry Outlook

6%

74%

19%

8%

71%

21%

9%

56%

35%

5%

79%

16%

Sales will increase by5% or more

Sales will remainabout the same

Sales will decreaseby 5% or more

North American Light Vehicle Sales Outlook20182017.520172016.5

Survey responses suggest a gradual industry transformation, with suppliers focused on new products to keep pace with the future technology roadmap. While the majority of respondents expect a relatively constant sales outlook, a potential rise in interest rates, along with high vehicle inventory levels could result in slowed vehicle sales.

44%

53%

3%

87%

12%

1%

66%

33%

0%

79%

21%

0%

Interest rates likelyto increase

Interest rates likelyto stay the same

Interest rates likelyto decrease

12-Month View on Interest Rates20182017.520172016.5

28%

21%

18%

14%

12%

4%

3%

1%

0%

Develop new products/services

Improve on what we currently do

Acquire new technologycompany/companies

Seek new customers

Hire new talent

Divest underperforming/non-corebusiness lines

Enter new geographic markets

Relocate manufacturing

Outsource non-core products/services

To be a relevant supplier in ten years, what actions does your firm need to take?

4%

16%

34%

46%

No opinion

Shift is detrimental

Little or no impact

Shift is beneficial

How is the consumer shift in the US from sedans to utility vehicles impacting your company?

Page 7: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

7© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

MegatrendsThe timing and impact of electric & autonomous vehicles are impossible to predict. Given recent examples of disruptions (e.g. Tesla production issues and OEM announcements of switching to EV), trends indicate a major industry transformation is coming, with potentially various co-existing drivetrain technologies (BEVs, FCEVs, ICEs, and hybrids)

70%

30%

73%

27%

73%

27%

66%

34%

Yes

No

Will a major tech company enter the Auto Market as an OEM in the next ten years?

2018

2017.5

2017

2016.5

1%

4%

44%

50%

1%

9%

53%

37%

0%

9%

45%

46%

0%

9%

45%

46%

Never

Less than 5years

5 - 10 years

More than 10years

2018

2017.5

2017

2016.5

Expected Commercial Availability of Self-Driving Cars

54% of respondents believe self-driving cars will be commercially available in 10 years or fewer

Page 8: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

8© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

CAFE Mandate & Enhancements

5%

4%

11%

80%

11%

6%

15%

69%

7%

5%

12%

76%

No opinion

Repealed

Maintained

Reduced or delayed

2018 2017.5 2017 11%

1%

22%

66%

8%

1%

27%

64%

8%

1%

32%

58%

No opinion

Decrease

Remain unchanged

Increase

2018 2017.5 2017

6% 2% 5%

20% 24%

43%

4% 6% 6%14%

21%

49%

1% 6% 8%14%

33% 38%

1% 1% 7%17%

43%31%

Smaller vehicles Crash avoidancesystems to reducestructure weight

Vehicle sales mix Lightweighting Alternative fuel Powertrainenhancement

2016.5 2017 2017.5 2018

Recent developments in the auto industry may have accelerated plans to electrify cars in order to meet the European and Chinese emissions and electric-car requirements. Respondents ranked alternative fuel 10 percentage points higher than the previous survey, supplanting powertrain enhancement as the expected change with the greatest impact on CAFE in the next 10 years.

Under the current administration, do you believe CAFE mandates will be:

In the next five years, do you expect your company’s level of investment in light-weighting and emission technologies to:

Rank the following vehicle changes/enhancements in terms of impact on CAFE over the next ten years Alternative fuel appears to be gaining momentum amongst respondents

87% of respondents companies’ are gearing up in anticipation of increased demand for electric vehicles, with 64% either already supplying or expecting new business from electric vehicle programs in the next 12 months.

Page 9: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

9© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

4%

48%46%

3%6%

55%

35%

5% 6%

42%

49%

3%

9%

60%

31%

Getting betterStaying the sameGetting worseNo opinion

2018

2017.5

2017

2016.5

Talent Remains Constrained

In which ways is your company being impacted by a shortage of “the right” talent?

Talent shortage and industry perception are worsening. Industry transformation may face challenges46% of the respondents believe the industry talent shortage will worsen over the next 12 months, representing an 11% increase from the previous survey. As the traditional automotive industry continues to transform and competition with other non-traditional auto companies intensifies, the talent shortage may cause lagging innovations, production inefficiencies, and a slow down in new product developments.

How do you view the industry’s talent shortage issue trend over the next 12 months?

4.8%

6.8%

4.1%

3.4%

4.8%

4.8%

3.4%

4.1%

5.4%

38.8%

22.4%

34.7%

36.7%

19.0%

13.6%

27.9%

19.7%

18.4%

33.3%

40.1%

31.3%

30.6%

44.9%

36.7%

29.9%

31.3%

36.7%

17.0%

23.8%

21.1%

18.4%

24.5%

34.0%

28.6%

37.4%

27.9%

6.1%

6.8%

8.8%

10.9%

6.8%

10.9%

10.2%

7.5%

11.6%

Delivery issues

Cost increases

Launch delays

Quality issues

Slow down in performance improvement

Slow down in new product development

Production inefficiencies

Lagging or lacking innovation

Lower employee morale

No Opinion No Impact Slight Impact Moderate Impact Significant Impact

Page 10: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

10© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

U.S. has the Highest Talent Shortage

Industry Talent Shortage Regions61% of the respondents indicated the United States has the most acute industry talent shortage amongst all regions surveyed, followed by Mexico (29%), both of which worsened compared to the previous survey. Recent OESA Supplier Barometer results echoed this, indicating that most suppliers are having difficulty finding qualified skilled workers in the U.S. and Mexico, and more suppliers in the U.S. and Mexico are running on alternate shift schedules compared to last year.

AutoPulse respondents believe the primary causes of the industry’s talent shortage to be the perception of the industry by millennials and other industries attracting specific talent types.

Primary Cause of Industry’s Talent Shortage

16%

24%

25%

61%

66%

Intensity of global competition

The "automotive culture"

Talent flight caused by the Great Recession

Other industries/start-ups/locations attractingspecific talent types

Perception of the industry by Milennials

0.5%

1.0%

1.5%

4.0%

5.5%

7.0%

12.5%

12.5%

18.0%

37.5%

0.8%

1.6%

0.0%

1.6%

4.9%

8.1%

13.0%

18.7%

16.3%

35.0%

South Korea

South America

Other

India

Japan

Canada

China

Europe

Mexico

United States

2018 2017.5

Page 11: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

11© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

Views on the Supply Chain

The top three factors considered by respondents to pose the biggest threat to supplier profit margins have remained consistent with prior surveys

The Three Biggest Threats to the Supply Chain

Compared to the previous survey, the percentage of respondents believing a supply chain disruption occurring in the next year is at least somewhat

likely has increased from 31% to 52%

Extremely likely 10%

Somewhat likely 42%

Neutral 29%

Somewhat unlikely 15%

Not likely at all 4%

42%

38%

51%

46%

49%

31%

38%

62%

65%

67%

48%

41%

57%

50%

71%

Trade policies and tariffs

Talent availability

Program launches - frequency andshortened time frame

Quality and delivery requirements

Capacity availability

2018 2017.5 2017

Likelihood of a Disruption Occurring in the next Twelve Months

1st 2nd 3rd

Level of investment needed to win and

retain businessPeer competition

Expected price-downs

86%

65%

34%

Page 12: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

12© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

Regional Attractiveness

Unchanged

Revenue Growth Potential in the Next Ten Years

1

64%22%

2

China ASEAN

Greatest… Least…

Japan

24%

Expected Return on Invested Capital in the Next Ten Years

1

51% 25%

2

China Mexico

Greatest… Least…

India

21%9

9

Page 13: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

13© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

2018 OESA KPMG AutoPulse Survey

KPMG Thought LeadershipThe Clockspeed Dilemma The Future of the Car

Me, My Car, My Life Metalsmith or Grid Master

Global Automotive Executive Survey 2018

Click on picture of cover to launch thought leadership

Your Connected Car Is Talking. Who’s Listening?

I see. I think. I drive.(I learn)

KPMG Insights

KPMG’s knowledge base of research demonstrates our understanding of complex business challenges faced by companies around the world.

Will autonomous vehicles put the brakes on the collision parts business?

Lab Coat to Shop Coat Transformation

Page 14: OESA KPMG 2018 AutoPulse Survey · The 2018 AutoPulse survey, developed by KPMG and OESA, provides OESA members unique insights and perspectives on where suppliers view the industry

Contact Us

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

kpmg.com/automotivekpmg.com/socialmedia

KPMG LLP OESA

Gary SilbergThe Americas Head of Automotive200 E. Randolph DriveChicago, IL [email protected]

Joseph A. RadeckiManaging Director, Deal Advisory1225 17th Street, Suite 800Denver, CO [email protected]

Jack WilliamsManager, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]

Anthony Y. LoManager, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]

William G. DiehlManaging Director, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]

Vince PavlakPartner, Deal Advisory150 West Jefferson, Suite 1900Detroit, MI [email protected]

Timm KuechleDirector, Deal Advisory200 E. Randolph DriveChicago, IL [email protected]

Dan YuManager, Data & Analytics20 Pacifica, Suite 700Irvine, CA [email protected]

Julie A. FreamPresident & CEO25925 Telegraph Road, Suite 350Southfield, MI [email protected]

Mike A. JacksonExecutive Director, Strategy & Research25925 Telegraph Road, Suite 350Southfield, MI [email protected]

April BufordSenior Director, Communications25925 Telegraph Road, Suite 350Southfield, MI [email protected]


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