Automotive: Industry Update | February 2025

February 11, 2025

The automotive supplier industry in 2024 faced significant disruption from geopolitical risks, labor shortages, and regulatory shifts, but strategic adaptations have emerged to tackle these challenges. Suppliers navigated weakened demand and rising operational costs, driven by the global shift towards electric vehicle (EV) production and declining Internal Combustion Engines (ICE) profitability, with many original equipment manufacturers (OEMs) adopting a “shift and pause” strategy to balance EV innovation and market readiness. Despite these pressures, suppliers pursued merger and acquisition (M&A) activity, focusing on geographic expansion, new technologies, and process automation, as seen in notable acquisitions like Aurelius Private Equity’s integration of Dayco Propulsion Solutions into a unified platform.

Amid these changes, the easing of supply chain constraints allowed suppliers to shift focus to demand dynamics, with strategic pricing adjustments and incentives becoming critical to attract inflation-conscious consumers and stabilize inventories. Looking ahead, suppliers are increasingly prioritizing flexible multi-energy platforms, cost efficiency, and investments in cutting-edge technologies, positioning themselves for resilience and long-term growth in a transforming automotive landscape.

For more information, please reach out to Kathleen Lauster, CFA and Matthew Lapish.

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