- After 10.5 percent sales growth for the current year, only 6.5 percent growth expected for 2024
- Profitable growth and cost optimization as top priorities
- Shortage of skilled workers coming to a head
- Expansion in USA, India and other markets - not in Western Europe
In the spring of last year, the participants in Horváth's annual automotive top management survey predicted sales growth of 7.5 percent for 2023. Currently, the industry is forecasting an impressive 10.5 percent for the current year – two percentage points above the overall average across all industries. However, the recovery following the crisis-hit years is slowing down. For the coming year 2024, board members and executives across the automotive industry are only expecting an increase of 6.3 percent. However, the automakers and their suppliers are not alone in their cautious expectations; the cross-industry outlook is also only 6.5 percent.
"There is still considerable uncertainty regarding market development due to the geopolitical environment, emerging competitors from China, and persistent, significant material bottlenecks in the supply chain," says Frank Göller, a partner and automotive expert at Horváth.
Cost issues dominate the management agenda
Against this background, it is not surprising what most of the participants in the study answered when asked about their most pressing current management issue: improving the cost and revenue structure. This was already the top priority in 2022. The relevance of liquidity or working capital optimization has risen considerably; up seven places to second place. This is due above all to the rising cost of capital, driven by higher interest rates, and the substantial capital required to finance the transformation in the automotive industry. "In times of material shortages and supply chain disruptions, suppliers in particular have significantly increased their inventories. This tied-up capital must now be reduced and made available for innovations in terms of products and digitalization," says Göller.
Shortage of skilled workers drives up personnel costs
Rising personnel costs and the increasing shortage of skilled workers are a significant challenge. Compared to 2022, the respondents highlight personnel cost increases of over eleven percent – compared to 7 percent cost increases for materials. This also explains why HR issues have moved up six places into the top three management priorities. Sixty-four percent of the participants assigned a very high importance to "personnel-related topics". "It's about skilled workers for digitalization and e-mobility, but also about specialized workers in the plants, who are becoming increasingly scarce due to demographic and social changes, especially in Europe," says Horváth partner Frank Göller.
Changing location strategies: Western Europe is increasingly being shunned
Almost two thirds of the companies surveyed are planning at least a slight reduction in capacity in Central and Southern Europe. Expansion is planned primarily in the USA and India, but also in China and other Asian countries, Central America and Africa. On the "old continent", the industry only sees relevant potential in Eastern Europe, with at least around 60 percent stating that they still intend to expand here. "This shift can be explained on the one hand by the fact that the general conditions in other markets, such as the USA due to the Inflation Reduction Act, are significantly more attractive. On the other hand, there is high sales potential that companies want to exploit globally. For this, customer proximity is the key," says Horváth’s Frank Göller. OEMs and suppliers are therefore following their (new) clientele and meeting region-specific needs there. The fact that they are focusing the value chain regionally also has the major advantage of minimizing risk as far as the supply chain is concerned. 'Local for local' has thus become the decisive motto. A large majority of those surveyed want to drive regionalization even more strongly in the future (84 percent).
About the study
A representative sample of board members from automotive companies was interviewed for the industry survey. The sample comprises over 30 respondents with whom personal in-depth interviews were conducted. These took place as part of Horváth's large-scale international "CxO Priorities 2023" study, for which a total of over 430 top managers from 19 countries and 13 industries were surveyed. Most respondents are employed at companies with at least one billion euros in annual sales and 1,000 employees. The study report is available on request from presse@horvath-partners.com.
