Automotive suppliers are feeling more optimistic going into 2018, according to the Q4 2017 Original Equipment Supplier (OESA) Barometer. Twenty-three percent of suppliers surveyed by the OESA (Southfield, MI) are “somewhat more optimistic” compared with 16% in Q3 of 2017.
Contributing to the optimism is the belief that the current administration “is not likely to impose further regulations on automotive-based manufacturers” and that “more high-quality opportunities” are coming through the pipeline than earlier in the year, with “a number of them considering bringing business back to the U.S. from Asia.”
For 38% of survey respondents whose sentiment was “unchanged” (both in Q3 and Q4 of 2017), the reasons cited included “uncertainty” and “ongoing rhetoric” with respect to NAFTA and tax changes.” While NAFTA continues to hang in the wind with not much progress in the negotiations, the tax reform bill passed in December, which probably will move some suppliers out of the “unchanged” category. Some respondents expressed concern over a “slowing” in the market in 2018.
Pessimism dropped among survey respondents, with 37% “somewhat more pessimistic” in Q4, down from 48% in Q3. Reasons cited for pessimism included an unstable political climate, volume and mix risk and volume uncertainly in North America, a softening of the North American market and price pressures from customers.
When asked to rate specific strategies in terms of priorities for acquisition, 27% of respondents said “accelerating access to new technologies” was their highest priority. Accessing new customers through expansion into new geographic markets was rated by 22% and building market share was cited by 8%.
A report on the global automotive industry in 2018 from Standard and Poor’s ("Global Auto Industry 2018: At a Crossroad") projects that global demand is likely to remain stable into 2018, as will “ratings on automakers and suppliers” with “little upside, particularly in the U.S. and Europe.” Standard and Poor’s also noted that the most “disruptive mega-trend” over the next decade probably will be power-train electrification. “Autonomous driving and new mobility services could over time challenge the business models of incumbent manufacturers and suppliers,” said the report. “Partnerships between automakers and suppliers as well as alliances and restructurings will become more common and vital to all companies’ efforts to stay competitive.”
While the U.S. auto market is slowing a bit, Standard and Poor’s notes that SUVs and CUVs will continue to lead the pack in sales. “In 2018 and 2019, we think sales could weaken slightly from 2017 levels . . . but stay at a relative healthy total of 16.5 million to 17 million units based on our expectation for steady U.S. GDP growth, housing starts and gasoline prices.”
Standard and Poor’s expects U.S. automakers and suppliers to “face margin pressure resulting from rising commodity costs, lower sales volumes or a shift in the product mix toward vehicles with lower profitability.”
Looking at Japanese companies, a stable outlook for those automakers “could depend on trends in the key North American market. We believe major Japanese automakers and auto suppliers will generate slightly weaker business results year-over-year in fiscal 2017 (ending March 31, 2018). We expect a slowdown of new-car sales in the key North America market, which has supported growth of these companies’ revenues in recent years.”
However, it would appear that optimism reigns among Japanese automakers in North America. A report in the Jan. 11 issue of the Wall Street Journal (“Foreign Car Makers to Take U.S. Lead”) said that in the “first quarter of 2018, foreign makers are expected to produce 1.4 million vehicles in the U.S., WardsAuto.com projects, equaling their American rivals for the first time.”
Toyota Motor Corp. announced on Wednesday, Jan. 10, that Alabama has been chosen as the home for a “shared factory” with Mazda Motor Corp. The $1.6-billion plant investment “is the latest