Decade of growth for auto parts industry may soon be over

The auto parts industry has a steady growth for the past decade, but analysts and forecasters believe the strains of falling vehicle sales, rising material costs and huge demands for research and development spending could bring the party to an end.

The combination of uncertainty over future technologies, lingering import tariffs and unsettled trade issues with key trading partners. China, Mexico, Canada and Europe will erode supplier company values and stock prices, making it harder to keep up current spending demands.

The industry is already in transition, cutting payrolls ahead of any real continued fallout. The sector cut nearly 22,000 jobs in the U.S. through May, or 211 percent more than last year’s first 5 months. According to the study, segments such as transmissions and axles are expected to decline 6 to 10 percent, respectively, by 2025. Meanwhile, the electric and autonomous vehicle sectors will rise. Electric drivetrain is expected to grow 306 percent, battery and fuel cell sectors by 266 percent and advanced driver-assistance systems and sensors by 190 percent, according to Deloitte.

Investments in these sectors are likely to ramp up in the wake of declining car sales. Business strategy is the key for suppliers to position themselves for sustainability in a down market.