From surviving to thriving: Suppliers' 2025 playbook

By Matthew Beecham , AutoTechInsight Research Manager, S&P Global Mobility

Global vehicle sales are projected to reach 89.6 million in 2025, according to S&P Global Mobility. That is barely above the level of a decade ago, and nearly 5 million units short of 2017’s record 94.3 million. Of course, we’ve had the COVID-19 pandemic since then, which has left no element of everyday life untouched.

Without that pandemic, global total industry volume would conceivably be past 100 million by now, a level the industry is not forecasted to reach until 2034. These are challenging times for suppliers tied to the automotive industry. Flat markets ramp up competitive intensity and make it imperative that suppliers have the correct product portfolio to eke out any pockets of growth.

With these challenging circumstances, it’s little wonder that the macroeconomic outlook surfaced as the No. 1 theme for suppliers surveyed for AutoTechInsight’s four-volume Supplier Outlook 2025.

Alongside low topline growth, suppliers are navigating a cautious recovery, influenced by shifting US policies and changing demand dynamics. Challenges related to interest rates and trade flows complicate the path toward electrification and sustainable growth.

Amid these challenges, suppliers expect a difficult yet improving economy as inflation eases and consumer confidence begins to rise. However, uncertainty persists due to geopolitical events and market fluctuations. To adapt effectively, firms are prioritizing agility and flexibility, enabling them to respond swiftly to shifting demand and market conditions. This is crucial as consumer preferences can change rapidly.

Other themes that emerged during our conversations with over 40 leading suppliers included (in no particular order) — electric vehicles, labor costs and skills, regulatory compliance and sustainability, changing consumer trends, and cost management.

Sustainability and regulatory compliance

Sustainability is a growing focus as companies adapt to stricter regulations. This includes reducing carbon footprints, improving product recyclability and ensuring sustainable supply chains. Suppliers are transitioning to low-carbon energy and using sustainable materials while collaborating with partners to achieve sustainability goals. Their aim is to stay ahead of regulations and establish a reputation as environmentally responsible market leaders.

Electrification and technological advancements

The automotive industry's shift toward electrification, with investments in EV technology and supporting infrastructure like charging networks, is central to 2025 strategic planning. Companies are reevaluating product lines and manufacturing capabilities, integrating AI, data analytics and connectivity to stay competitive. This approach aims to enhance operational efficiency and create innovative solutions that meet consumer demands for smart, sustainable mobility options.

Innovations in collaboration

Collaboration is vital for companies adapting to changing market dynamics. Many are forming strategic alliances with industry players, from tech startups to traditional automotive manufacturers, to share technology and develop products jointly. This approach enables resource pooling and risk mitigation. Additionally, aligning with original equipment manufacturers is crucial for understanding market expectations and technological needs, helping companies maintain competitiveness and improve their market position.

Addressing labor challenges

The labor market has a significant influence on 2025 strategies, with skills gaps and labor shortages affecting production. Companies are investing in talent development and retention to attract skilled personnel for modern manufacturing, especially in tech roles. To address employee turnover, strategies focus on improving working conditions, job satisfaction and inclusivity. By fostering a supportive environment and enhancing training programs, companies aim to build a resilient workforce to tackle future challenges.

Focus on cost management and efficiency

Increased raw material and production costs are prompting companies to adopt stringent cost-management strategies for operational efficiency. Investments in advanced equipment and technologies aim to enhance production and reduce waste. Suppliers are also exploring automation to streamline processes, lower costs and address labor shortages, with the ultimate goal of improving productivity and operational stability.

Navigating consumer trends

In 2025, understanding consumer behavior will continue to be a strategic focal point. Companies are leveraging data analytics and market research to gain insights into buyers’ preferences, guiding product development and marketing. As consumers become more eco-conscious and tech-savvy, businesses must create products that align with these values. Companies are also adapting to demand for diverse mobility solutions, including hybrid vehicles, full EVs and other innovative options that reflect changing consumer preferences.

Cautious optimism

What shines through is the resilience of the automotive supply chain when confronted with a spectrum of challenges. Due to the pandemic and its knock-on economic effects, market levels might not be what suppliers would have hoped after a period of intense investment in new technologies, but suppliers are cautiously optimistic as they enter 2025.

Companies that focused on sustainability, technological advancements, collaboration and consumer trends amid rapid changes have the strategies in place to succeed in such an environment. However, as the “Sage of Omaha” Warren Buffett once quipped, “You don’t find out who’s been swimming naked until the tide goes out.”

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