Press "Enter" to skip to content

Supplier executives cautious due to economic and supply chain risks in 2023

Expected weakness in the U.S. economy, continued disruption to automotive supply chains and labor availability constraints are concerns reported in study

Research Triangle Park, Md.—According to the Q1 2023 MEMA Original Equipment Automotive Supplier Barometer Index (SBI) — a gauge to measure the sentiments of North American automotive supplier executives — a range of factors continue to weigh on the 12-month outlook for supplier executives. Factors include expected weakness in the U.S. economy, continued disruption to automotive supply chains from input shortages, and labor availability constraints. The first quarter barometer showed continued pessimism with an SBI reading of 46, or 4 points below a neutral level of 50, highlighting growing concerns with sequentially negative results.  

The Q1 2023 MEMA Supplier Barometer, sponsored by Deloitte, focused on Production, Planning and Electrification. The results indicate:  

  • Concerns related to weakness in the U.S. economy became the leading threat to the industry in the coming 12-months but remain unchanged sequentially. Threats of supply chain disruption and labor availability continue to threaten the industry but show improvement from the end of 2022. 
  • The industry is expected to exceed break even again this year, after marginally outperforming break even in 2022. Suppliers continue to expect slim production volume margins in 2023 and note that their break even point is largely dependent on program performance.
  • The top internal production issue is labor related. External issues are related to supply chain risks and sub-tier supplier financial distress. Perceptions of internal and external production risks eased compared to 2022.
  • Inventories increased on net across the supply base, with the percentage of suppliers reporting an increase at 62%, down 4 points. from 2021.
  • Battery Electric Vehicle (BEV) program development is driving innovation across the supply base despite the lack of program profitability. Suppliers are neutral in the view that BEV production will reach 20% of global production within the next 2-5 years.

“The latest MEMA automotive supplier barometer reading of 46 reflects ongoing concerns, especially over the U.S. economy, including widespread inflation and higher interest rates, weighing on supplier performance and triggering higher levels of sub-tier supplier distress. Executive sentiment is cautious, anticipating light vehicle output to climb by nearly 700,000 units in 2023, with North American production of 15.0 million units, better supporting utilization and margin,” said Mike Jackson, executive director, strategy and research, MEMA, Original Equipment Suppliers. “The supplier community continues to battle acute market anomalies, as it has over the past three years, by embracing talent and R&D capabilities to innovate and seize new program opportunities, while protecting against optimistic planning volumes for many new BEV entries.”            

The Q1 SBI chart, a full copy of the Supplier Barometer results and the Deloitte commentary on the Q1 2023 MEMA OE Supplier Barometer are available on the MEMA website. 

Comments are closed.

Bringing you regional and national automotive aftermarket news
Verified by MonsterInsights