Automotive suppliers increasingly worried about recovery

Brussels – European automotive suppliers are feeling increasingly concerned about the impact of Covid-19 on their businesses, a new survey has found.

The survey was conducted 27-30 April by the European suppliers’ trade group CLEPA, whose members include Continental, Eaton, Gates and Toyoda Gosei. 

More than 90% expect revenues to fall in 2020, compared with 60% who said that in a CLEPA survey in late March. More than half of respondents said they expected to make a loss before taxes in 2020.  

Suppliers are also more pessimistic about a recovery, the survey found. Some 75% said it would take more than a year to return to normal business, up from a timeframe of six to 12 months in the March survey. One third of respondents said it would take two to three years to recover.

The survey, the results of which were aggregated by McKinsey and company, also found that 90% of suppliers said that demand volatility was the most pressing issue for the automotive supply chain. 

Suppliers are also concerned that production will restart at a very low level, which means that fixed costs increase much faster than turnover. 

“Their future perspective depends very much on consumer sentiment and demand picking up substantially,” CLEPA said in a note published 8 May. 

The group has called for coordinated Europe-wide measures to stimulate demand, such as scrapping incentives.

With some factories beginning to restart, 85% of respondents said they were “well prepared” with health and safety measures. 

Suppliers were also asked what steps they are taking to preserve cash and prepare for a recovery. Among their responses: 

•    84% said they would cut investment, and 74% will reduce their workforce

•    Half of respondents said they would take those measures in the next six months

•    Nearly 40% have already started to cut R&D budgets; many others say they expect to do so.