Industry observers tend to overlook the changing role and structure of the automotive supply base. Of course, the story of success in the market is often viewed through the retail sales volume of branded OEM products. However, over the course of several decades, automakers have grown increasingly reliant on an ever smaller number of large tier 1 suppliers to deliver the core technology and innovation needed in the marketplace.
As a result, automakers face new challenges to maintain a balance of power with this new breed of supplier. In addition, suppliers at all tier levels must establish a position of relevance in a supply chain dominated by such power players. And finally, tier 1 suppliers must continue to anticipate the trends and development in the marketplace and upgrade their portfolio of capabilities in order to press their advantage.
In this analysis, we describe the trends, highlight several case examples, and discuss the implications of these developments along four strategic themes.