MEMA OE Supplier Barometer: Sentiment Reflects Caution Due to Economic and Supply Chain Risks
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 breakeven again this year, after marginally outperforming breakeven in 2022. Suppliers continue to expect slim production volume margins in 2023 and note that their breakeven 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 ppts. 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,” Jackson said.
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 at: https://www.oesa.org/resource/oesa-automotive-barometer-studies.
About the MEMA Original Equipment Automotive Supplier Barometer:
The MEMA OE Automotive Supplier Barometer captures the pulse and analyzes the twelve-month business sentiments of top executives in the supplier industry. It is a quarterly survey on commercial issues, the business environment and strategies that influence the supplier industry. This Barometer is distributed to vehicle manufacturers, financial institutions, governmental officials and the media to provide an on-going profile of supplier industry trends.
MEMA, The Vehicle Suppliers Association, is the leading trade association in North America for vehicle suppliers, parts manufacturers, and remanufacturers. It has been the voice of the vehicle supplier industry since 1904. Its more than 1,000 members are Strong by Association .
Companies join MEMA via two membership groups: MEMA Aftermarket Suppliers and MEMA Original Equipment Suppliers. Automotive and commercial vehicle suppliers are the largest manufacturing sector in the United States and lead the way in new vehicle innovations.
Members conceive, design, and manufacture the OE systems and technologies that make up two-thirds of the value of every vehicle and supply the aftermarket with the parts that keep millions of vehicles on the road, fueling international commerce and meeting society’s transportation needs. MEMA members are committed to safety and sustainability.
MEMA has offices in Southfield, Mich.; Research Triangle Park, N.C.; and Washington, D.C. Learn more at MEMA.org.
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