Interactive
As volatility has become the norm for the automotive industry, it has upended traditional profit margin dynamics. For two decades leading up to 2019, automotive suppliers’ EBIT margins were on average 1 to 2 percentage points higher than those of original equipment manufacturers (OEMs). Then came massive supply chain disruptions with the Covid-19 pandemic and global chip shortage, plus higher raw material and energy prices, and now rising borrowing costs and wage bills due to inflation. Automotive OEMs were able to ride out the supply shortage by focusing production on the highest-margin models and raising prices, but suppliers had no such strategic options.
We’re tracking the EBIT margins of the top 15 OEMs and top 100 suppliers worldwide, and each quarter, we publish the latest trends in this dashboard.
Here are some of the key takeaways through the first quarter of 2025:
- OEM margins continued to decline in the first quarter of 2025, falling to 5.4%—a more than 40% drop from their 2021 peak. This marks the third consecutive quarter in which supplier margins outperformed those of OEMs, a significant reversal of the 17-quarter trend that began during the pandemic.
- OEMs’ falling margins reflect softening customer demand and intensifying pressure on prices. OEM margins may get squeezed further in 2025 and beyond by persistent inflation and high interest rates causing subdued demand, rising costs, and falling prices. In addition, growing uncertainty around the pace of electric vehicle (EV) adoption will likely force OEMs to shoulder the dual burden of producing both combustion engine vehicles and EVs for an extended period, further pressuring margins. Many OEMs have already announced efficiency and performance improvement programs, including a reduction of material costs, that put additional pressure on suppliers.
- After supplier margins had stabilized at around 6.5% postpandemic, they dropped to 6% in the first quarter of 2025. Suppliers are still suffering from higher input costs (even though material costs have receded from all-time highs) while OEMs increase cost pressure even further. A growing number of suppliers face liquidity challenges that will likely require special support, including from OEMs, to prevent insolvency.
- Amid this hurricane of external pressures on margins, both OEMs and suppliers have no time to lose to increase the resilience of their business models, enacting more fundamental cost-reduction measures while staying disciplined to maintain price levels. Looking ahead, escalating trade tariffs could add a new layer of pressure on margins, particularly for globally exposed supply chains.
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