Featured Insights Archive - Page 2 of 18 - Berylls

hether the COVID-19 pandemic, supply bottlenecks, the war in Ukraine, or inflation – the crises seen in recent years have also presented the automotive industry with challenges in the form of rising interest rates, high energy costs, and volatile raw materials prices – and continue to do so.

In addition, manufacturers are exerting pressure on suppliers due to increasing price competition, which is further exacerbating the revenue and profitability situation and has already led to massive job cuts at many suppliers. Among the TOP 100 suppliers worldwide, a decline in margins from 8.3% in 2017 to around 6% in 2023 can be observed.

Suppliers had to contend with some significant cost increases in 2023. This was the result of an expert survey in which German representatives from medium-sized companies to the largest global suppliers took part. Around 76% of respondents stated that costs had risen by more than 5% (7.9% on average). The main reasons given for the increase were the higher cost of materials, wages, and energy. For 2024, the majority of experts surveyed predict the recent downward trend in producer prices to continue and lead to lower cost increases than in the previous year. Only just under 30% of experts expect costs to rise by more than 5%, with an average increase of 4.2% in 2024.

However, measures taken on the supplier cost side alone will not be sufficient to counteract the rise in costs and the further increase in pressure from OEMs in 2024. Any claims arising from cost increases, volume fluctuations, etc. need to be systematically identified and implemented. Claims management has great potential to boost revenue and earnings.

Actual cost increase in 2023 and expected cost increase in 2024 compared to the previous year

Source: Berylls by AlixPartners

While 38% of all respondents still covered more than 75% of their cost increases through claims in 2023, the outlook and level of confidence in the ability to successfully manage cost increases via claims has deteriorated for 2024. Only 19% of suppliers still expect to be able to pass on more than 75% of their increases to OEMs through claims. The majority expect less than 50% of their claims to be successful.

This development has led to a thought experiment regarding the relevance of successful claims management. According to Berylls experts, companies with outstanding claims management skills can realize up to 15% of their revenue through claims. Let us now imagine a supplier with total annual revenue of 1 billion euros, a 6% profit margin and claims realization of 100%. Based on these figures, 150 million euros of that company’s revenue is generated through claims. If the claim rate now falls to 50%, this corresponds to a drop in revenue of 75 million euros. Assuming costs remain the same, the profit margin is then reduced to –1.5% in this case and therefore in the red. Effective claims management is therefore highly relevant for the company’s results. The decline in the assertion of claims predicted by the experts for 2024 could have dramatic consequences for individual suppliers and threaten their very existence.

A shift can be observed with regard to the reasons for claiming. While higher materials costs were the most common reason for claiming in 2023, volume fluctuations are expected to be the main cause in 2024. This trend is in line with current forecasts, which recently revised production volumes in Europe slightly downwards for 2024, largely due to declining sales volume predictions for BEVs.

Actual (2023) and expected (2024) coverage of the cost increase through claims

Source: Berylls by AlixPartners

However, despite the worsened outlook, the experts surveyed rate their claims management as positive on average, according to the survey. In summary, the maturity of claims management is usually well below the optimum level, resulting in the following fields of action for suppliers:

Create transparency: In order to process claims both swiftly and successfully, comprehensive transparency regarding all options for claims, contracts with customers, cost developments, and ongoing claim processes is essential.

Establish clear rules and processes: Successful claims management requires clear structures, responsibilities, and processes. It is important to establish coherent rules for communication with customers and the involvement of management levels.

Enforce claims systematically: KPIs must be used to manage, control, and incentivize the enforcement of claims. They serve as a trigger for initiating a claim process and help to boost performance and drive effectiveness. The involvement of cross-departmental and cross-functional teams from purchasing, production, sales, and finance as well as external experts in critical negotiations is crucial to successfully asserting claims.

A final look at the survey results: In 2023, the experts surveyed were unable to compensate for a total of some EUR 2.7 billion of the total cost increases via claims. As the enforcement of claims is likely to become even more difficult in 2024, it is therefore imperative for all suppliers to further professionalize their claims management processes.

Main reasons for claims

Source: Berylls by AlixPartners

Authors

Dr. Alexander Timmer

Partner

alexander.timmer@berylls.com

Thorsten Lips

Partner

thorsten.lips@berylls.com

Philipp Stütz

Associate Partner

philipp.stuetz@berylls.com

Maximilian Deuringer

Consultant

maximilian.deuringer@berylls.com

Philipp M. Stütz

Philipp M. Stuetz (1981) joined Berylls at the beginning of 2021. He has over fifteen years of experience in the automotive industry. Thereof he spent seven years at an international automotive supplier with assignments in Spain, the USA and Mexico and over eight years in consulting. His focus is in operations excellence, especially in large transformation programs, process optimizations and efficiency improvements in administrative functions and indirect operations areas. He counts suppliers and OEMs to his clients alike.

Philipp M. Stuetz graduated in business administration from the universities of Stuttgart and Strasbourg.

Dr. Alexander Timmer

Dr. Alexander Timmer (1981) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, as a partner in May 2021. He is an expert in market entry and growth strategies, M&A and can look back on many years of experience in the operations environment. Dr. Alexander Timmer has been advising automotive manufacturers and suppliers in a global context since 2012. He has in-depth expert knowledge in the areas of portfolio planning, development and production. His other areas of expertise include digitalization and the complex of topics surrounding electromobility.
Prior to joining Berylls Strategy Advisors, he worked for Booz & Company and PwC Strategy&, among others, as a member of the management team in North America, Asia and Europe.
After studying mechanical engineering at RWTH Aachen University and Chalmers University in Gothenburg, he earned his doctorate in manufacturing technologies at the Machine Tool Laboratory of RWTH Aachen University.

Thorsten Lips

Thorsten Lips (1972) is a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors). He began his career as a management consultant at PricewaterhouseCoopers Düsseldorf in 1998. After spending six years at Malik Management Centre in St. Gallen, Switzerland, he took the cross-industry, global responsibility for Pricing, Sales, Service and Marketing as a partner at Horváth. At Berylls, his area of expertise is Pricing & Revenue Management. This encompasses classical topics like new- and used-car pricing, aftersales pricing and the like. In addition, he is an expert in innovative Pricing and Revenue Management approaches for digital products and services as well as in the field of data-driven Pricing.

Industrial engineering and management studies at the Technical University of Ilmenau and the Technical University of Darmstadt.

uppliers need to exploit the opportunities offered by AI in the short term while realistically assessing the added value in the long term

The enthusiasm for artificial intelligence (AI) in the automotive industry is unbroken in the media, and management expectations regarding the potential to cut costs and therefore boost earnings through AI are high – and rightly so. This is also the case for the world’s 100 best automotive suppliers. Most of them take a public stance on AI – artificial intelligence is a topic in over 5% of all media coverage of the most active companies (see chart 1). Harman, a leading company, even mentions the topic of AI in more than 10% of all its relevant reports.

However, the dynamics of recent years also show that in economically challenging times, investments in the “future topic of AI” always involve risks – on the one hand, the risk of underestimating the significance of AI, but more serious, however, is the risk of being overly cautious in this area. This article is a compact guide to help you successfully navigate the use of AI in the supply industry by answering a few simple questions: What needs to be done and what should not done? Where is it worthwhile setting priorities to ensure a successful long-term competitive position, and where is technological innovation “simply a must”?

Key question: what needs to be done?

Our experience shows that the automotive companies leading in the use of AI have acted swiftly and have been determined to optimize business processes through AI and actively seize the available opportunities. Their efforts have focused on boosting efficiency “throughout the process” and “within the product.”

“Throughout the process” includes optimization at all points that are suitable for machine optimization due to quantity, duration, effort, and/or complexity. On the one hand, these are “expected” tasks, such as the typical manually time-consuming creation and checking of specifications by AI – completion, pattern and error recognition, or translation can both improve quality and increase speed. On the other hand, AI can also be suitable for “unexpected” use cases, such as using it to help reduce electricity costs in production by detecting leaks in compressed air lines. The spectrum is therefore very broad and prioritizing the right cost-benefit ratio in line with the individual company’s position is crucial to success.

Although artificial intelligence “within the product” is usually associated with personalization within the vehicle, it also has its raison d’être in individualized customer interaction between or with supplier companies. Discussions with sector participants show that the focus here is on providing customers with initial information, which is achieved, for example, through context-sensitive digital agents and chatbots. From a supplier’s point of view, this may seem to play only a minor role, but this is precisely where undiscovered opportunities can lie. Low-threshold access to product and order information via an intelligent chatbot agent can help new customers in particular in terms of sales and at the same time scale up very efficiently without the need for additional staff. What’s more, ideally, AI-supported sales tools can be based on existing product data with little effort and create transparency regarding user behavior by analyzing the inquiries made. This in turn provides a more sound basis for making decisions on incremental improvements. Therefore, AI investment “within the product” can also pay off in the medium term for supposedly non-digital product portfolios.

Anteil der Artikel, in den KI erwähnt wird – Data frame: from 2023 (last 18 months)

Data Source basis: more than 100 sources, including InvestorPlace, Zacks Investment Research, Seeking Alpha, Reuters, CNBC, Market Watch, Forbes, Bloomberg Technology, Yahoo etc.

Follow-up question: what should not be done?

The use of AI always goes hand in hand with a discussion about the risks involved. Reservations about the secure handling of confidential and competition-related data, commercial concerns about initial development costs and long-term “lock-in” effects, but also ethics and bias justifiably play a major role. This is because the nature of (generative) AI sometimes makes it more difficult to uncover errors in results or detect the unconscious biases and unwanted behavior of an AI model. However, automotive suppliers should not allow themselves to be paralyzed by this factor.

It is essential to build the use of technology on a solid foundation. A key cornerstone of this foundation is choosing the right mix of AI partners who – in addition to in-house experts – can play an important and efficient role in implementing AI solutions. A competent technology partner can help to directly address the fundamental risks mentioned above. Particularly in the field of digital agents, the technology partner’s business model is often based on the customer’s ability to make successful use of AI. This means that high-quality results and data security, as well as the associated long-term use of a digital agent, are in the direct interest of the technology partner.

A look at the market shows that this strategy is bearing fruit, as due to the high speed of technological development, suppliers are increasingly willing to try out “fast-moving start-ups” instead of simply using established technology service providers. Particularly in application scenarios that require a quick ROI, start-up solutions of this kind can present a worthwhile alternative for automotive suppliers.

Final question: where should automotive suppliers use AI to make a conscious effort to improve their competitive position in the long term?

Despite the current challenges facing the entire automotive industry, the constant battle for the best competitive position will not be decided in a sprint, but in an endurance race, even with AI. The right talent is an essential ingredient. Automotive suppliers should therefore not only review the relevance of AI in their own company, but also aim to expand their own capabilities when it comes to analyzing, developing, and scaling AI solutions and thus create an attractive environment for AI pioneers and enthusiasts alike. This is an essential prerequisite for ensuring that AI solutions are perceived as more attractive by the company’s own workforce and therefore deployed to a greater extent. Only when this is successful can the hoped-for potential for cutting costs and thus boosting earnings come to fruition.

Here too, a look at the market allows us to draw an optimistic conclusion. According to our analysis, automotive suppliers that have increasingly leveraged (generative) AI during the last 18 months have consequently also experienced significant growth in their AI expertise. The last 100 employees to join the largest and/or most AI-focused automotive suppliers have industry knowledge from relevant companies. Therefore, from the perspective of these suppliers in particular, nothing should stand in the way of this trend.

Transfer of technical staff – Sankey diagram with pure tech companies, excluding tech consulting companies

Source: Berylls by AlixPartners

Autoren

Malte Broxtermann

Partner

malte.broxtermann@berylls.com

Clinton Charles

Senior Data Scientist

clinton.charles@berylls.com

Malte Broxtermann

Malte is an expert in the development and implementation of automotive digitization strategies.

He focuses on helping clients scale (generative) artificial intelligence to improve their bottom line across the entire automotive value chain. His primary customers are automotive manufacturers and their suppliers, especially those active in the Software-Defined-Vehicle space.

Before his time at Berylls by AlixPartners (formerly Berylls Strategy Advisors), he advised leading North American utility companies. Prior to that, he saved lives as emergency medical technician. Malte holds master’s degrees in economics from Maastricht University and Queen’s University in Canada.

he automotive supply industry is undergoing the greatest transformation in its history.

More than ever, suppliers are compelled to significantly boost their efficiency to remain competitive in the long term.

The industry is responding with proven methods: large-scale cost-cutting programs combined with job cuts and site closures. However, these measures do not always have the desired effect. Companies that cut costs, restructure, change their business model, or alter their strategy can cause themselves long-term damage through poor implementation.

Symptoms and diagnosis of the current crisis

The rise of e-mobility together with the advance of digitalization is changing the face of the automotive industry forever. There are also various market-specific challenges, such as the reorganization of the automotive value chain by OEMs or the emergence of new vehicle manufacturers in China.

By 2030, around a quarter of the approximately 270,000 jobs in the automotive supply industry in Germany could therefore be lost. Over the past ten years, the number of people employed in the sector in Germany alone has decreased by 7.5%. A few years ago, the average return on investment stood at 7 or 8%. Today, however, the figure has fallen to 5 or 6%. Necessary investments are being postponed or delayed and innovation programs largely cut back. R&D, operational excellence, and precision – once supreme disciplines and a competitive advantage – have become a sea anchor that is slowing down urgently needed adjustments.

Therefore, only cost cuts promise to provide sufficient breathing space in the short and medium term. The programsintroduced by well-known suppliers such as Continental, ZF, or BOSCH have long been pointing to tougher times ahead. The common reaction to date: job cuts and the associated efficiency gains. However, the question remains as to whether and to what extent this approach sustainably improves the allocation of resources and whether lower costs and leaner structures can be achieved. In the past, simply cutting costs has generally turned out to have a boomerang effect. Failure often correlated with inadequate integration with the corporate strategy, a lack of involvement of employees and managers, unrealistic goals, or poor implementation.

Functional analysis as an instrument for shaping the future

When used correctly, functional analysis can be an excellent tool for effective, efficient cost structuring. Typically, this method analyzes processes, resources, and interfaces within the organization in a step-by-step sequence with the aim of identifying potential for improvement and boosting efficiency.

Functional analysis is currently experiencing a revival in various industries and fields, such as product development in automotive engineering as well as in the area of digitalization and technology. The results serve to optimize processes and implement positive changes. Which value streams and functions will be important going forward and which effects will their interaction have on the organization as a whole? Functional analysis can provide the answers to these crucial questions. It shows which processes are becoming obsolete and where efficiency can be improved through technologies such as artificial intelligence. A clear vision of the future organization is essential. The aim is to identify both current and future potential for success in order to increase speed and improve adaptability. The centralization and decentralization of processes needs to be carefully considered so that autonomy is guaranteed where it offers the greatest added value. On the one hand, the focus should be on rigorously applying an end-to-end view of value streams. On the other hand, implementation, i.e., the more consistent realization of the identified improvements and the more sustainable monitoring of their effects, is also crucial to achieving the goals that have been set.

Approach – Our blueprint for future-oriented performance improvement considers classical elements such as functional analysis and combines them with organizational transformation elements and a strong execution.

Source: Berylls by AlixPartners

Unused change potential accompanies implementation

Any increase in efficiency is only successful if its goals are sustainably achieved. The fact that the top-down definition of measures and potential does not work should be common knowledge nowadays, but is nonetheless often ignored. Experience shows that the effects achieved in this way regularly fizzle out over time. An efficiency-boosting project is not usually met with applause. Accordingly, it is important for its success and sustainable integration that those involved understand the necessity and the measures and, ideally, have helped to develop them, support them, and thus actively embrace them. A functional analysis offers plenty of opportunities to generate the transparency required to do so and create interactive spaces for dealing with any fears and misunderstandings that may arise within the organization.

Expertise and skills management are the basis for future sustainability

Already today, at many OEMs and suppliers the knowledge and skills of employees are barely keeping pace with the ongoing transformation. The majority of CEOs see this as a threat to their future business and are justifiably concerned about the resulting skills gaps within their company. Moreover, many job profiles on which the competitive advantages of the past were based will have disappeared by 2030. At the same time, completely new job profiles are emerging in areas such as customer experience design, human-machine interaction, and cybersecurity. Many automotive suppliers have just begun to embrace this race against time and established corresponding programs to counteract the decline in the half-life of knowledge. The current situation is hitting them at a bad time. If action is not taken now with a clear idea of future requirements, there is a risk of downsizing in the wrong places or of talented people leaving the company – with fatal consequences. Strategically integrated expertise and skills management is therefore the basis for maintaining future viability and thus another success factor that should be part of a modern efficiency program based on a functional analysis.

Conclusion: shaping a resilient future

Automotive suppliers are at a critical turning point. The short-term answer lies not only in cutting costs, but also in the strategically induced transformation of the company. A holistic functional analysis that combines the approaches of proactive change management and strategically integrated expertise and skills management is an effective tool here.

Authors

Dr. Alexander Timmer

Partner

alexander.timmer@berylls.com

Dr. Frank Heines

Associate Partner

frank.heines@berylls.com

Philipp Stütz

Associate Partner

philipp.stuetz@berylls.com

Frank Strebe

Project Manager

frank.strebe@berylls.com

Philipp M. Stütz

Philipp M. Stuetz graduated in business administration from the universities of Stuttgart and Strasbourg.

Dr. Alexander Timmer

Dr. Frank Heines

Dr. Frank Heines (1967) joined Berylls Strategy Advisors as Principal in September 2016, and is based at Berylls’ Swiss office. He started his career at the postal automation division of Siemens AG before changing to a medium-sized electrical and electronics company where, in his position as responsible for the technical department, he soon became member of the board. In 2003, he began his consulting career at the Malik Management Zentrum St. Gallen, becoming Partner and member of the group management board in 2007. The focus of his consulting work lies in strategy development, organizational design, productivity increase as well as in integrated organizational development and transformational management.

Economics at the University of Constance, Germany; business administration at the University of Zurich; Ph.D. at the University of St. Gallen, Switzerland.

he supplier crisis has characterized the automotive industry for years and is being further exacerbated by new financing hurdles.

Just two years after the coronavirus pandemic, cost pressure has returned to pre-crisis levels, while economic conditions remain challenging. Upfront investments in innovations and relocations are increasing the financial pressure even further. Medium-sized suppliers in Germany, which have been reporting below-average returns for several years, are particularly impacted. The decreasing availability of financing sources and rising financing costs are therefore only the latest causes of the crisis that are pushing suppliers to breaking point.

Cost pressure and investment requirements

Suppliers have been struggling with incredible cost pressure for some time now. Production costs in the automotive industry have risen significantly over the past four years. This is due in particular to the increase in prices for raw materials (+16% to +32%) and energy (+40%) since the end of 2019, but also notably to rising wage costs (+12%).¹ The coronavirus pandemic had defused the situation for the time being to the extent that OEMs showed understanding for cost increases and were willing to make concessions in the interest of supply chain security. In the meantime, however, cost pressure has returned to pre-crisis levels.

In addition to cost pressure, the technological and regulatory transformation is compelling companies to invest heavily in order to continuously speed up the pace of innovation and the relocation of production sites in order to safeguard their competitiveness. These necessary investments require considerable financial resources and increase the pressure on already tight profit margins and operating cash flows.

Low returns for SMEs

Returns for suppliers, particularly for German SMEs, have been well below average for the past four to five years. An analysis by Roland Berger shows that the average EBIT margin of automotive suppliers has fallen from 7.6% in 2017 to just 4.6% in 2022.² Many companies are struggling with low profits or even making losses. Moreover, the equity base has decreased considerably during this period, further weakening the financial stability of many companies. The average equity ratio of the five largest German suppliers has fallen from 33.8% to 28.2% since 2018.³ Low returns and the reduced equity base are making it increasingly difficult for suppliers to finance the necessary investments from their own funds.

Increasing financing problems

In the last one to two years or so, the financing situation for automotive suppliers has become increasingly challenging. Access to relatively cheap bank loans has become more difficult and many companies are no longer able to obtain financing from commercial banks at all. Instead, they have had to turn to alternative sources of financing such as debt funds. However, this move increases the financing costs considerably, as interest rates for this alternative type of financing are often well over 10%. Even companies that continue to be financed by commercial banks have experienced a drastic rise in their financing costs over the past two years. During this period, the Euribor has increased from below 0% to just under 4%.⁴ With a standard market interest margin of 4%, financing costs have therefore doubled from around 4% to approximately 8%.

German commercial banks are increasingly reluctant to grant loans to the automotive supply industry, especially to SMEs. This is also confirmed by a study conducted by KfW in collaboration with the ifo Institute: According to this, 26.3% of SMEs surveyed in the manufacturing sector reported difficult credit negotiations with banks at the end of 2023, compared to just 14.8% at the beginning of 2019.⁵ This reluctance on the part of banks means that suppliers are even more dependent on more expensive sources of financing, which puts further pressure on their financial situation.

Rejection of high financing costs by OEMs

OEMs are not willing to accept the high financing costs of suppliers in their calculations. This further exacerbates the situation, as suppliers are unable to pass on the increased financing costs to their customers. A study conducted by PwC emphasizes the fact that suppliers are not in a position to impose higher costs on OEMs and are therefore suffering from falling margins – in contrast to the OEMs.⁶

This additional burden threatens to significantly reduce the competitiveness of the German supplier industry. Medium-sized companies are particularly impacted, as they often do not have the financial reserves to shoulder these additional costs.

Innovative financing models and better cooperation are necessary to successfully meet these challenges. Suppliers, OEMs, commercial banks, and policymakers must work together to ensure that the framework conditions for sustainable competitiveness in the German supplier industry can be created. A better understanding of the respective needs and challenges and a regulatory framework adapted to suit them are necessary in order to at least overcome this cause of the supplier crisis.

¹ Oliver Wyman (2024): Die nächste Hürde: Wie finanzieren Automobilzulieferer die Transformation?
² Roland Berger (2023): Global Automotive Supplier Study 2023.
³ Bloomberg (2024).
⁴ Euribor Rates (2024).
⁵ KfW Research (2024): KfW-ifo-Kredithürde.
⁶ Strategy& (2024): Automobilzulieferer-Studie 2023.

Authors

Andreas Rauh

Executive Partner

andreas.rauh@berylls.com

Johannes Auch

Investment Associate

johannes.auch@berylls.com

Andreas Rauh

Andreas Rauh joined Berylls Equity Partners as co-founder and managing director in January 2020. Berylls Equity Partners, as the investment company of the Berylls Group, invests in companies in the mobility industry that are in special situations.

Andreas is an expert in private equity, mergers & acquisitions and corporate management.

After ten years in transaction advisory with a focus on medium-sized companies, Andreas moved to the investment sector in 2014. There, he has since accompanied a double-digit number of company acquisitions and sales in a leading role.

Andreas is a business graduate with a diploma from the University of Trier and holds a Master of Science in Business degree from Handelshøyskolen BI.

ntil 2020, the supplier industry was a guarantor of stable market developments and steady growth. However, since 2020 the tide has turned.

Trends that were thought to be reliable in the long term now need to be reconsidered in the short term and replaced by new changes at short notice. This uncertainty is still the new normal today, and will probably remain so for the unforeseeable future – and managing directors and decision-makers alike will have to come to terms with it. Suppliers seem to be getting better and better at dealing with the situation.

Beginning with the pandemic, the last few years have been a major and seemingly never-ending crisis for automotive suppliers. This was followed by production losses caused by lockdowns and the collapse of global supply chains, astronomical increases in raw materials and energy costs, and the renaissance of the combustion engine, which had already been declared dead. Last but not least, lengthy commercial negotiations with manufacturers with uncertain outcomes were the order of the day. All in all, a tense situation that has presented suppliers with some tough challenges in recent years.

The supplier industry has learned from these years of crisis and there are the first tentative signs that suppliers worldwide are becoming increasingly confident in dealing effectively with short-term changes. Supplier margins are back at pre-crisis levels and revenue growth is also breaking new records – a welcome development, but one that requires a differentiated view.

Asian suppliers in particular have emerged stronger from the crisis, despite some adverse currency effects. Nine of the most profitable suppliers are based either in Japan, South Korea, or China. The same applies to revenue growth. The three fastest-growing suppliers are all located in Asia.

Looking at Germany, the situation is less encouraging. In no other country are more production sites currently being closed than here in Germany. On the other hand, however, German suppliers are opening plants in China, Mexico, and the USA. The facts are both overwhelming and worrying for Germany as a business location, as on average, four times as many sites are closing as new ones are opening. In fact, Germany is currently in the midst of automotive deindustrialization.

Although German suppliers are also benefiting from the slowly emerging recovery, the obvious loser is Germany itself, and therefore also the German plants and business locations. The reasons for this development are well known and have already been the subject of numerous controversial and public discussions. What is needed now is not a renewed public controversy, but an effective change of course towards a stable, long-term European industrial policy. Stability creates trust – and trust encourages investment!

Author

Dr. Alexander Timmer

Partner

alexander.timmer@berylls.com

Dr. Alexander Timmer

he world’s 100 largest suppliers again recorded revenue growth in 2023. Lower raw materials and energy costs also helped to ease the pressure on margins, which were very tight in the previous year.

Last year’s biggest winners once again came from Asia. Among the various product groups, battery and semiconductor manufacturers once again recorded the highest growth rates in terms of revenue and margin, despite declining revenue growth.

In 2023, the automotive industry experienced a recovery along the entire supply chain. Both OEMs and suppliers were able to increase their revenues and margins. After supplier revenue exceeded the one-trillion-euro mark for the first time in 2022, suppliers managed to grow their revenue by a further 6.9% in 2023 and once again achieved a record figure of EUR 1,135 billion. With a revenue increase of 8.1% to EUR 1,770 billion, the ten largest car manufacturers even outperformed the growth of their suppliers. OEMs benefited above all from an upswing in demand in North America and Europe, which, contrary to many forecasts, was primarily attributable to vehicles with combustion engines.

In terms of margins, suppliers recorded the higher level of growth, also driven by an easing of the raw materials and energy crisis. The revenue-weighted margin of the TOP 100 rose by 0.7 percentage points to 5.9%, while the TOP 10 OEMs were able to improve their revenue-weighted margin by 0.6 percentage points to 8.5% in 2023. The turnaround marked the end of a three-year period in which automotive suppliers saw their margins diverge further from OEMs year on year. Suppliers from Asia in particular recorded impressive figures with high growth rates in both revenue and margins in 2023. Four of the five growth champions, in terms of both relative revenue growth and margin increase, are based in Asia.

Looking back over the year, three issues in particular influenced developments in the automotive industry: firstly, the increase in sales volume by OEMs, particularly for ICEs; secondly, the decrease in producer prices, which led to a recovery in margins; and thirdly, the continued strong performance of Asian suppliers compared to their competitors from Europe and North America. South Korean battery manufacturers in particular stood out with high revenue growth, while semiconductor manufacturers, which had grown so strongly one year earlier, were able to catch up with other product groups in terms of growth.

REVENUE AND MARGIN OF THE “TOP 100 SUPPLIER” AND “TOP 10 OEMs” 2017-2023 (IN BN. EUR AND % OF REVENUE)

1) VW, Toyota, Mercedes-Benz, Ford, GM, Stellantis, Honda, BMW Group, Saic, Hyundai

Source: Berylls by AlixPartners

Revenue increases – thanks to rising vehicle sales

The fact that suppliers and automotive manufacturers were able to increase their revenue in 2023 was largely due to the 12% growth in vehicle sales worldwide. For the TOP 10 OEMs, the higher demand for ICE models in particular led to a major increase in revenue amounting to EUR 85.6 billion. Although electric and hybrid models were characterized by high growth rates of 30% and 54% respectively in worldwide vehicle registrations, they only contributed to an absolute increase in revenue of EUR 17.7 billion and EUR 29.6 billion respectively for the TOP 10 OEMs due to the comparatively low volumes sold. Those deriving the greatest profit included suppliers with a high proportion of components for ICE vehicles in their portfolio. They recorded an above-average revenue increase of 9.6% in 2023, 2.7 percentage points above the 6.9% growth of the 100 largest suppliers. Companies with a focus on ICEs also recorded higher margin growth than the average for the sector. While the margin of the TOP 100 rose by an average of 0.7 percentage points, the increase for companies with a high proportion of combustion engines in their product portfolio was 1.1 percentage points. Companies that manufacture parts for commercial vehicles also benefited in 2023. At 16% in Europe and 14% in the USA, the growth rate for newly registered commercial vehicles was 2% higher than that of newly registered passenger cars. In China, sales of commercial vehicles rose by as much as 22%, significantly outstripping the 11% growth rate for passenger cars. The greatest profit was recorded by Weichai Power, a Chinese specialist for ICEs and commercial vehicles, which boosted its revenue by 38.5% and its margin by 5.8 percentage points in 2023. Commercial vehicle supplier Knorr-Bremse also benefited from this growth, increasing its revenue by 11.5% and its margin by one percentage point.

REVENUE GROWTH OF THE TOP 10 OEMs DIVIDED INTO DRIVE TYPE AND REGION (IN MRD. EUR)

Source: Berylls by AlixPartners

Margins rise – thanks to lower producer prices

In addition to revenue growth driven by higher demand, lower producer prices and the associated increase in margins also had a positive impact on the financial situation of manufacturers and suppliers alike. Pressure on margins has steadily risen in recent years due to geopolitical conflicts such as the war in Ukraine, Covid-19, and the shortage of semiconductors. As a result, prices for raw materials and energy both rose sharply, while margins shrank, causing Germany in particular to become less attractive as a business location in 2023, prompting numerous restructuring measures and plant closures. Bosch, the world’s largest automotive supplier, also announced job cuts in Germany. However, it remains unlikely that the decline in producer prices will herald the end of these austerity programs. Although producer prices fell by 2.4% in Germany in 2023, mainly due to a 50% drop in energy costs, the overall cost level within the country remains high in an international comparison. At –2.7% in the USA and –6.8% in China, producer prices in both countries not only fell more sharply, with an increase of 16.3% in the USA and 4.1% in China, they had already grown less strongly in 2022 than in Germany, where producer prices rose by 32.9% in 2022.

EVOLUTION OF PRODUCER PRICES SINCE 2021
(IN %)

Source: Berylls by AlixPartners

Race of nations – China in the fast lane

The above-mentioned cost advantages are also a reason why Chinese suppliers are increasingly represented in the TOP 100 ranking. Whereas Weichai Power was the only Chinese supplier in the ranking in 2012, by 2022 there were already eight Chinese companies among the world’s 100 largest suppliers. CATL in particular came into the limelight – in 2018, the battery manufacturer was among the 100 largest suppliers for the first time and even climbed into the ranks of the ten largest suppliers within five years. In 2023, another Chinese company, tire manufacturer Sailun, also made it into the TOP 100

and there is still no end in sight to the rapid rise of Chinese suppliers achieving this level. According to Berylls’ analysis, eight additional Chinese suppliers could be represented in the TOP 100 ranking by 2030 and, with CATL, the world’s largest supplier would also come from China instead of Germany in 2030, as is currently the case with Bosch. Thus, with 17 suppliers, China could well have replaced Germany in second spot behind Japan by 2030. By contrast, Germany, which currently has 17 companies in the TOP 100, would only have 13 suppliers by 2030. Japan, currently represented by 23 companies, will retain its position at the top of the list of countries with the most suppliers within the TOP 100 and is likely to further extend its lead with an expected 26 companies by 2030.

Another important point is that these Chinese suppliers are not just battery or semiconductor manufacturers. Quite the opposite: Chinese companies are increasingly gaining market share in more traditional product groups such as seats, tires, lighting, and brakes. For example, the Chinese NBHX Group, a specialist for vehicle interiors, increased its revenue by 17.9% to EUR 3 billion in 2023, narrowly missing out on a place in the TOP 100. With revenue of EUR 2.6 billion and a growth rate of 23.2% last year, the Chinese car body and interior supplier TUOPU is also a leading contender for a place in the ranking of the 100 largest suppliers. However, the strong growth of Chinese suppliers is only partly due to the rise of Chinese OEMs. In fact, Chinese suppliers have succeeded in taking market share from the competition in both Europe and the USA. While revenue measured in euros for the five largest Chinese OEMs in 2023 has only grown by 39% since 2018, the five largest Chinese suppliers managed to increase their revenue in euros by 121% during the same period.

The fact that suppliers from Europe and the USA were not among the big winners in 2023 is an alarming signal when you look at the regional growth of the OEMs. In Europe and the USA, the ten largest OEMs recorded double-digit growth rates of 15.5% and 12.7% respectively, while revenue growth in Asia was significantly weaker at 3.8%. Nonetheless, there is positive news for suppliers based in Germany: since 2017, the revenue share of German suppliers in the TOP 100 ranking had fallen continuously, but the trend was halted in 2023. As in 2022, Germany’s share of total revenue amounted to 20.6%. However, the exchange rate effects in favor of the euro in the past year must also be taken into account at this point. Compared to 2022, the Chinese yuan lost an average of 7.6%, the Japanese yen 9.2%, and the Korean won 3.8%. It is all the more impressive that Japan, whose share of revenue fell from 27.7% to 21.8% between 2018 and 2022, was also able to stabilize its share of revenue in 2023. For Chinese suppliers, the exchange rate effects even resulted in a loss of market share, albeit only slight, as instead of 9.3% in 2022, suppliers from China only contributed 9.1% to the revenue of the TOP 100 in 2023. This year, the winner in the race of nations was once again South Korea, which increased its share of revenue from 8.8% to 9.8%, mainly due to its battery manufacturers.

RISE OF CHINA WITHIN IN THE TOP 100

1) 2030 revenue share is based on the adjusted CAGR from 2019-2023 for the suppliers from the TOP 100 ranking and possible Chinese new joiners; CAGR adjusted according to Berylls assumptions for battery growth, one-time effects and weighting of annual growth rates between 2019 and 2030.

Source: Berylls by AlixPartners

China and Korea become auto nations

The ascendency of Chinese automotive suppliers is more than just a side effect of economic growth in China. While China’s nominal GDP in euros has risen by 36% since 2018, the revenue of the suppliers represented in the ranking has increased by 144%. China also benefited from the addition of three new companies that have made it into the ranking since 2018: the tire manufacturers ZC Rubber and Sailun and the glass manufacturer Fuyao. The difference is even more pronounced in South Korea. With revenue growth of 145%, South Korea has even outperformed the growth of Chinese suppliers, despite nominal GDP growth of just 5%. Here too, new market entrants, most of which produce new technologies for the automotive industry, contributed to revenue growth. With SK on, Samsung SDI, and LG Energy Solution, three of the Korean newcomers are battery manufacturers. The fact that new technologies in the automotive industry have experienced high growth rates in recent years is also impressively demonstrated by the example of the Netherlands. As in 2018, NXP Semiconductors was the only Dutch representative in the ranking of the 100 largest suppliers in 2023. Driven by the high demand for semiconductors in recent years, the semiconductor manufacturer’s revenue growth amounted to 101% from 2018 to 2023, significantly exceeding nominal GDP growth of 27%. Of the established supplier nations – Japan, Germany and the USA – only Japanese companies in the TOP 100 managed to grow faster than nominal GDP, even though there were five fewer Japanese companies in the TOP 100 ranking in 2023 than in 2018. However, the remaining companies were able to generate the same revenue in 2023 as all 28 companies combined in 2018. This places Japan above nominal GDP growth, which has fallen by 11% since 2018, despite stagnating revenue.

DEVELOPMENT OF TOP 100 REVENUE AND NOMINAL GROSS DOMESTIC PRODUCT PER COUNTRY (2018-2023, IN % CUMULATED)

Source: Berylls by AlixPartners, World Bank

Battery and semiconductor producers strong again – tire business weak

In 2023, battery manufacturers were once again among the companies with the highest revenue growth, despite a slump in the growth rate of 40.8 percentage points. While battery manufacturers’ revenue growth was still as high as 64.5% in 2022, it was only 23.7% last year. Market leader CATL in particular was unable to match the growth rate of the previous year and only increased its revenue in euros by 11.4% in 2023, compared to 84.5% in 2022. By contrast, things went much better for the Korean battery suppliers: With revenue growth of 62.8%, SK on recorded the highest growth of all suppliers in the TOP 100, followed by LG Energy Solution with 40.1%. Samsung SDI, the last of the three Korean battery manufacturers in the ranking, also managed to secure a place among the five growth champions with 34.6%.

However, the times of rapid growth seem to be coming to an end for the time being. In the fourth quarter 2023, the battery manufacturers included in the ranking all had to contend with weak demand. CATL, for example, recorded a 10.6% drop in revenue year on year. However, all other battery manufacturers that made it into this year’s TOP 100 also experienced a year-on-year decline in revenue in the final quarter of 2023. For battery manufacturers, the declining growth rate is an alarm signal, because driven by high subsidies, manufacturers have expanded their capacities to such a degree in recent years that 268% of global demand was covered in 2023 and battery manufacturers’ plants were theoretically only operating at 37% capacity. The consequence of overcapacity is a price war between manufacturers, which is already having an impact on margins. For example, LG Energy Solution’s margin fell from 6% in the third quarter 2023 to 0% in the fourth quarter and is thus dangerously close to reporting a loss. The margins of battery manufacturers are also expected to remain under pressure in the coming years, as high subsidies will continue to be paid for the construction of battery production facilities, despite the existing overcapacity. Demand is therefore not expected to have caught up with capacity in such a way that manufacturers will at least come close to achieving their target capacity utilization of 80% until 2040.

FORECAST OF EV BATTERY DEMAND AND PRODUCTION CAPACITY (in Gwh)

Assumptions: 80% of total capacity is used for EV; CAGR production capacity 8% from 2030, based on growth 2027-2030

Source: Berylls by AlixPartners

In addition to the battery producers, semiconductor manufacturers also saw above-average revenue growth once again. ST Micro, Onsemi, and Infineon all recorded growth of over 15%. Moreover, semiconductor manufacturers were able to increase their revenue-weighted margin by 3.6 percentage points to 31%. Thus semiconductor manufacturers once again recorded the highest absolute margin growth in 2023, even though their revenue-weighted margin of 27.4% in 2022 was already well above the TOP 100 average of 5.2%. However, the average growth of semiconductor manufacturers in the TOP 100 ranking fell substantially from 48.7% in 2022 to 13% in 2023. There are three main reasons for this decline in growth.

Firstly, car manufacturers already built up large inventories of chips in 2022 for fear of further shortages, thus significantly boosting demand in 2022. Secondly, other semiconductor manufacturers that mainly produced for the consumer goods industry have also taken note of the high demand for semiconductors in the automotive industry and now become serious competitors to the suppliers represented in the TOP 100. Qualcomm, the American industry giant for smartphone chips, was able to increase its revenue in the automotive sector by 24.1% to EUR 1.73 billion in the 2023 fiscal year. If growth remains at the same level, Qualcomm, which is theoretically in 133rd place in the ranking today, would make it into the top 100 automotive suppliers within the next three years. Most recently, the lower-than-expected demand for EVs was responsible for the decline in the growth rate, as vehicles with electric drivetrains contain up to three times as many semiconductors as conventional vehicles with combustion engines.

The only product group that did not benefit from the growth in vehicle sales was tires. Tire manufacturers recorded a 1.9% decline in revenue in 2023 due to a slump in the tire replacement business, while the revenue-weighted margin rose by an average of 0.2 percentage points, which is significantly weaker than the revenue-weighted margin of the TOP 100. The slump in the replacement tire market, which is responsible for around 80% of tire manufacturers’ revenue, primarily affected European and American producers. Revenue fell by 8% in the USA and by as much as 12% in Europe. Goodyear’s revenue dropped by 5.3%, Michelin lost 0.9%. Although Continental managed to grow its overall automotive revenue by more than 5%, figures in the tire business fell by 0.3%. The only European tire manufacturer not to record a decline in revenue was Pirelli, with growth of 0.5%. Pirelli is also the only one of the four tire manufacturers mentioned with an increase in margin. The only Asian tire manufacturer that did not manage to improve its margin was Bridgestone. The remaining five Asian tire manufacturers all recorded significant margin growth. Hankook Tires reported the largest increase with a rise of 6.4 percentage points year on year. Tougher competition, particularly from Asia, is compelling European and American tire manufacturers to continue cutting their costs. Germany as an industrial location is suffering the most: in 2023, four closures of Michelin and Goodyear sites were announced – one third of all existing tire plants in the country.

Outlook

In the dynamic world of the automotive industry, suppliers are faced with some groundbreaking challenges. A clear market strategy for dealing with China is essential, as competition from that country is increasing noticeably across all product groups. However, the Chinese market not only offers competition, but also significant opportunities, as the demand for supplier products there is likely to increase dramatically with the rise of Chinese OEMs.

A critical review of the portfolio strategy is also required. Despite the undisputed importance of electric mobility as a technology of the future, the optimum time for a complete switchover is still unclear. If growth rates for EVs continue to fall, investments in electrified vehicle portfolios must be carefully considered and adjustments made if necessary. Furthermore, suppliers need to show flexibility to be able to respond to short-term volume changes by manufacturers between EVs and ICEs.

Authors

Dr. Alexander Timmer

Partner

alexander.timmer@berylls.com

Dr. Jürgen Simon

Associate Partner

simon.juergen@berylls.com

Gereon Heitmann

Senior Consultant

gereon.heitmann@berylls.com

Simon Flierl

Consultant

simon.flierl@berylls.com

Dr. Alexander Timmer

Dr. Jürgen Simon

Dr. Juergen Simon (1986) is Associate Partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry. He is an expert in sales and corporate strategies as well as M&A and can look back on many years of consulting experience.
Dr. Juergen Simon has been advising automotive manufacturers and suppliers since 2011 and has in-depth expert knowledge in the areas of holistic strategy development, business models and commercial due diligence. He also focuses on market entry strategies and topics related to the “Software Defined Vehicle”.
Prior to joining Berylls Strategy Advisors, he worked as senior consultant at the Droege Group, a consulting and investment firm.
As a graduate economist from the University of Hohenheim, he completed his doctorate at the Institute of Management at the Karlsruhe Institute of Technology (KIT) before joining Berylls.

COMPLETES ACQUISITION OF LEADING AUTOMOTIVE CONSULTING FIRM, BERYLLS

NEW YORK (June 3, 2024) – Global consulting firm, AlixPartners, today announced the completion of its previously announced acquisition of the majority of the operations of leading automotive consulting firm, Berylls.

The transaction, which closed on 31 May 2024 following the conclusion of a successful regulatory approvals process, will result in the Berylls Strategy Advisors and Berylls Mad Media businesses becoming wholly owned by AlixPartners. Given the strong brand recognition that Berylls enjoys, its specialist service offerings will be taken to market under the banner of “Berylls by AlixPartners”. The transaction will see approximately 160 people joining AlixPartners from Berylls, predominantly in Germany, and across China, the UK, South Korea, North America, Austria, and Switzerland as well.

As a result of this high-profile, strategic acquisition, AlixPartners and its new Berylls colleagues will afford automotive clients access to the consulting industry’s most comprehensive range of expert advice spanning the value and supply chains in their entirety.

Simon Freakley, CEO, AlixPartners, commented: “We are delighted to welcome our new Berylls colleagues to AlixPartners. Today marks an exciting new chapter for the firm in our continued growth, as we combine Berylls’ best-in-class strategy, growth, and digital capabilities, and our financial, operational, and performance improvement consulting expertise. This enhanced offering ensures that we are more perfectly positioned than ever to help our automotive clients to create value in today’s complex and disrupted environment.”

Andrew Bergbaum, Global Co-Head of AlixPartners’ Automotive & Industrial Practice, said: “The arrival of our new Berylls colleagues marks a pivotal moment for our automotive offering at AlixPartners and we are thrilled to have them on board. The response from our automotive clients has been overwhelmingly positive, and we’re excited to be creating a unique offering for them, as they look to secure their future against a backdrop of unprecedented change for the industry.”

Jan Burgard, co-founder of Berylls and Global Co-Head of the AlixPartners’ Automotive & Industrial Practice, added: “We are delighted to be joining the AlixPartners team and to be providing our people and our clients with new opportunities as we bring together our collective skills. In AlixPartners, we have found a home that will take the Berylls brand and its people ever closer to our founding principle of being the world’s number one automotive consulting team.”

Willkie Farr & Gallagher LLP acted as legal counsel to AlixPartners, and Gleiss Lutz acted as legal counsel to Berylls.

About AlixPartners

AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private-equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York and has offices around the world. For more information, visit www.alixpartners.com.

The full press release is now available for download.

Berylls Press Release

Press release: AlixPartners takes over management consultancy Berylls

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Contact person

Christian Bangemann

Spokesperson

christian.bangemann@berylls.com

Dr. Jan Burgard

Dr. Jan Burgard (1973) ist CEO der Berylls Group, einer internationalen und auf die Automobilitätsindustrie spezialisierten Unternehmensgruppe.
Sein Aufgabengebiet umfasst die Transformation von Luxus- und Premiumherstellern, mit besonderen Schwerpunkten auf Digitalisierung, Big Data, Start-ups, Connectivity und künstliche Intelligenz. Dr. Jan Burgard verantwortet bei Berylls außerdem die Umsetzung digitaler Produkte und ist ausgewiesener Spezialist für den Markt China.
Dr. Jan Burgard begann seine Karriere bei der Investmentbank MAN GROUP in New York. Die Leidenschaft für die Automobilitätsindustrie entwickelte er während Zwischenstopps bei einer amerikanischen Beratung und als Manager eines deutschen Premiumherstellers.
Im Oktober 2011 komplettierte er die Gründungspartner von Berylls Strategy Advisors. Die Top-Management-Beratung ist die Basis der heutigen Group und weiterhin der fachliche Nukleus aller Einheiten.
An das Studium der Betriebs- und Volkswirtschaftslehre, schloss sich die Promotion über virtuelle Produktentwicklung in der Automobilindustrie an.

Kontakt Über Berylls

Dr. Jan Dannenberg

Dr. Jan Dannenberg (1962) ist seit 1990 Berater der Automobilindustrie und seit Mai 2011 Gründungspartner bei Berylls Strategy Advisors. Bis zum Frühjahr 2011 war er acht Jahre international als Partner – davon fünf Jahre als Associate Partner – für Mercer Management Consulting und Oliver Wyman tätig. Er ist ausgewiesener Spezialist für Innovationen und Markenmanagement in der Automobilindustrie und berät im Schwerpunkt Zulieferer und Investoren zu Strategie, Mergers & Acquisitions und Performance Improvement. Zudem ist er Geschäftsführer von Berylls Equity Partners, eine auf Mobilitätsunternehmen spezialisierte Beteiligungsgesellschaft.

Bachelor of Arts in Volkswirtschaftslehre von der Stanford University, Studium der Betriebswirtschaftslehre und Promotion an der Universität Bamberg.

Kontakt Über Berylls

Andreas Radics

Andreas Radics (1973) ist seit 2001 als Strategieberater in der Automobilindustrie tätig und blickt darüber hinaus auf mehr als vier Jahre Berufs- und Führungserfahrung in der Industrie zurück. Bevor er als Gründungspartner 2011 Berylls ins Leben rief und aufbaute, war er bei den international agierenden Strategieberatungen Gemini Consulting und Oliver Wyman tätig.
Er zählt zu den führenden Köpfen für Mergers & Acquisitions sowie für die Entwicklung und Umsetzung von Unternehmensstrategien in der Automobilindustrie, ist Experte für eMobility und ausgewiesener Kenner des US-Marktes.
Studium der Betriebswirtschaftslehre an der Katholischen Universität Eichstätt, Wirtschaftswissenschaftliche Fakultät Ingolstadt.

Kontakt Über Berylls

LIXPARTNERS TO ACQUIRE LEADING SPECIALIST CONSULTING FIRM BERYLLS TO CREATE GLOBAL AUTOMOTIVE INDUSTRY STRATEGY AND OPERATIONAL CONSULTING POWERHOUSE

Munich/New York (May 6, 2024) – AlixPartners, the global consulting firm, is announcing that it has entered into an agreement to acquire the majority of the operations of leading automotive specialist consulting firm, Berylls.

The deal will see the Berylls Strategy Advisors and Berylls Mad Media businesses become wholly owned by AlixPartners. Collectively, these businesses will bring approximately 160 people to AlixPartners, the majority of whom are based in Germany, as well as new colleagues in the U.K., U.S., Austria, Switzerland, South Korea and China.

Berylls has an exceptional record for delivering high-calibre strategy, growth, and digital consulting to the world’s leading automotive OEMs and suppliers. Its offering naturally complements AlixPartners’ long-established reputation as a leading provider of financial, operational and performance improvement consulting to OEMS and their supply chains. Given the exceptional brand recognition that Berylls enjoys, its specialist service offerings will be taken to market under the banner of “Berylls by AlixPartners”.

As a result of this high-profile deal, which takes place at a pivotal moment in the automotive industry’s history, AlixPartners and its new Berylls colleagues will afford automotive clients access to over 400 dedicated industry experts located in the sector’s major markets. Together, this industry-leading team will provide automotive and mobility’s most comprehensive range of expert advice, spanning the value and supply chains in their entirety.

Commenting on the proposed deal, Andrew Bergbaum, Global Co-Head of AlixPartners’ Automotive & Industrial Practice, said:

“We are delighted to welcome our new colleagues from Berylls to the AlixPartners family, having admired their work from afar over many years. This transaction is a significant addition to our already internationally renowned automotive practice. The ability to now harness and combine our excellence in financial and operational implementation with their well-earned reputation for strategy and growth advice creates something special for our clients. Whether they are OEMS, suppliers, distributors or technology-led new market entrants, together, we are uniquely positioned to help automotive businesses to secure their future against a backdrop of unprecedented change for the industry.”

Jan Burgard, CEO and Co-Founder of Berylls, added: “Everybody at Berylls is excited at the prospect of combining forces with AlixPartners. From day one, the north star for Berylls has been to create the world’s premier automotive consulting team. The combination of, what is now, a globally recognized consulting firm born in Detroit, and a best-in-class boutique from the heartland of the European automotive industry, takes us ever closer to that ambition. Working together in our homeland territories and in all other critical regions for the industry around the world, we will bring an unparalleled combination of skills, experience and services to our clients, many of whom are having to make and execute the most critical decisions in their history.”

In addition to bolstering AlixPartners’ global automotive service offerings, the deal will bring new senior leaders to the firm. Jan Burgard, CEO and co-founder of Berylls, will take the role of Global Co-Head of the AlixPartners Automotive & Industrial practice. Jan Dannenberg, Executive Partner & co-founder of Berylls, will serve as joint regional leader for Germany at AlixPartners together with Andreas Rueter, Partner & Managing Director at AlixPartners. Andreas Radics as Managing director of Berylls and Andreas Rueter will be co-chairs of the integration steering committee.

Completion of the transaction is subject to customary regulatory approval. Further announcements will follow upon successful conclusion of the approval process. The particulars of the transaction will not be disclosed.

From l. t. r.: Andreas Radics, Berylls Executive Partner; Andreas Rüter, AlixPartners Deutschland Chef; Dr. Jan Burgard, Berylls Group CEO und Dr. Jan Dannenberg, Berylls Executive Partner

About AlixPartners

The full press release is now available for download.

Berylls Press Release

Press release: AlixPartners takes over management consultancy Berylls

DOWNLOAD

Contact person

Christian Bangemann

Spokesperson

christian.bangemann@berylls.com

Dr. Jan Burgard

Kontakt Über Berylls

Dr. Jan Dannenberg

Bachelor of Arts in Volkswirtschaftslehre von der Stanford University, Studium der Betriebswirtschaftslehre und Promotion an der Universität Bamberg.

Kontakt Über Berylls

Andreas Radics

Kontakt Über Berylls

he analysis of the use of e-mobility in 35 countries worldwide shows that unit sales of battery electric vehicles in Europe¹ rose again slightly in 2023. Although 2024 got off to a bumpy start, average BEV sales are still expected to grow compared to the previous year – and are urgently required in view of the CO₂ limits that will apply for manufacturers in Europe as of 2025.

¹ Europe = EU countries + EFTA countries + United Kingdom

The year 2023 was a turbulent one for both the global economy and the automotive industry. Following the semiconductor crisis and the resulting supply shortage, inflation also made itself felt in terms of vehicle sales. Despite the global challenges the market share of battery electric vehicles (BEVs) continued to grow in many markets, following on from the success of the previous year (FIGURE 1).

However, really strong BEV growth rates were only achieved in certain markets. While Norway remains unmatched at the top of the rankings in terms of BEV sales, Finland has moved up one place and Denmark three, thus overtaking the Netherlands. Belgium has even jumped up six places. These movements reflect developments in the tax models of the respective countries – where taxes on vehicles with internal combustion engines (ICEs) were increased and taxes on emission-free vehicles decreased. By contrast, Germany dropped four places in the ranking and the United Kingdom even lost seven places – two countries where the tax model has remained very attractive for ICEs.

FIGURE 1 – DEVELOPMENT OF THE SHARE OF NEW BEV REGISTRATIONS IN 2023 YEAR ON YEAR, BY COUNTRY
(in % points)

Source: Berylls Strategy Advisors

The situation is different for plug-in hybrids (PHEVs), where the negative trend seen the previous year continued, with the proportion of new registrations falling in many European countries (FIGURE 2). Primarily in the Scandinavian countries, it is clear to see that the PHEV era is coming to an end and that they will be replaced by BEVs in the medium term. China, on the other hand, has played a special role with a large increase in PHEV sales over the last two years. As PHEVs are considered “New Energy Vehicles” (NEVs) together with BEVs, they remain relevant for China’s OEM targets regarding NEV vehicles.

FIGURE 2 – DEVELOPMENT OF THE SHARE OF NEW PHEV REGISTRATIONS IN 2023 YEAR ON YEAR, BY COUNTRY
(in % points)

Source: Berylls Strategy Advisors

One factor driving the rise in new BEV registrations is the further expansion of the charging infrastructure (FIGURE 3). While the coverage for standard and fast charging (up to 150 kW) continues to improve, in 2023 the main focus was on expanding the network of ultra-fast charging points (150 kW and above). Ultra-fast charging enables a car battery to be charged within just a few minutes, particularly important for customers on long journeys. Ultra-fast charging points have been installed across all markets in Europe, mostly with triple-digit growth rates. The same applies to eastern Europe, even if there is still a significant gap by comparison. These developments are increasingly invalidating the argument that BEVs are unsuitable for long distances.

FIGURE 3 – DEVELOPMENT OF THE NUMBER OF PUBLIC CHARGING POINTS PER 10,000 RESIDENTS IN 2023 YEAR ON YEAR, BY COUNTRY
(in units)

Source: Berylls Strategy Advisors

IN 2024, COMPANIES ARE PREPARING FOR STRICTER EUROPEAN EMISSIONS TARGETS IN 2025

In 2025, the second stage of the EU law designed to reduce the CO_₂ emissions of new vehicles registered in Europe (Regulation [EU] 2019/631) will come into force. This stage requires a further 15% reduction in CO_₂ emissions for OEMs in Europe compared to the current targets. The stricter regulation will culminate in a ban on new ICE vehicles as of 2035 – despite this ambitious target being regularly called into question in the worlds of politics and business and coming up for review again in 2026.

A slight increase in new BEV registrations is therefore predicted in Europe in 2024. However, similar to the previous year, the rise is likely to remain relatively low with an expected market penetration of around 16% to 18% (15.7% in 2023). Conversely, very strong growth is expected for 2025 against the backdrop of the new European requirements for CO_₂ emissions. BEVs are expected to account for almost a quarter of new registrations in Europe in 2025.

However, to achieve this ambitious target, OEMs will need to significantly expand their BEV portfolio and make their vehicles far more attractive to buyers. For this reason, numerous new models have either already been announced (e.g., the Fiat Panda) or presented (e.g., the Citroën ë-C3, Renault 5, or Audi Q6), which will be available by the end of 2024. Particularly in the B (small car) and C (mid-range) segments, by far the most popular in Europe, the choice of models on the market will be substantially larger. Until now, there has only been a very limited and uncompetitive range of BEVs in these segments. The affordable Renault 5, Citroën ë-C3, and Fiat Panda models will be particularly relevant and available from 2025 for less than €25,000. With a reasonable range (over 300 km in accordance with WLTP), these vehicles will therefore open up a completely new market.

On the other hand, OEMs will also have to increase their BEV sales in southern and eastern European countries, which have so far only played a marginal role on the road to electrification in Europe. As new vehicle registrations in Norway are almost completely electric (over 90% share of BEV and PHEV sales in 2023), very little additional growth is expected there. Major markets such as Italy and Spain, which account for 12% and 7% of European sales respectively, will therefore have to play a greater role in the registration of new BEVs in Europe.

EUROPEANS ARE READY TO SWITCH TO BEVS, AS LONG AS THE PRICE IS RIGHT

Although the public debate on this topic is still very tense, there are numerous signs that many European consumers are willing to consider buying a BEV. Although a BEV is often still more expensive to buy than a comparable ICE, the BEV scores points in terms of total cost of ownership, as the operating costs (fuel, maintenance, etc.) are lower than those of an ICE vehicle.

The example of social leasing for low-income households in France also shows that lower costs can be a strong argument in favor of purchasing a BEV. In this case, an electric vehicle manufactured in Europe could be leased for €100 per month – and partially financed by the state government. The program was launched at the beginning of 2024 – and discontinued just one month later as the annual budget had already been exceeded, which proves there is no shortage of BEV customers, provided the offer is financially viable.

Last year, the best-selling model in Europe (and worldwide) was also a BEV: the Tesla Model Y. Above all, it has helped Tesla to catch up with highly popular car brands such as Citroën or Fiat (in terms of vehicle sales in Europe) and overtake established manufacturers such as Volvo or Nissan on the European market. The trend is confirmed when you take a look at Chinese manufacturers. For example, sales figures for manufacturers MG (SAIC) and BYD in Europe have skyrocketed, largely due to their highly competitive range of BEVs. In 2023, MG made it into the top 20 brands in Europe – a first for a Chinese brand – and its top model, the electric MG4, secured a place in the top 5 best-selling electric vehicles in Europe in 2023. This fact underlines how important it is for established manufacturers to offer a competitive range of models in Europe’s main market segments in order to avoid losing market share to new entrants.

The market is beginning to adapt to this new reality, with many manufacturers lowering the prices of their electric models (in some cases significantly) in order to position themselves more competitively on the market. This was the case with Renault and Volkswagen, for example, but also Toyota, where prices for the mid-range SUV bZ4X were reduced by €20,000 in France between mid-2023 (from €55,000 at the time) and February 2024 (from €35,000). Due to the previously far higher price, only 626 units of this vehicle were sold in France in 2023.

BEV SALES FIGURES WILL CONTINUE TO RISE – DESPITE THE GRADUAL PHASING OUT OF SUBSIDIES IN EUROPE

For some years now, the subsidies offered by European governments to encourage the purchase of BEVs have been gradually reduced as their attractiveness (price, charging infrastructure, technical maturity) increases and registration figures rise. And 2024 is no exception; in France, for example, the subsidy when purchasing a BEV has been reduced from €5,000 to €4,000. However, these reductions have so far never hindered the gradual increase in the share of BEVs in new car sales figures, as the example of Norway clearly illustrates. The Scandinavian country had previously introduced a full VAT reduction for BEVs, which was abolished as of January 1, 2023. Although this move caused the overall market share of BEVs to drop significantly in the first few months of 2023, the upward trend over the year as a whole was not reversed as a result.

Subsidies for BEVs are a means for policymakers to increase the pace of electrification. The taxation of combustion vehicles also serves this purpose, and the subsidies are also partly financed via this method. For example, Norway, the Netherlands and, to a certain extent, France have implemented a tax system that makes the purchase of ICEs – especially those with high CO₂emissions – far less attractive (FIGURE 4, FIGURE 5).

FIGURE 4 – COST COMPARISON BETWEEN BUYING A HYUNDAI KONA (B-SUV SEGMENT) AS A BEV VERSION OR A PETROL VERSION IN SELECTED EUROPEAN COUNTRIES
(in thousands of EUROS)

Source: Berylls Strategy Advisors

For mainly external reasons (federal budget 2024), Germany abruptly discontinued its subsidy system for the purchase of BEVs at the end of 2023.
In contrast to other countries, however, there has been no corresponding adjustment or change to the tax model that would make the purchase of ICE vehicles less attractive. The combination of these two aspects means that the attractiveness of BEVs compared to ICEs has declined and, as a result, BEV sales unit figures contracted considerably in the first quarter of 2024. As the OEMs’ CO_₂ fleet targets are at stake, OEMs in Germany must potentially offer higher discounts in order to make their BEVs attractive again and partially compensate for the expiry of the environmental subsidies. That is far easier with premium models, as the margins are highest in this market segment and the price difference to an ICE vehicle is much smaller – sometimes even to the advantage of the comparable BEV model (FIGURE 5).

FIGURE 5 – COST COMPARISON BETWEEN BUYING A BMW X5 / iX (E-SUV SEGMENT) AS A BEV VERSION AND A PETROL VERSION IN SELECTED EUROPEAN COUNTRIES
(in thousands of EUROS)

Source: Berylls Strategy Advisors

The discontinuation of subsidies will mainly affect private customers, as the tax benefits for electric company cars will be maintained (or even expanded, taking into account the increase in the upper price limit for the reduced tax rate to 0.25%). As company cars account for 60% of the German car market (compared to 20% in France, for example), that should at least partially mitigate any potential decline in BEV sales in 2024. OEMs are therefore well advised to make attractive BEV offers and highlight them, especially when it comes to company car leasing.

THE EXPANSION OF CHARGING INFRASTRUCTURE IN EUROPE CONTINUES – AND THE TREND IS GAINING PACE

Charging infrastructure is dependent on long-term investments and less subject to fluctuations in the automotive market. Apart from the 38% increase in the overall number of charging points in Europe last year (FIGURE 6), the doubling (+110%) of ultra-fast charging points (150 kW and above) illustrates the current degree of momentum in Europe (FIGURE 7).

FIGURE 6 – DEVELOPMENT OF THE NUMBER OF PUBLIC CHARGING POINTS IN 2023 YEAR ON YEAR, BY COUNTRY
(in thousands)

Source: Berylls Strategy Advisors

FIGURE 7 – DEVELOPMENT IN THE NUMBER OF PUBLIC ULTRA-FAST CHARGING POINTS (150 KW AND ABOVE) IN 2023 YEAR ON YEAR, BY COUNTRY
(in units)

Source: Berylls Strategy Advisors

The trend is unlikely to lose pace in 2024 or even beyond, as numerous investments have already been announced, often combined with state or European funding. The EU is supporting the development of charging infrastructure with its AFIR law, which requires the member states to fulfill two conditions: firstly, to ensure a certain installed capacity per electric vehicle registered in the country (1.3 kW per BEV and 0.8 kW per PHEV), and secondly, to guarantee minimum coverage along the main transport routes with ultra-fast charging points (one charging station of at least 150 kW per 60 km in the European “Core TEN-T Network” by 2025). The aim of the first condition is to maintain the pressure on EU member states so that the infrastructure can be expanded at a sufficient rate to meet the needs of the ever-growing fleets of BEVs in future years. At present, all EU states except Malta meet this criterion. The second condition is aimed at stepping up the development of a sufficiently fast infrastructure to enable convenient long-distance travel throughout Europe – a matter that can currently still be a problem in some eastern European countries.

Many charging network operators as well as energy suppliers and oil companies are either in the process of entering this dynamic market or increasingly investing in it. Mercedes-Benz Mobility, for example, entered the ultra-fast charging market last year, while Total Energies fully converted some of its petrol stations into charging stations for electric vehicles in 2023 – taking a further step on its journey from being simply an oil company to an energy supplier. The rapidly growing market requires high levels of investment to expand the infrastructure, which will, however, only pay off at a later date. The many new players need to invest a great deal at the moment in order to play a role in this highly promising market in the future. However, it is not yet large enough for the companies to be profitable, which means the market is inevitably heading for consolidation.

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Authors

Dr. Alexander Timmer

Partner

alexander.timmer@berylls.com

Valentin Froh

Project Manager

valentin.froh@berylls.com

Dennis Koschmieder

Consultant

dennis.koschmieder@berylls.com

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