These trends can be summarized as:
- The blurring of the line between cars and trucks as truck-like vehicles become increasingly popular
- The drive to make vehicles more environmentally friendly by cleaning their emissions, making them more recyclable and lighter, and eliminating their consumption of non-renewable resources
- The effort to make vehicles as safe as possible by improving their crash avoidance capabilities, crash worthiness, and occupant protection
Within each of these trends, the driving force is the continuing application of advanced technologies, notably the continuing increase of mobile and in-vehicle electronics, expected to rise to $9.6 billion in 2007, an increase of more than 11 percent; automotive-grade semiconductors, experiencing year-on-year growth of 10 percent, reaching $18 billion in 2007; and automotive telematics and navigation, also expected to have strong growth in several world regions, generating about $38.3 billion in revenues by 2011. Most of these products and/or their components will come from auto parts suppliers.
The blurring of the line between cars and trucks is the result of the growing popularity of light trucks as multi-purpose passenger vehicles, resulting in a demand for vehicles that incorporate the comfort and performance of the automobile with the utilitarian benefits of a truck. The result is a new breed of vehicles that is a cross between a car and truck, requiring different steering, suspension, chassis, seating and other systems, most being sourced from the auto parts suppliers.
The same is true for the new breed of powertrains on the horizon in the first decade of the twenty-first century, notably direct-injection clean diesel engines, advanced gasoline engines with electronic valve timing, electrical and hybrid powertrains, and fuel cell-powered vehicles. Advanced safety systems, from smart air bags and seat belt systems that sense the size and positioning of passengers to more sophisticated electronic stability control systems and all the associated componentry will largely originate from innovative suppliers. The auto parts industry is under intense pressure, both from increasing global competition and from many of its customers that demand lower costs and higher quality in the face of rising material, labor, and transportation costs.
The OAAI identified five issues facing the U.S. Automotive Parts Industry in its 2007 Annual Industry Assessment, which summarize the course the industry will likely be taking through much of the first decade of the twenty-first century:
- Higher energy, plastic and steel costs, heavy debt, cash flow problems and overcapacity created by production cuts at Ford, GM and Chrysler.
- High legacy costs, employee wages and benefits with touch negotiations between suppliers, automakers and labor unions.
- Continued depletion of industry ranks as a result of bankruptcies, mergers and acquisitions, plus migration to other industry-industry analysts predict that over nearly 800 major suppliers in 2000, fewer than 100 will be left by 2010.
- Mergers and acquisitions of supplier companies. In 2005 there were thirty-two mergers, up from twenty-six in 2004, with private equity firms responsible for 53 percent of the deals.
- Relations between the domestic Big Three and their suppliers, which are improving slightly, but remain poor compared with those of Japanese competitors.
