MEMA OE Vehicle Supplier Barometer: EV Demand Volatility and Commercial Vehicle Slowdown Weigh on Sentiment

According to the Q1 2024 MEMA OE Vehicle Supplier Barometer Index (SBI) – a gauge to measure the sentiments of North American supplier executives – market pressures are reflected in the latest reading of 43, up 4 points from Q4 2023, but 7 points below neutral. Results posted the eighth straight quarter of building pessimism on net, yet levels eased across firms of all sizes except firms with revenue between $500 mils - $1 billion. Concerns related to poor sales of vehicles in programs supplied overtook issues related to the UAW Strike as the number one threat to the industry over the next 12-months. Anecdotes point to softening electric and commercial vehicle markets as the primary areas of concern. Notably, the Q1 2024 Vehicle Supplier Barometer is the first to integrate responses from Original Equipment suppliers to both the light vehicle and commercial vehicle sectors.

The Q1 2024 MEMA OE Vehicle Supplier Barometer, sponsored by Deloitte, focused on Production, Planning and Electrification. The results indicate:

• Commercial vehicle supplier sentiment is more pessimistic (41) in comparison to light vehicle supplier sentiment (45).
• New orders and production fell slightly over the past month and year with the moderate expansion in light vehicle pulled down by commercial vehicle. Increasing costs continue to hurt suppliers in both segments.
• Suppliers estimate that the likelihood of a recession is low in the next 12 months, but most feel at least somewhat prepared if one were to occur.
• Light vehicle suppliers’ breakeven estimates rose 100,000 units to 14.0 million units for 2024. The industry is projected to surpass breakeven again this year, after exceeding breakeven by 1.7 million units in 2023.
• Top internal production issues are related to labor and inventory carrying costs. External issues are related to sub-tier supplier financial distress and supply chain risks.
• Suppliers are prioritizing lean manufacturing, supply chain management optimization, product portfolio optimization and automation investment as their top cost management strategy priorities.
• R&D spending is expected to be in-line with last year, at 3% of total sales on average.
• Many suppliers continue to benefit from the shift toward higher Battery Electric Vehicle adoption, with innovation being driven by new customers and technologies. Suppliers still expect it will take 5-10 years for BEV production to reach 25% of global vehicle output.

“Supplier executives are more optimistic about the economy and pessimism has eased since last year’s UAW strike, yet sentiment remains negative for the eighth consecutive quarter. Many EV programs have underperformed and commercial vehicle volumes for tractors and trailers are in decline, resulting in cost pressures that impact skilled-trades and the hourly workforce while also elevating risks of sub-tier supplier distress, as some programs may now represent greater financial exposure,” said Mike Jackson, executive director, strategy and research, MEMA, The Vehicle Suppliers Association.

“North America light vehicle output of 15.7 million units in 2024 offers stability and supports supplier profitability, surpassing breakeven levels by 1.7 million units, while bolstering supplier commitment to R&D investment despite economic uncertainty & geopolitical risks. Leading suppliers continue to embrace innovation by pursuing gains in advanced materials and digitalization while also attacking costs via lean initiatives, product and process optimization and by adopting higher levels of automation,” Jackson said. 

The Q1 SBI chart, a full copy of the Supplier Barometer results and the Deloitte commentary on the Q1 2024 MEMA OE Supplier Barometer are available via the links below.

Q1 2024 Supplier Barometer Results
Deloitte Commentary

About the MEMA Original Equipment Vehicle Supplier Barometer    
The MEMA OE Vehicle Supplier Barometer captures the pulse and analyzes the twelve-month business sentiments of top executives in the supplier industry, for light and heavy-duty vehicles.  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.

About MEMA
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.

About Deloitte
Deloitte provides industry-leading audit and assurance, tax and legal, consulting,  financial advisory, and risk advisory  services to nearly 90% of the Fortune Global 500® and thousands of private companies. Our more than 345,000 professionals deliver measurable and lasting results that help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society and a sustainable world. Building on its 175-plus year history, Deloitte spans more than 150 countries and territories. Our organization has grown tremendously in both scale and capabilities, yet our shared culture and mission—to make an impact that matters—remains unchanged. This is evident not only in Deloitte’s work for clients, but also in our  WorldClass ambition, our WorldClimate initiative and our  ALL IN diversity and inclusion strategy.