Numerous European suppliers, such as Faurecia and Valeo have previewed a half to full decade window of increased expansion, mainly buoyed by the latest auto industry megatrends.
The latest report shows the parts makers get above-average organic growth from such megatrends as the race to introduce partially and fully autonomous vehicles or the one where governments pressure automakers to churn out greener cars. “For the manufacturers, some of these trends are also a huge additional cost” but for “suppliers, however, the cost is not their problem and they can reap the benefits of investment in technologies, for example to improve fuel efficiency, or in autonomous driving or electric drivetrains,” comments study author Edoardo Spina of Exane BNP Paribas. He identified French exhaust and interiors maker Faurecia and rival supplier Valeo as among the ones ready to outperform the sector.
The report author also believes that the $13.5 billion bid by German supplier ZF Friedrichshafen for US competitor TRW Automotive – which is pending approval from EU anti-trust regulators on by Feb 26 – would not be followed by other major fusions or acquisitions of European suppliers. Additionally, investors seem to have become fully aware of the recent benefits of trading parts maker holdings, with European suppliers currently enjoying a 45 percent premium in the enterprise value over automakers. Analysts predict that if oil prices remain at the record low levels, the auto parts makers would benefit even more – as the cost of plastics (associated with curde oil) is set to follow the trend and lift earnings.
Via Automotive News Europe