News analysis - Rubber manufacturers ‘must adapt to' shifting market trends

Frankfurt, Germany - The severe challenges facing EU automotive parts suppliers were detailed in no uncertain terms by Roland Berger analyst Dr. Kay Thielemann at the WDK annual conference in Frankfurt.

But the industry expert also highlighted opportunities for rubber manufacturers, linked to increasing demand for innovative and sustainable materials as well as vehicle electrification, China expansion and AI-driven digitalisation.

The automotive industry’s recovery has halted and is not expected to return to pre-Covid levels before 2029, Thielemann set out in his presentation to the German rubber industry association’s meeting on 3 Nov.

According to the analyst, the automotive supply sector has structurally lost around two percentage points of its earnings (EBIT) margin compared to pre-Covid levels.

Parts suppliers, he forecast, are set to remain under pressure given current automotive industry trends: flattening production volumes; slowing battery electric vehicle (BEV) adoption; competition in/from China; and geopolitical tensions.

To compete, the rubber industry must “navigate stagnant automotive production, a more gradual than expected shift to BEVs, continuing geopolitical risks and intensified regulatory pressures,” the analyst advised.

Amid slow growth in demand for tires and rubber components, suppliers should “focus on efficiency and diversification beyond traditional passenger car segments,” Thielemann told the Frankfurt gathering.

Despite slower adoption, he noted, BEV volumes are growing, with increasing demand for “specialised rubber solutions such as lightweight & low rolling resistance tires, battery pack sealing and thermal management systems.”

But highlighting a need for stronger supply-chain resilience in the face of ongoing cost & margin pressure, raw material volatility and geopolitical risks, Thielemann said “strategic procurement and operational efficiency” were now key to competitiveness.

Meanwhile, he forecast that “eco-friendly materials and compliance with stricter standards will become a major differentiator for suppliers given intensified sustainability and regulatory pressure.”

Of at least equal significance is the rise of Chinese automotive producers: the country’s OEMs having “gained domestic market traction with a steadily growing EV portfolio and upper segment share...”

Read the full ERJ News Analysis report