The industry is already in transition, cutting payrolls ahead of any real continued fallout. The sector cut nearly 22,000 jobs in the U.S. through May, or 211 percent more than the same five months of 2018, according to data by Challenger, Gray and Christmas Inc.
But who suffers most will be determined by business strategy, argues Neal Ganguli, managing director and leader of the automotive supply base group for Deloitte.
Auto suppliers around the world have created $510 billion in shareholder value since the Great Recession. That more than doubled the sector's market value before the recession.
The top third of auto suppliers accounted for more than 99 percent of the growth, Ganguli said.
The troubling market forces will drive consolidation in the industry, Ganguli said, and suppliers will either be on the hunt for stronger segments to add to their portfolio, or they will become part of someone else's plans.
"If you're in a commoditized sector, you're asking how you consolidate," Ganguli said. "How are you going to be the last one, two or three companies standing? Someone has to make axles, for example. Will it be you? The solution is to build scale, consolidate and be the cost leader or be ready to be consolidated."
The consolidation is driven by long-term outlooks on where market growth will be taking place. According to the study, segments such as transmissions and axles are expected to decline 6 to 10 percent, respectively, by 2025. Meanwhile, the electric and autonomous vehicle sectors will rise. Electric drivetrain is expected to grow 306 percent, battery and fuel cell sectors by 266 percent and advanced driver-assistance systems and sensors by 190 percent, according to Deloitte.
Investments in these sectors are likely to ramp up in the wake of declining car sales, as suppliers position themselves for sustainability in a down market, Ganguli said.