The Automotive supplier market in Italy

Automotive suppliers in Italy are experiencing a period of great transformation that challenges them to rethink their value proposition and market approach

Italian supplier market trends

In 2024, Italian automotive suppliers faced a 6% revenue decline and a roughly 20% reduction in EBIT margin, primarily driven by reduced vehicle production volumes in Europe and Italy. 

The current market conditions are expected to persist in 2025, with vehicle production in Europe forecasted to decrease by an additional 4% compared to 2024. In Italy, vehicle production has reached its lowest point in the past 25 years, and none of the top 10 car models to be sold in Europe in the next two years will be manufactured in Italy.

The impact of e-mobility

The rise of e-mobility is exerting high pressure on Italian suppliers, that are significantly focused on internal combustion engine (ICE) related components. The heavy-duty and off-road segments have proven to be more resilient to the e-mobility shift, while passenger cars and light commercial vehicles face greater disruption.

The market for ICE-related components is expected to nearly halve from 2024 to 2030, while components for electric powertrains are projected to grow with a 30% CAGR. Automotive suppliers need to innovate their value proposition and potentially increase focus on the aftermarket, medium-heavy and off-road vehicles, which offer higher margins.

M&A deal volumes and types

The M&A market has shown a flat trend over the past three years, yet a recovery is expected driven by the progressive reduction of interest rates. M&A activity has been primarily driven by industrial investors, with limited involvement of private equity. Deals have mainly been driven by larger players aiming to achieve economies of scale and commercial and operational synergies. Companies that invested in inorganic growth have shown above-average performance in terms of revenue and profitability growth.

Way-forward

The automotive supplier market in Italy is undergoing significant transformation. To navigate this challenge and remain sustainable in the medium to long term, Italian automotive suppliers need to undertake a series of initiatives to diversify value pools and preserve profit margins, such as:

• Exploiting the potential of the aftermarket channel, driven by the growing and ageing vehicle fleet.
• Extending the offering towards heavy-duty and off-road vehicles, which are less impacted by e-mobility and more stable in terms of volumes and platform lifecycle.
• Pursuing economies of scale through M&A operations, especially in commodity markets where there is  high price pressure.
• Focusing on innovation to develop new products and skills, through investments in R&D and partnerships with innovative start-ups.