Smaller auto suppliers more dependent on customers, less likely to own designs: BCG-ACMA

Smaller auto component suppliers in India are more likely to depend on a small number of customers and are less likely to own the designs of the products they make, according to a BCG-ACMA report.

Small suppliers face higher customer dependence

The report is based on financial analysis of around 450 Indian auto component suppliers from FY15 to FY25. It also includes a CXO survey and leadership interviews across more than 50 companies, ranging from ₹100 crore specialists to multi-thousand-crore Tier 1 suppliers. The report found that around 34% of the companies analysed depend on one or a few customers. Around 45% of companies do not own their product designs.

Design ownership remains a gap

The risk is higher among smaller companies. About 53% of small companies are dependent on one or a few customers, compared with 19% of large companies. Small companies are also more likely to lack design ownership. Around 65% of small companies do not own their designs, compared with 29% of large companies.

The report also found a strong link between customer dependence and design ownership. Among companies that depend on one or a few customers, nearly two out of three also do not own their designs. The report highlights the link between the two risks for auto component suppliers. Companies that depend heavily on a small number of customers can also be dependent on those customers for product design.

Resilient suppliers improved margins

The study also looked at how auto component companies have performed over the past decade. Around 75 of the 450 suppliers analysed outperformed industry growth in at least six of the last eight years. These companies had lower EBITDA margins than the rest of the sample in FY16. By FY25, however, their EBITDA margins were 1.4 percentage points higher. The gap grew most during years when the industry faced major shocks.

Industry sees higher risks

The report also found that around 90% of industry leaders believe they are in the right place at the right time, while nearly 78% say the business is riskier than it was five years ago. These views were similar across large, medium and small companies.

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