Image Source: Don O’Brien, Darryl Braaten
Structure of the Auto Parts Supplier Industry
The highly-cyclical auto supplier industry depends on economic conditions and consumer confidence. Volatile gas prices impact a supplier’s input costs and the types of vehicles demanded by consumers. OEMs have considerable bargaining power over suppliers in negotiating terms on largely-commoditized parts. The industry is regulated by environmental and safety laws, providing both challenges and opportunities. Suppliers have considerable operating leverage and remain extremely competitive, which prevents outsize economic returns over the long haul. In general, we don’t like the structure of the group.
We have dropped coverage of the Auto Parts Supplier industry.