Automotive suppliers are pretty optimistic about vehicle production in the United States and Europe, but China's market is giving them the jitters. The September Supplier Sentiment Index (SSI) produced by the Original Equipment Suppliers Association with the support of Deloitte LLP, came in at 50, a drop of seven points from July's SSI. Of the 79 barometer respondents, a significant percentage of companies (52%) show an "unchanged" outlook over the past two months.
Optimism momentum declined across all revenue groups, with those in the $501 million and below categories registering the largest survey-over-survey declines. "Markets in China" was the most often mentioned issue for respondents changing their outlook to "more pessimistic." "There is a continued, though softening, positive outlook within the automotive supplier community," said the survey.
Increasing capacity to handle vehicle volumes is the big issue among suppliers, the survey revealed. With 2015 North American production running at 17.5 million units, and 2016-2017 production levels expected to increase by some 700,000 units, suppliers report they are looking at all major options to increase capacity: "Replacing equipment beyond normal replacement cycles and increasing plant floor space at existing and new facilities. Incremental demand plus new vehicle launches and an evolving customer base will continue to incentivize suppliers to increase capital expenditure budgets."