For decades, Western auto suppliers thrived in the background. While auto manufacturers are the frontrunners in the glory of polished showroom reveals and Super Bowl commercials.
They built the guts of every car on the road: fuel systems, suspension assemblies, braking technologies, and thousands of intricate components that never made the headlines. Yet, these companies often outperform their carmaker clients on financial metrics like profitability and cash flow.
But that era is coming to a brutal halt, The auto industry is undergoing a shift not just from petrol to electric power, but from hardware dominance to software integration. And it's not the automakers that are bleeding the most. It’s the suppliers.
According to data from AlixPartners, the world’s top 30 auto suppliers saw their free cash flow drop by nearly a third in 2024 a big blow for an industry that once prided itself on reliability and steady margins. That’s no joke. That’s a full blown structural damage.
Take for example Bosch. Once a rock of German engineering, the company cut 12,000 jobs worldwide last year. That's shocking.
But what's more shocking is In total, 54,000 jobs disappeared from Europe’s supplier landscape, with layoffs from Stuttgart to the suburbs of Turin.
Continental, another industry titan, announced further details in June 2025 about spinning off its parts division. Why? Because the rubber (its tire business) is still rolling, but the rest of the operation has stalled in the face of EV disruption. Tyres, after all, don’t care what powers the vehicle.
And in the United States, Marelli, a Japanese supplier already weakened by debt and political trade shocks including tariffs from the Trump administration filed for bankruptcy on June 11th.
Why Suppliers Are Losing the Race
Suppliers were built for an era of combustion engines where Traditional engines require hundreds of moving parts.
EVs are simpler by design. They don’t need catalytic converters, oil pumps, gearboxes, or even exhaust systems. Many of the suppliers’ most lucrative product lines are becoming obsolete. Worse still, the shift to EVs has brought new players tech companies, startups, and Chinese manufacturers into the ring.
They design in-house, they integrate software seamlessly, and they don’t depend on the traditional supplier-carmaker ecosystem.
The rise of software-defined vehicles is particularly troubling. Tesla set the tone over-the-air updates, smart infotainment, and vertically integrated systems. Legacy suppliers built hardware. But in this new world, value is being created in code, not components.
Europe’s automotive heartland Germany is feeling the most acute pain. The country bet heavily on the internal combustion engine, not just technologically, but economically. Cities, towns, and entire regions are tied to the auto supply chain. When suppliers bleed, communities bleed also.