Automotive & Assembly Practice

Work the core: How auto

suppliers can get fit for the
EV transition
As the light-vehicle automotive industry goes electric, some components
will change, but many will remain similar or the same. Suppliers will
continue to create value by focusing on the core.

This article is a collaborative effort by Tim Fleischer, Michael Guggenheimer, Antonia Gutzler, Lukas Michor,
Timo Möller, and Andreas Venus representing views from McKinsey’s Automotive & Assembly practice.

© Getty Images

March 2023
 Driven by an urgent decarbonization agenda, the
automotive world is increasingly defined by electric
powertrains and digitization. In response, suppliers
must navigate a subtle transition. As electrification
rolls out, many light-vehicle components (such
as batteries and electric motors) will see strong
growth. However, the majority of parts will remain
the same as it did in vehicles powered by internal
combustion engines (ICE). As suppliers seek to
unlock new opportunities, they can create value by
continuing to focus on the core.
Over the coming years, the light-vehicle component
market will evolve on twin paths. As electrification
becomes more widespread, amid increased
automation and connectivity, some demand
dynamics will shift. We expect electric vehicle (EV)
and advanced electronics components, such as
electric powertrains, advanced driver-assistance
systems (ADAS), and infotainment electronics to
account for 36 percent of the market by 2030,
compared with 11 percent at present.¹ However, core
vehicle components, including the axle system,
suspension, body in white, and front and rear
structure, will remain a key part of the equation. We
estimate these will represent 55 percent of total
market revenues by 2030, compared to 69 percent
at present, and will generate revenues of $886
billion, compared to $748 billion in 2022 (Exhibit 1).  
Demand for individual core components and the
volume of design adjustments required will be
contingent, among other things, on the pace of
change in consumer demand for electrification.
To gauge possible outcomes, we modeled four
potential scenarios (see sidebar, “Potential
developments in the component market”). In this
article, we focus on an intermediate scenario, which

Exhibit 1
Core vehicle
Core vehiclecomponents
componentswill
will represent
represent 5555 percent
percent of the
of the revenue
revenue poolpool
in in
2030, compared with 69 percent in 2022.
2030, compared with 69 percent in 2022.

Light vehicle¹ component revenue pool development,² $ billion

Category
1,623 EV and E/E trend components
are mainly driven by trends of
powertrain electrification,
advanced driver assistance
591 systems (ADAS), infotainment,
and connectivity
1,083
116 ICE related components
146 consist of conventional
219 powertrain components, therefore
phasing out in the long-run in line
with the ICE engine production
Examples (non-exhaustive)
• E-motor, inverter
• Battery components (incl. housing, cells, BMS)
• Domain control unit
• Steer by wire, brake by wire
• Sensors (eg, LiDAR, Radar)
• Engine systems
• Transmission
• Fuel injection

Core vehicle components

886 are predominantly driven by vehicle • Axle system
748
production volume as components • Suspension
are inherently installed in all types • Body in white
of vehicles independent from • Front and rear structure
powertrain shifts or other trends • Interior
Global Global
2022 2030
1
Passenger cars and light commercial vehicles (GVW <6t), no aftermarket included.
2
Current trajectory scenario.
Source: McKinsey Center for Future Mobility

McKinsey & Company

1
McKinsey Center for Future Mobility (MCFM) internal modeling and data.

2 Work the core: How auto suppliers can get fit for the EV transition
Potential developments in the components market

We modeled four potential scenarios, ranging from fading momentum, in which demand fails to pick up as quickly as expected, to
achieved commitments, in which a purposeful policy environment and fast-changing consumer attitudes lead to a speedier transition
(exhibit).

Exhibit
The future of the component market will be determined by the progress
The future of the component market will be determined by the progress
of
of electrication.
electrification.

Overview of electrification scenarios

Speed of electrification transition
Slower Faster

Fading momentum Current trajectory Further acceleration Achieved commitments

Scenario Fading momentum in Current trajectory of Further acceleration of Net-zero commitments

description cost reductions, climate
policies, and public
sentiment will lead to
prolonged dominance
of fossil private
transport
EV/AV cost decline
continues, however
currently active
policies remain
insufficient to close
gap to net zero
transition driven by
country-specific
commitments and
technology, though
financial restraints
remain
achieved by leading
countries through
purposeful policies,
followers transition at
slower pace

EV US: Return to SAFE US: Dec 2021 EPA rule US: Accelerated reduction US: 2050 net-zero
regulation¹ EU: 2019 EU rule EU: Fit for 55 EU: –75% proposal EU: 2050 net-zero
CN: Continuation of 2025 CN: Current proposal CN: Accelerated reduction CN: 2060 net-zero

Technology BEV residual value meet BEV residual value BEV residual value BEV residual value
ICE by 2030 meet ICE by 2030 meet ICE by 2025 meet ICE by 2025

Consumer Consumer demand for Consumer demand Consumer demand Consumer demand
EVs stays at current increases in line with reaches Norwegian reaches Norwegian
2022 levels 2018–2022 growth levels by 2030 levels by 2030
Baseline for
this article

1
Brazil, India, and Japan regulation also modeled across scenarios; country/state-level EV mandates assumed to be met.
Source: McKinsey Center for Future Mobility

McKinsey & Company

is based on existing regulation and current trends
in EV adoption. The scenario predicts stable
growth in the core vehicle components business
up to 2030, in line with the outlook for global light-
vehicle production (Exhibit 2).
The dominance of core revenues
Despite a rising focus on electrification, core and
ICE-based components still dominate revenues
across the light-vehicle supply industry. Indeed, 89
percent of global tier-1 suppliers generate more
than 90 percent of their revenues from these
categories.
Across the supplier cohort, we differentiate four
key archetypes: process-focused, portfolio
conglomerates, new technology players, and
ICE specialists (Exhibit 3). The largest share is
controlled by process-focused players, accounting
for 57 percent of the total. These companies rely on
core components for 89 percent of their revenues.
Portfolio conglomerates, meanwhile, account
for about 20 percent of the revenue pool, with
around 30 percent of revenues associated with
ICE-related business. Most portfolio companies
are focused on building market position in EV and
electrical and electronic (E/E) trend components.

Work the core: How auto suppliers can get fit for the EV transition 3
 Exhibit 2
The core component market is expected to grow in line with vehicle
The core component market is expected to grow in line with vehicle
production.
production.

Core vehicle components overview¹

Light vehicle 842 845 886
revenue pool 748
development,²
$ billion

2019 2022 2025 2030

Exemplary Chassis Body structure Other exteriors Interior Conventional electronics

components Axles Body in white Body glass Dashboard Board net battery
contained in Suspension Closures Plastic panels Panels Low voltage harness
main clusters Braking Fasteners Lighting Seats Speakers
Steering Front structure Mirrors HVAC Conventional displays
Wheels Rear structure Sealing Restraints Conventional sensors

Focus of this article

1
Current trajectory scenario.
2
Passenger cars and light commercial vehicles (GVW <6t), no aftermarket included.
Source: McKinsey Center for Future Mobility

McKinsey & Company

Exhibit 3
Process focused players are the sector’s biggest revenue generators, followed
Process
by focused
portfolio players are the sector’s biggest revenue generators, followed
conglomerates.
by portfolio conglomerates.

2022 portfolio mix between tier-1 supplier archetypes,¹

% of automotive light-vehicle² tier-1 revenues

EV and E/E 3 3
8
trend components 8

ICE related
components 30

75 72

89

Core vehicle
components 63

26
16

Portfolio Process New technology ICE

conglomerates³ focused players³ specialists³
Share of 2022
revenue pool, % 20 57 8 14

1
Current trajectory scenario.
2
Passenger cars and light commercial vehicles (GVW <6t), no aftermarket included.
3
Figures may not sum to 100%, because of rounding.
Source: McKinsey Center for Future Mobility

McKinsey & Company

4 Work the core: How auto suppliers can get fit for the EV transition
 New technology players naturally make most of their Chassis and body structure in an age
money from E/E trend plays, and represent just 8 of electrification
percent of the core component revenue pool. Finally, The two critical subcategories in the core
ICE powertrain specialists account for about 14 component market are chassis, accounting for 24
percent of revenues. Many companies in this group percent of revenues in 2022, and body structure,
are positioning for the inevitable transition, amid accounting for 21 percent in in the same year
strategies ranging from consolidation to last-player- (Exhibit 4).
standing, and portfolio shifts toward EV and E/E
components.

Exhibit 4
Key chassis and structure component revenues will grow in line with the
wider market.
Key chassis and structure component revenues will grow in line with the
wider market.

Light vehicle¹ component revenue forecast²

CAGR CAGR
Chassis market, $ billion Components 2022–25, % 2022–30, %

Total +3.5 +1.6

206 200 204
20 21 23
180
Axles +4.9 +2.9
35 18
35 38
31 Wheels +4.3 +2.4
46 42
43
39
Steering +2.6 +0.8
49 48 50
43
Suspension +3.7 +1.9

55 48 53 52 Braking +3.1 +1.0

2019 2022 2025 2030

CAGR CAGR
Body structure market, $ billion Components 2022–25, % 2022–30, %

176 171 Total +3.3 +1.5

167
17 17
152 16
17
15 16 17 Front/rear structure³ +3.4 +1.6
31 15
29 28
26 Fasteners +3.4 +1.6

Closures +2.7 +0.9

111 106 109
96

Body in white⁴ +3.4 +1.6

2019 2022 2025 2030

1
Passenger cars and light commercial vehicles (GVW <6t), no aftermarket included.
2
Current trajectory scenario.
3
Excluding bumpers.
4
Including roof.
Source: McKinsey Center for Future Mobility

McKinsey & Company

Work the core: How auto suppliers can get fit for the EV transition 5
 The chassis market encompasses axles, suspension,
braking, steering, and wheels. Growth in demand is
projected to be in line with that of vehicle production.
That would be about 3.5 percent from 2022 to 2025,
but just 1.6 percent from 2022 to 2030.² Body
structure parts include body in white, closures,
fasteners, and front and rear structures. We expect
growth in that segment of 3.3 percent from 2022 to
2025, and 1.5 percent from 2022 to 2030.
Two player archetypes dominate. Process-focused
players account for 84 percent of the body structure
market and 67 percent of the chassis market, while
portfolio conglomerates account for 11 percent
and 23 percent respectively. Still, as electrification
plays out, there will be nuanced shifts in demand
across both categories. This will be in relation to the
parts themselves, as well as safety standards and
production technologies.
Electrification and parts. With electrical motors
often located in the rear rather than the front, as
in internal combustion engines, rear axles’ design
must evolve to carry the extra weight, while the
front subframe could become simpler. There will be
additional requirements for chassis and structural
components to protect high-voltage batteries. In
addition, the new configuration will create more
space at the front, creating an opportunity to build
more storage, as well as impacting design of thermal
management systems and heating, ventilation,
and air conditioning (HVAC). An overall heavier
EV will require a redesign of structural parts and
suspension. In the meantime, more affordable
twistbeams are seeing a revival for less expensive
battery electric vehicle (BEV) segments with front-
wheel drive.
Safety. Given the structural changes required in
EVs, suppliers should expect regulators to tighten
safety requirements for structural parts. This will
lead to rising demand for high-strength steel, for
example, to protect users in case of rollover, and
active countermeasures to avoid cabin intrusions
from small overlap crashes with rigid barriers.
2
McKinsey Center for Future Mobility.
6 Work the core: How auto suppliers can get fit for the EV transition
Production technologies. The industry is already
in the process of replacing steel clamshell designs
with aluminum-casted subframes—mostly relevant
for higher-performance segments due to the
cost. This will reduce design and manufacturing
complexity and facilitate the integration of linkage
to other components in the casting. There will be
large structural part casting (mega and giga casts)
of the rear and front ends. 
From a regional perspective, the fastest chassis
market growth from 2022 to 2025 is likely to be
North America, which is predicted to expand at 4.6
percent (compared with Europe’s 3.9 percent and
Asia-Pacific’s [APAC] 3.0 percent), due to the fast
recovery of production after the decline during the
COVID-19 pandemic. From 2022 to 2030, however,
North America will likely grow at just 0.6 percent
as volumes stabilize, compared with 2.6 percent in
Europe (Exhibit 5).
Next steps: How should core suppliers
respond?
As the transition to EVs plays out, the task for
supply-side decision makers will be to retain a firm
grip on the most promising aspects of the business.
In most cases, this could mean staying focused on
core vehicle components while aligning with the
latest trends and closely monitoring opportunities
associated with the EV rollout.
Amid intense global competition, the key to
long-term competitiveness will be to prioritize
production efficiencies for core components,
while building capabilities that will support
the innovation agenda. Players with expertise
in body glass may wish to focus on sunroofs
or moonroofs (projected to grow at 11 percent
CAGR, and potentially to reach $5.8 billion of
annual revenue by 2030). Meanwhile, experience
with conventional braking and steering could
provide an opportunity to roll out steer-by-wire or
brake-by-wire systems, amid rising demand for
components that will enable autonomous driving.
Exhibit 5
The fastest growing region in the short term will be North America, but in the
The fastest growing region in the short term will be North America, but in the
longer term itit will
longer term willbe
beEurope.
Europe.

Light vehicle¹ component revenue forecast²

CAGR CAGR
Chassis market, $ billion Components 2022–25, % 2022–30, %

206 200 204 Total +3.5 +1.6

11 11 12
180
42 10 39 Rest of World³ +3.7 +2.4
43
37

50 40 44 North America⁴ +4.6 +0.6

36

Europe⁵ +3.9 +2.6

102 106 109

97 APAC⁶ +3.0 +1.5

2019 2022 2025 2030

CAGR CAGR
Body structure market, $ billion Components 2022–25, % 2022–30, %

176 171 Total +3.3 +1.5

167
10 11
152 10
33 9 31 Rest of World³ +3.8 +2.5
33
29
43 33 36
North America⁴ +4.4 +0.5
30

Europe⁵ +3.5 +2.4

89 83 90 93

APAC⁶ +2.7 +1.4

2019 2022 2025 2030

1
Passenger cars and light commercial vehicles (GVW <6t), no aftermarket included.
2
Current trajectory scenario.
3
Africa, Middle East, and South America.
4
Including Canada and Mexico.
5
European Union, Iceland, Norway, Switzerland, and United Kingdom.
6
China, Japan, Korea, and South Asia.
Source: McKinsey Center for Future Mobility

McKinsey & Company

Among leading chassis and structural component
suppliers, only about 30 percent offer EV- or E/E-
oriented components, and these generally account
for 5 to 10 percent of their revenues. Most commonly,
they are focused on powertrain components
(battery housing, e-motors, and inverters) and
sensors.
However, as the green transition accelerates,
companies can consider additional opportunities.
We expect the battery-pack housing market
(including battery thermal management) to grow
by 23 percent CAGR and the market to be worth
$30 billion by 2030. The housing is increasingly
integrated in vehicle structure (for example, cell
to pack) and requires knowledge of cooling plate
design. Additionally, the redesign of structural
and thermal management systems could lead to
opportunities in components such as heat pumps
(expected to grow at 30 percent CAGR, with a
potential market size of $6.1 billion by 2030).
Suppliers should also reflect on their regional
strategies. Right now, the revenues of the top ten

Work the core: How auto suppliers can get fit for the EV transition 7
 chassis market suppliers emanate from APAC
(approximately 4 percent), Europe (around 22
percent), and North America (about 20 percent),
with similar proportions among body structure
suppliers: APAC (around 46 percent), Europe
(approximately 17 percent), and North America
(about 19 percent). Both markets are highly
fragmented. The top five players in structural
components account for just 27 percent of the
market, with the top 50 creating a long tail of 73
percent. In chassis, the top five account for 23
percent and the top 50 for 72 percent. With that in
mind, it may make sense for suppliers to consider
inorganic strategies such as M&A.
Finally, the biggest risk in a time of change is inertia.
Indeed, as the core component market continues
to grow, the decisions that leaders make now will
be critical to business prospects in the longer term.
As suppliers make strategic decisions, it will pay to
adopt a change management mindset across the
organization and act decisively in identifying new
and continuing pockets of opportunity.
As the light-vehicle automotive industry goes
electric, some changes will be inevitable in the core
components market. By remaining aware of the
shifts and maximizing the opportunities, players in
the market can ensure they remain relevant in the
changing world.

Tim Fleischer is a consultant in McKinsey’s Cologne office, where Timo Möller is a partner; Michael Guggenheimer is an
associate partner in the Munich office, where Antonia Gutzler is a partner; Lukas Michor is a partner in the Vienna office; and
Andreas Venus is a senior partner in the Berlin office.

The authors wish to thank Zachary Salyer and Niklas Winterberg for their contributions to this article.

Copyright © 2023 McKinsey & Company. All rights reserved.

8 Work the core: How auto suppliers can get fit for the EV transition