OEM profit margin pressure in stark focus after 40% drop since 2021

Car manufacturers hit a fresh low for operating margins at 5.4% in the first quarter of 2025, down more than 40% from their 2021 peak, according to data from management consulting firm Bain & Company.

This marks three consecutive quarters where supplier margins have outperformed manufacturing margins, reversing a 17‑quarter post‑pandemic trend.

Bain and Co's latest automotive profitability dashboard attributes persistent inflation, elevated interest rates and slowing EV adoption as factors putting increased pressure on margins for original equipment manufacturers (OEMs).

Manufacturers are facing the cost of running dual production lines for combustion engine vehicles and electric models.

Many have announced efficiency schemes and cost cuts that in turn are ramping up pressure on their suppliers.

Supplier performance remains slightly more resilient after stabilising near 6.5% following the pandemic, EBIT margins fell slightly to around 6% in Q1 2025.

However, Bain and Co said automotive suppliers are still suffering from higher input costs (even though material costs have receded from all-time highs) while OEMs increase cost pressure even further.

It said a growing number of suppliers face liquidity challenges that will likely require special support, including from OEMs, to prevent insolvency.

Bain and Co's dashboard analysis said: "Amid this hurricane of external pressures on margins, both OEMs and suppliers have no time to lose to increase the resilience of their business models, enacting more fundamental cost-reduction measures while staying disciplined to maintain price levels.

"Looking ahead, escalating trade tariffs could add a new layer of pressure on margins, particularly for globally exposed supply chains."