By Laurie Harbour, president and CEO, Harbour Results, Inc.
It’s been an interesting three years for the manufacturing industry. In 2020, the industry was hit by COVID-19. Together, everyone learned what to do. Despite starts and stops, ups and downs, the tooling industry persevered. Then, in 2021, it was a year of unprecedented high demand for energy and major durable goods, driving major supply chain challenges in every region.
Additionally, labor continued to be an issue, not just because people didn’t go back to work for a variety of reasons, but because demand was so huge. Then, labor rates went up incredibly high and businesses had to pay to attract and retain employees. From there, the industry had its biggest shortage of semiconductors ever seen and consumers changed their living and buying behavior, more than ever before.
When 2022 came, manufacturers thought it would be a great year for the tool and die industry, but it progressed to be almost more challenging than previous years, with much of the uncertainty a result of global unrest in Ukraine and between China and Taiwan. Then, there has been a major energy crisis (particularly in Europe), inflation, rising interest rates and a pending recession that has impacted nearly all businesses. Despite these challenges, manufacturers still see great opportunity on the horizon for the automotive tooling and other durable goods industries.
Automotive Tooling Forecast
Looking forward, the future is bright for this industry. Harbour Results’ 2022 Automotive Tooling Forecast, released in November 2022, predicts automotive vendor tooling spend in North America to increase year-over-year at a rate of 13.4%, resulting in $8.3 billion in spending in 2025. This is a significant increase from the 2022 estimated spend of $5.7 billion. Additionally, the number of tools needed during the same duration will increase 14%.
What’s Driving the Growth
It is important for mold shops to understand what is driving the growth – automaker profitability and the introduction of EV vehicles are two key factors. Despite a drop in North American vehicle demand from 15.8 million to 13.7 million units, most automakers are experiencing record levels of profit per vehicle sold. This is funding investment in technology and new vehicles, which will all require investment in new molds.
Additionally, from 2023 to 2029, the number of vehicle nameplates in the region will grow 18% from 210 to 249. And, battery electric vehicle (BEV) nameplates will grow from 20% of the mix in 2023 to 46% of the mix in 2029. The new nameplates and vehicle introductions generate more vehicle launches, which require more tools. It is important to note that the tooling spend per vehicle for BEVs is, on average, lower than internal combustion engine (ICE) vehicles by about 28%.
Finally, Ram, Ford and General Motors, which source most of their tools in North America, are planning to source tooling for all-new full-sized pickup trucks and SUVs in 2025 and 2026. On average, a truck requires 20% to 40% more tools per vehicle, so these vehicles significantly increase tooling demand in this region.
It’s Not All Good News
However, it is not all good news. Although automakers are seeing record profits, the automotive supplier community is being squeezed and forced to make difficult investment and resource decisions to remain viable. Additionally, the threat of a recession has had some automotive companies put some future investments on hold. All of these factors, as well as new and used vehicle pricing and consumer demand, could impact the future of tooling spending.
Planning for the Future
In the next 18 months, the manufacturing industry will continue to face challenges and mold shops will need to be intentional with their future business plans and strategies. There are several factors that must be considered when planning for 2023 and beyond.
- Know the market intel by studying launches and building sales forecasts based on core competencies. Also, know which OEM is launching and whether all-new, major or facelift so the plan can be based on the company’s customer base.
- Understand customers’ needs and plan for them also while staying focused on the team and their growth.
- Focus on lead time reduction by focusing on gaps and driving improvement.
- Build flexibility to drive resiliency and hunker down financially – be smart, focus on cash and quality of earnings.
There are a lot of factors – globally and regionally – occurring simultaneously, making it even more critical to continuously monitor the health of the industry and customers to
better understand how it all impacts a manufacturer’s
As president and CEO of Harbour Results, Inc. (HRI), Laurie Harbour leads a team of analysts and manufacturing consultants to help small- to medium-sized manufacturers develop short- and long-term strategies, improve their operations, reduce risks and optimize business. As a trusted advisor to the North American manufacturing industry, HRI monitors, researches and analyzes the manufacturing value stream to identify strengths and weaknesses, gaps and risks, and business and operational opportunities in an effort to help the industry transform to be more successful in the global marketplace. For more information: