Automotive vendor tooling spending will increase year-over-year at a rate of 13.4 percent to reach $8.3 billion in 2025, according to a new study by Harbour Results Inc.
Even though North American vehicle demand is falling, record profit per vehicle will drive tooling growth. Higher profit is funding investments in technology in new vehicles, with the number of vehicle nameplates expected to increase 18 percent from 210 in 2023 to 249 in 2029.
New nameplates generate new vehicle launches, which require more tools, according to Harbour Results. President and CEO Laurie Harbour said the positive forecast is tied to new product rather than revenues or volumes.
"As the tooling market grows, it is important that shops position themselves for the future," Harbour said. "Leadership needs put steps in place today to improve flexibility, drive resiliency and focus on improved efficiency.
"Regardless of the forecast, now is the time to be smart and establish plans to shore up weaknesses and address the talent issue facing this industry," she said.
The report estimates a drop in North American vehicle demand from 15.8 million to 13.7 million units. But U.S. automakers, who source most of their tools in this region, plan to source tooling for all new full-sized pickup trucks and SUVs in 2024, 2025 and 2026, which will significantly increase tooling demand, according to the report.
Harbour expects the recession "to be limited," with a more balanced economy establishing itself by the end of 2023, but that the industry could still lose some plastics companies, tool suppliers and mold builders.
"We're just going to go back to a really reasonable level of demand," she said. One problem, Harbour said, is that companies staffed up for extra demand during the pandemic and now their sales have softened.
"We threw people at the problem and if you're not managing it well then some companies are going to … go out of business," she added. "It's just a tough overall time in all of manufacturing."
"Although cars have been selling, they're selling at high rates and trim rails," Harbour said at the MAPP Benchmarking conference in September. "The rich are getting richer and they're still continuing to buy very expensive goods on the marketplace."
She also noted that North American tooling spend per vehicle on battery electric vehicles is about 30 percent lower than spending on internal combustion vehicles.
"So although we are seeing the tooling spend and number of tools sourced go up over the next few years, the average spend per tool is decreasing," she said.
The Harbour study shows the discrete number of tools increasing by a compound annual growth rate of 14 percent from 2022 to 2025.