North American automotive tooling market forecast to reach $8.3B in 2025

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.

Although HRI's forecast is positive, Harbour said "a prolonged recession, increased supply chain issues or a drop in vehicle demand below 13 million units," could negatively impact tooling spending.

"Businesses need to continuously monitor the health of the industry and their customers to better understand how it will impact their bottom lines," Harbour said. "It will be important for mold and die companies to focus on improved efficiency and throughput."

"Companies need to really hone in on [making] improvements, otherwise we're going to see some fallout," Harbour told Plastics News.

Automotive OEMs will continue to be faced with difficult strategic decisions about where to put their money and what vehicles to launch, the report said.

Tariffs on goods imported from China are also helping the North American tooling spend forecast, Harbour said on the Manufacturing Alliance podcast on Nov. 16, adding that tariffs are "here to stay."

"Originally when the current administration got in office there was a lot of talk about a different approach to China," she said. "I think given all the other crises that we're going through in terms of inflation, war supply chain issues and COVID, that's been put a bit on the back burner."

"The government has pretty much said they're going to keep those industrial tariffs," Harbor added. "Certainly if the administration flips again in two years, we'll likely see those stay intact."

But, she said, big OEMs have "short memories" when it comes to the cost of tooling, and could still return to Chinese toolmakers.

"China's not going to go away, they have built an incredibly large industrial base of toolmakers," Harbour said. "But they have absolutely struggled in COVID, some of them have gone out of business. … We're never going to compete on a direct price basis with China, that's just the nature of the beast. I shouldn't say never, there's definitely been some cases where I've seen us compete."

In order to compete, she said, North American toolmakers need to avoid price gouging and find ways to provide "great value" to their customers.

HRI's most recent Manufacturing Pulse Study, conducted in August, showed 45 percent of tool shops indicating they were optimistic or very optimistic about the future and predicted ending the year at 83 percent utilization, it said.

"Despite economic uncertainty and supply chain challenges, we are seeing a bright future of the automotive tooling industry," Harbour said.