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Text | Xiao Luyu

Editor | Yang Xuran

Germany's auto industry seems to be going through its most difficult time since the outbreak of the epidemic. The most significant manifestation is not the decline in BBA sales, butThere has been an unprecedented wave of bankruptcies among its auto parts suppliers.

According to data from consulting firm Falkensteg, 20 automotive parts suppliers with annual revenue of more than 10 million euros have filed for bankruptcy, a 60% surge year-on-year.

Earlier, layoffs had already spread among Germany's leading auto parts suppliers. Earlier this year, Bosch Group and ZF announced plans to reduce their workforce in Germany, with tens of thousands of jobs to be cut in the next few years.

Weak demand is seen as the root cause of the difficulties faced by German auto parts suppliers. However, if we combine this with the recent news that BBA has withdrawn from the price war in the Chinese auto market, it is not difficult to find thatThe old order in the mid- to high-end automobile market, once dominated by German companies, is collapsing.

Competition from Chinese companies may be imminent, but the more hidden crisis originates from within Germany and the European Union.

Thirty years ago, the German automotive industry achieved unprecedented prosperity by relying on the wave of globalization, especially the rise of developing countries represented by China. With the automobile as the pillar industry, the entire Germany also completed the economic revival and the improvement of social welfare.

But when Germany and Europe began to frequently concoct various anti-dumping and anti-subsidy bills, restricting the development of Chinese companies and the entry of Chinese goods in various ways, did they never imagine that they would eventually have to bear the consequences of these anti-globalization measures?

01 Back

In 2023, Germany's economic size surpassed Japan in the world economic rankings and became the world's third largest economy. However, Germany's gross domestic product (GDP) actually declined that year: it decreased by 0.5% year-on-year in 2022, the industrial production index fell by about 1.2%, and the unemployment rate rose from 2.9% to 3.1%.

Although the International Monetary Fund and the German government have shown sufficient optimism in predicting their economic trends this year, with the release of various economic indicators in the first half of the year, the issue of the driving force of Germany's economic growth can no longer be ignored.

On the one hand, the economic recovery of the entire eurozone has fallen short of expectations.On July 24, data released by S&P Global and Hamburg Commerzbank showed that the euro zone's preliminary composite PMI in July fell from 50.9 to 50.1, the lowest reading since February this year and lower than the expected 51.1.

On the other hand, the German economy lags behind the overall performance of the eurozone.The latest German composite PMI dropped sharply to 48.7 from 50.4 in the previous month, while the manufacturing PMI was only 42.6, returning to near its low point during the epidemic. Germany's output also fell for the first time in four months.

From a structural perspective, whether in Germany or the eurozone, the performance of economic sectors is clearly differentiated. The service industry continues to strengthen, but the manufacturing industry continues to be under pressure. The increase in service industry orders cannot make up for the decrease in manufacturing industry orders.

This sluggish manufacturing order volume is also consistent with the decline in German exports to third countries.According to Trading Economics, Germany's exports grew by 1.6% in April this year, but fell by -3.6% in May. In June, Germany's exports to third countries (non-EU countries) continued to decline, with exports down 2.6% month-on-month and even down nearly 9% year-on-year.

With trade protectionism and anti-globalization on the rise, Germany can no longer rely on foreign exports to stimulate economic growth as it did in the past.The German economy has always been highly dependent on foreign countries. It can even be said that Germany’s entire “business model” is based on global free trade.

For Germany, important historical nodes in modern history, such as the dramatic changes in Eastern Europe, the disintegration of the Soviet Union, and the establishment of the European Union, are almost all beneficial to the development of its industry and economy - these factors have brought Germany a large number of new markets, as well as sufficient cheap resources and labor.

What's more, at that time, the United States had not yet swung its currency harvesting sickle towards Europe.

Today, Germany has not only lost the cheap energy delivered by the Nord Stream pipeline, but its domestic factories are also facing production difficulties due to power problems, and it is also having to watch a large outflow of domestic capital.

In 2023, German companies announced a record $15.7 billion in capital commitments to US projects, almost doubling the $8.2 billion in the previous year. The corresponding number of investment and construction projects in the United States was 185, of which 73 were manufacturing projects.

Wherever capital flows out, jobs will be lost.No wonder the outlook for Germany’s labor market is not so clear. However, looking at what Germany and the EU have done in this round of anti-globalization, they are not innocent.

Taking Chinese electric vehicles as an example, the EU plans to start regulating them on July 4.BYD、auspiciousCompanies that cooperate with the investigation will be subject to a weighted average tariff of 21%, and companies that do not cooperate with the investigation will be subject to the remaining tariff of 38.1%.

But trade protectionism and populism are like Pandora's box. Those who open the box often cannot guarantee how they will be affected, nor do they know when and where they can close it again.

02 Status

In fact, countries that are "confident" enough to take the lead in trade protectionism should rely on the fact that their domestic market demand is large enough and other countries have strong demand for their products. However, when the competition pattern and industry order change, this "confidence" can easily turn into "ordinary confidence".

In the past, automobiles and parts, mechanical equipment, and electrical products have always been the advantageous categories in Germany's foreign trade, and supporting these industries are the strong German automobile brands.Benz、BMW、Audi、PorscheWhen Volkswagen is trying to gain market share overseas, they naturally have the confidence to give priority to German suppliers.

In the 2020 list of the top 100 global auto parts suppliers released by the American automotive media Automotive News, Germany's five major auto parts giants all ranked in the top 20, fully demonstrating the outstanding position of the German auto parts industry in the world.

In the 2024 Global Top 100 Auto Parts Suppliers List, although German companies did not lag behind, Chinese companies made more impressive progress. A total of 15 Chinese companies made the list, a record high, and none of the Chinese companies on the list fell in rank.

Desay SV and Ningbo Top have made significant progress, moving up 15 and 13 places respectively, while CATL remains firmly in the top five of the list. This reflects that the global market competitiveness of Chinese auto parts suppliers is steadily improving, and also reflects the rapid changes in the automotive supply chain in the era of electrification. The competition between new and old forces has become increasingly fierce.

The more eye-catching alternation of old and new forces occurred in the field of complete vehicles. BBA was first forced into a price war by the aggressive Chinese auto brands. After finding that price cuts could not guarantee sales, they hoped to protect their brand image and profit margins by raising prices, which ultimately caused dissatisfaction among many consumers.

In commercial competition, if you don't advance, you will retreat. Moreover, before the strong rise of electric vehicles, Germany failed to seize the opportunity of the development of the information industry, which has already laid hidden dangers for today's automobile and auto parts industry.

In 2022, Germany's fiber optic network will cover only 26% of households (the data for the capital Berlin is only 10%). Germany's IT talent gap will reach 149,000 in 2023, and 70% of companies said there is a serious shortage of IT talent.

Through these phenomena, it is not difficult to understand why Germany has not produced any well-known Internet technology companies, and why it has responded so slowly in the historical process of digitalization and intelligence.This industry gap, which began in the IT boom era, has also directly led to the backwardness of German cars in terms of intelligence.Especially in terms of intelligent voice systems and human-computer interaction experience, it can no longer meet the needs of Chinese consumers.

Although European and American consumers are not as concerned about and in short supply of intelligence as Chinese consumers, it is hard to imagine that after L3-L4 level autonomous driving is widely popularized, BBA, which is slow in intelligentization, can still be considered high-end in terms of technology content and driving experience.

Germany's auto parts giants have already become aware of this. Bosch has established an intelligent driving and control system division to adjust and reorganize its automotive and intelligent transportation technology businesses. Continental will reorganize its smart travel business. Even semiconductor supplier Infineon will focus on digitalization in the automotive field to bring in new profit growth.

The giants still have the energy to adjust, reorganize and seek transformation, but those small and medium-sized auto parts manufacturers that can only manufacture single traditional mechanical components can only face a more brutal elimination competition.

03 Revelation

If a country wants to cultivate a strong industry, it cannot just have that one industry that is strong.

In an era when fuel vehicles dominate the world, Germany not only has world-renowned vehicle manufacturers, but also many excellent parts suppliers, raw material suppliers, R&D service providers, and a first-class engineering and technical education system, forming a highly coordinated industrial ecosystem that other countries cannot catch up with.

When German cars were hot-selling all over the world, it was also the time when German automobile, auto parts, machinery and electrical companies expanded systematically overseas.

Now, China's automobile industry has basically completed overall localized large-scale production. On this basis, China can completely achieve the internationalization of the entire automobile industry chain from production to sales, just like Germany did in the past.

This process can be divided into three stages. Export is the first step, which mainly involves the partial export of domestically manufactured complete vehicles and parts, with the product types mainly targeting the low-end market.

Going overseas is the second step. What is exported are smart electric vehicle brands that are more cost-effective and competitive, as well as supporting sales channels, after-sales services, charging and battery replacement and other supporting operating facilities, and starting to build overseas production capacity in some areas with strong demand.

From exporting to going overseas, the goal is to form a new energy industry chain overseas as soon as possible amid the uncertainty of free trade around the world, and then rely on the technological capabilities of independent new energy vehicles to launch a dimensionality reduction attack and accelerate the grabbing of global market share.

After all, the price war in the automobile industry cannot go on endlessly. When the price war enters a relatively stable state, the competition for market share will rely more on capital operation and industrial chain coordination.The experiences and lessons learned by veteran overseas players like Fuyao Glass are worthy of reference for other Chinese companies.

Looking at the global automotive glass market, major players are in a state of low expansion willingness, only Fuyao Glass's capital expenditure is currently at a relatively high level. The company is entering the third round of capital expenditure cycle and is highly motivated to expand production. This has become a representative of the evolution of the global automotive industry chain.

Fuyao Glass is currently the only player in the global automotive glass industry that has maintained a steady increase in market share, and its global share has continued to increase from 2.6% in 2001 to 30.1% in 2023. With the subsequent release of production capacity such as the US expansion project, the company's global share is expected to further increase.

Although Fuyao Glass encountered various setbacks at the beginning of its establishment in the United States, the Fuyao US factory is now continuing to contribute to revenue and profit growth. Even in 2021, when the epidemic was raging, it quickly returned to a state of revenue growth. In 2023, the factory achieved revenue of 5.57 billion yuan, a year-on-year increase of 21.83%, and the net profit margin also steadily increased to 8.87%.

The capital market was once panicked about the experience of its American company, and Fuyao also tried to reassure the market.

On the same day, Fuyao Glass released its performance report, showing that in the first half of 2024, the company achieved a consolidated operating income of 18.34 billion yuan, a year-on-year increase of 22.01%, and realized a net profit attributable to shareholders of 3.499 billion yuan, a year-on-year increase of 23.35%.

As can be seen,Fuyao Glass has set an example for Chinese automotive industry chain companies. In the future, other Chinese automotive parts companies will have the opportunity to achieve greater scale advantages and global competitive advantages of their products in a similar way.

When overseas production bases like Fuyao USA are connected to form an export corps with a complete industrial chain covering raw materials, parts, vehicle manufacturing and software services, Chinese investors will no longer be scared by a "door-to-door investigation".

By then, more German and Japanese auto parts companies will exit the stage of history. This is not because their products are not good enough, but like Hermès harnesses, no matter how exquisitely made they are, they have nothing to do with cars.