International Observation | Germany's automotive supply chain transformation faces multiple challenges
2024-08-16
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Xinhua News Agency, Berlin, August 15 (Reporter Li Hanlin) Germany is a traditional powerhouse in the automotive industry, with a century-old history of automobile design and production and a complete industrial supply chain. However, in recent years, as the trend of automobile new energy transformation has accelerated, Germany's "old master" in car manufacturing has encountered new problems. Many traditional auto parts manufacturers have recently encountered operating difficulties, and the supply chain that was once proud of is no longer prosperous, reflecting that the road to electrification transformation of German cars faces multiple challenges.
People visit the Porsche exhibition area in the city public display area of the Munich International Motor Show in Germany on September 8, 2023. Photo by Xinhua News Agency reporter Zhang FanGerman car seat manufacturer Recaro recently filed for bankruptcy. The company, which once produced seats for well-known car brands such as BMW, Mercedes-Benz and Lamborghini, has become the latest example of the operating difficulties of many German auto parts companies.
According to data from German consulting firm Falkensteeg Holding, a total of 20 German auto parts suppliers with annual revenues exceeding 10 million euros filed for bankruptcy in the first half of 2024, a surge of more than 60% year-on-year. In order to reduce costs and increase efficiency, some companies have had to lay off employees or close non-core businesses.
Analysts said that the operating difficulties of parts manufacturers are due to the weak economy and the continuous reduction of domestic production, which has led to a decline in demand. On the other hand, the wave of new energy vehicle transformation has also had a great impact on the traditional supply chain. The German Automotive Research Center said that German auto parts companies facing operating pressure are mainly concentrated in the field of internal combustion engines.
Compared with traditional fuel vehicles, electric vehicles require significantly fewer parts. Frank Schwope, an automotive expert at the University of Applied Sciences Hannover, Germany, predicts that by 2030, the number of jobs in the German automotive supply chain will be reduced from the current 270,000 to 200,000, weakening the influence of the German automotive industry.
The new energy revolution has brought a huge impact, and the road to electrification of German cars has not been smooth. Mercedes-Benz announced at the beginning of the year that it would postpone its goal of 50% electric vehicle sales from 2025 to 2030; Porsche announced that it would abandon its goal of 80% electric vehicle sales in 2030; Volkswagen Group is also considering closing the Audi Q8 e-tron electric vehicle factory in Belgium.
On September 5, 2023, in Munich, Germany, people took pictures of a Porsche exhibition car at the German International Automobile and Smart Mobility Expo. Photo by Xinhua News Agency reporter Zhang FanAt the same time, the German federal government announced in December 2023 that it would terminate subsidies for electric vehicles ahead of schedule, which exacerbated consumers' wait-and-see attitude. According to data from the German Federal Motor Transport Administration, the number of new electric vehicle registrations in July fell 36.8% year-on-year; the market share of newly registered electric vehicles in Germany in the first half of the year fell from 15.8% in the same period last year to 12.5%.
In view of the changes in market demand, many vehicle manufacturers have slowed down the electrification process this year and continued to cancel or postpone orders, which has further aggravated the operating difficulties of spare parts suppliers. Despite this, some leading German auto parts companies still maintain an active attitude to respond to the challenges of transformation. For example, Bosch plans to launch about 30 electric vehicle-related projects this year; Continental plans to split off its core automotive division and seek an independent listing; chip manufacturer Infineon focuses on automotive digitalization and looks for new profit growth points.
"The current market situation is not good, resulting in the idleness of some of our electric transmission production lines, which we invested heavily in," said ZF CEO Koch. "But it is certain that the future of the automotive industry belongs to electric vehicles. The company has actively invested in this field and will continue to invest heavily."
Schwope also believes that German auto parts manufacturers need to adjust their strategies as soon as possible to adapt to the new competitive landscape. Small companies with limited funds can cooperate with large companies to obtain technical support through technology transfer or joint research and development, while large manufacturers need to use their scale and R&D advantages to explore new growth paths.
