title: German Auto Suppliers Struggle to Keep Pace as Asian Competitors Pull Ahead: An Unforesen Market Shift
Asian automotive manufacturers deemed relentless, posing significant challenge to competition in global market.
The automotive industry is in a distressing situation, and it's not just the auto-makers feeling the pressure but also their suppliers. A survey shows two-thirds of German automotive supply industry companies anticipate a market consolidation within the next two years—meaning suppliers disappearing from the market.
This pessimistic outlook is courtesy of Baker Tilly, a consulting and auditing firm, which surveyed executive leaders from German automotive suppliers. An alarming 67 percent of respondents predict fewer competitors in two years, with only 20 percent expecting fresh providers, primarily hailing from China.
The competition from Asia is seen as the biggest challenge, with more than half (51 percent) of respondents attributing an "uncatchable lead in key technologies" to Asian companies.
The industry's overall assessment is grim: 79 percent describe it as "rather bad" or even "very bad." However, respondents were more optimistic about their own companies, with 78 percent describing their situation as "rather good" or even "very good."
Despite the challenges, many German suppliers believe their business model is largely independent of the shift in drive technology, thanks to the parts they manufacture being essential in both electric and internal combustion engine vehicles. Relocations abroad play a minor role, with only 17 percent of respondents considering it necessary to maintain competitiveness.
However, several factors make Asian—especially Chinese—companies more agile and competitive:
- Faster Innovation and Electrification: Asian manufacturers enjoy a competitive edge thanks to their innovative approach, particularly in electric vehicle (EV) technology. Their models cater to current market demands, including strong preferences for EVs in China and other growth markets.
- Strong Domestic Market and Government Support: Chinese automakers benefit from robust domestic demand and significant government support, which enables rapid scaling and cost reductions.
- More Flexible and Resilient Supply Chains: Asian suppliers have developed more flexible and vertically integrated supply chains, making them less vulnerable to global disruptions and geopolitical tensions.
- Cost Leadership and Affordability: Asian companies produce vehicles that are less expensive to buy and operate, making them appealing to cost-conscious consumers.
- Rapid Adaptation and Automation: Asian companies show a remarkable ability to adapt and automate production, leading to higher efficiency and lower labor costs.
- Global Trade Policy Uncertainty: Uncertainty around US tariffs and other protectionist measures weakens German suppliers' confidence and export prospects, further exacerbating their vulnerabilities.
In essence, Asian—and especially Chinese—manufacturers have pulled ahead due to their rapid innovation in electrification, strong domestic support, resilient supply chains, cost leadership, and better adaptation to global demand shifts. Meanwhile, German suppliers are grappling with slow adaptation, reliance on globalized production, rising costs, and uncertainty from protectionist trade policies. This divide seems to create an "uncatchable lead" for Asian competitors in the evolving market.
- In response to the challenging market shifts, German suppliers are considering revising their community policy to include vocational training programs aimed at fostering innovation and technological advancement within their businesses, similar to Asian competitors.
- To ensure long-term financial stability and competitiveness, some German auto suppliers are exploring partnerships or mergers with organizations providing vocational training, focusing on areas like electrification and automation, vital for maintaining pace in the business landscape.
