Study on electric cars: German suppliers face major changes

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While the general public is still discussing here and there whether a switch to battery-electric drives might make sense, this debate in the industry has already come to an end. The internal combustion engine is now equipped with significantly fewer development resources in many places than was the case a few years ago.

For car manufacturers this means a financial feat, for some suppliers the end of gasoline and diesel engines in their previous form is likely to come to an end. Because the margins there are lower than at the car manufacturers. At the same time, enormous sums of money have to be invested in research and development, which it may take a few years to refinance.

From the point of view of some experts, German industry has to be careful not to be left behind on the world market. According to a study by the management consultancy PwC, Asian automotive suppliers were able to increase their share of the world market to 43 percent last year. Declines in sales would have consumed important equity reserves at German suppliers, which are urgently needed for the transformation, said industry expert Henning Rennert. According to PwC, 80 top international supplier companies were examined for the study. The suppliers’ key financial figures were included in the analysis. The study period covers the years 2010 to 2020.

The sales of the world’s 80 largest auto suppliers fell according to information from PwC Strategy& in the crisis year 2020 by twelve percent to 783 billion euros, the German by 11 percent to 199 billion. The world market share of Robert Bosch, Continental, ZF Friedrichshafen and Co. is still high at 26 percent, but competition with competitors in Asia is getting tougher. During the crisis, they achieved the highest profitability with an operating profit of 4.4 percent and kept their equity ratio at 48 percent. For German suppliers it fell to 21 percent.

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On average, German suppliers invest 6.1 percent of their sales in research and development (R&D) – far more than their competitors in the rest of Europe (4.8 percent), America (3.6 percent) and Asia (3.8 percent). In an industry survey by the German Association of the Automotive Industry (VDA) and the Deloitte business consultancy, the companies surveyed stated that they invested as much as 15 percent of their total sales in innovations in the field of electromobility. Most of the companies surveyed in the spring of this year assume that the combustion engine will be completely pushed off the road between 2023 and 2040. They anticipate that battery vehicles will have established themselves as the new technology standard by 2030.

Other experts, however, fear that European and German suppliers have lost sight of their competitive cost structure for a decade. That could “become an expensive mortgage in global competition,” said study author Rennert. The latest takeover on the supplier market only became known at the weekend: The company Hella, based in Lippstadt, which has been up for sale for a few months, is going to the French competitor Faurecia.

The completion of the takeover of Hella is expected in early 2022. Faurecia does not want to guarantee jobs – however, there are no specific plans for job cuts, according to the company. “We are growing very strongly. We will have to hire people,” said Faurecia boss Patrick Koller. The new company will be the seventh largest automotive supplier globally (top 5 in Europe and top 10 in America and Asia) and will significantly strengthen its profile in terms of business activities and customer access, the new owner announced. Size is very important in the supplier business as it strengthens the negotiating position with automakers. The German groups Bosch, Continental and ZF Friedrichshafen are among the largest automotive suppliers in the world.


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