The importance of suppliers for the automotive industry is often underestimated, although a significant part of the added value is generated there. This also applies to development and research, because car manufacturers have been outsourcing parts for decades. Bosch and Continental have been known for decades, industry giants such as Mahle or Schaeffler should only be known to those who have dealt with the topic in more detail.
They are all not only major employers, but also an important part of German industry. They are currently falling behind in international competition and are losing market share. This is the conclusion reached by an analysis by management consultancy PwC. For the evaluation of this study, the key balance sheet figures of the 82 top 100 suppliers with more than 50 percent automotive sales were analyzed.
Declining profit margin
Accordingly, German suppliers lost market share to their competitors last year. With an average growth rate of 13 percent, “they bring up the rear globally, far behind the rest of Europe (21 percent), Asia (23 percent) and America (25 percent)”, according to the PwC analysis. They also came last in terms of profit margin. The opponents on the world market have left the economic consequences of the corona pandemic behind them more quickly.
Since 2019, German automotive suppliers have lost 2.7 percentage points of world market share – “as much as they were previously able to laboriously gain in 20 years,” wrote the industry experts. In the race for future technologies and future profits, Asian competitors are in a strong position. Two South Korean battery manufacturers made it into the top 30 right away, the Chinese battery manufacturer CATL is already in second place in the ranking, ahead of the Japanese supplier Denso, Hyundai Mobis and ZF Friedrichshafen. Robert Bosch maintained the top spot.
Investments higher than ever
Worldwide, the industry is building on the successful times before the past crises in terms of sales. But because they could hardly pass the increased costs on to the automakers, margins fell. In terms of profit share from sales before interest and taxes (EBIT margin), the German suppliers came in last place in the PwC comparison with 3.9 percent. At almost 16 billion euros, they are “investing more than ever in research and development” and are therefore also at the top in absolute terms.
“In order for these investments to bear fruit, however, they should gear their technology development even more closely to market needs and the competitive situation, instead of chasing long-established trends such as in the battery business,” says study author Henning Rennert. In order to “catch up, the former top dogs have to drive real innovations again, achieve economies of scale and quickly develop new growth strategies.”
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