German Auto Suppliers Grapple with EV Transition Pressures

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German automotive supplier Vitesco Technologies faced skepticism five years ago when proposing a shift to electric vehicle (EV) specialization. CEO Andreas Wolf reflects on the industry’s belated realization.

Industry Turmoil: German Car Giants in Crisis The German car industry, a European powerhouse, grapples with the surge in EV demand. Major players like BMW, Mercedes-Benz, and Volkswagen strive to boost EV sales amid rising competition from Chinese startups.

Suppliers Caught in the Crossfire Germany’s extensive network of automotive suppliers faces compounding challenges, with over 30,000 jobs lost in three years. Economic downturn, inflation, and the EV shift contribute to the woes of companies like Schaeffler and Continental.

Double Spending Dilemma for Suppliers Suppliers face financial strain, simultaneously investing in EVs and sustaining the combustion engine market. A report reveals German suppliers spent a record €16bn on research and development in 2022, impacting profit margins.

Global Impact on Legacy Automotive Suppliers Legacy automotive suppliers globally, dominated by German firms, experience a three percent average shrinkage in margins from 2017 to 2022. Despite holding 25% of the global market share, Germany loses ground to Asian rivals.

The Technological Shift: From Engines to Software German car models now emphasize software capabilities, marking a significant departure. While the global number of car suppliers rises, Germany’s market share diminishes as Chinese counterparts excel in batteries, semiconductors, and software.

Winners and Losers in the Changing Landscape Modern suppliers in Asia, specializing in batteries, semiconductors, and automotive software, outshine legacy players. The industry sees a shift in winners and losers, as China and the US gain prominence in the market.

Schaeffler-Vitesco Merger: Navigating the Future The merger between Schaeffler and Vitesco promises synergies of €600mn annually. Positioned to serve the growing EV market, the combined group aims to provide spare parts for existing combustion engine cars.

Navigating Choppy Waters: Industry Transformations Vitesco’s CEO, Wolf, reflects on their early transition while many rivals embark on uncertain journeys. The industry faces a critical question: Can it transition swiftly enough to electrification, or does sentiment still linger for combustion engines?

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