“Innovation comes from Asia”
German auto suppliers are losing ground to China
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German auto suppliers are losing value, but Chinese competition is getting stronger. The reasons for this are the increased demand for batteries and government investment aid. Experts warn that investments and a greater willingness to take risks are also urgently needed in this country.
According to management consultancy PWC, German auto suppliers are losing ground to their Chinese competitors. “Although they are increasing their spending on research and development, crucial innovations only rarely come from Germany and are increasingly coming from Asia,” say the industry experts. They examined the key figures of 84 large suppliers that generate more than half of their sales in the automotive sector.
According to PWC, the global market share of German suppliers has fallen from 27 to 25 percent since 2020. The share of Chinese suppliers doubled to almost 10 percent. One driver here is demand for batteries. In addition, Chinese suppliers are also investing with government aid despite uncertain sales forecasts, “and are thus laying stakes for the future,” according to the study.
In the past six years they have quadrupled their investments. “As a result, the competition from China is pulling ahead in terms of sales growth – albeit at the expense of capital efficiency,” write the experts. But the “air is getting thinner for German automotive suppliers.”
No willingness to take risks, no innovation
Technological advances, new competitors and volatile political decisions made changes in the industry difficult to predict. “The automobile industry and its extensive supplier network have formed the backbone of the German economy for decades. This finely balanced system is currently beginning to falter,” says study author Henning Rennert.
Although German suppliers increased their research and development spending, they were increasingly unable to score points with important innovations. Instead of investing heavily with the aim of technological leadership, they are too timid, criticize the PWC strategy consultants. The limited access to capital puts them under additional pressure. Smaller companies in particular struggled to obtain refinancing, which was often due in just a few months.
