German Car Suppliers Navigate EV Transition Challenges

German automotive suppliers face challenges in transitioning to EVs, with job cuts and investment dilemmas amid a shifting market.

How are German car suppliers adapting to the EV shift?

German automotive suppliers are facing a challenging transition to electric vehicles (EVs), with significant impacts on the industry's workforce and financial stability.

The Shift To Electric Vehicles

The transition to EVs has been slow for traditional automotive companies like BMW, Mercedes-Benz, and Volkswagen. Meanwhile, Chinese startups are increasingly announcing electric model launches in Europe. This shift has added pressure on Germany’s automotive suppliers, who are already grappling with economic downturns and rising costs. In the three years leading up to 2023, the number of German tier-one suppliers dropped from just under 700 to about 615, with a loss of over 30,000 jobs.

Investment Dilemmas And Job Cuts

Companies are caught in a dilemma of investing in both EVs and combustion engine vehicles, leading to reduced profit margins. In 2022, German suppliers spent a record €16 billion on research and development. Despite this, firms like Bosch and ZF Friedrichshafen have announced significant job cuts, totaling up to 13,200 positions. Suppliers face the challenge of "double spending on double platforms" while struggling to grow profits, as noted by Christian Kames of Lazard.

Audi PB18 e-tron
Unless it's an Audi PB18 e-tron, Germans on average don't like electric cars.

Market Dynamics And Strategies

German suppliers, holding 25% of the global market share, have seen a decline due to competition from Asian rivals. The focus on software capabilities in new car models marks a shift from traditional German strengths. Suppliers like Vitesco Technologies, which invested early in EVs, still find their electrification technologies divisions unprofitable. However, Vitesco CEO Andreas Wolf anticipates profit margins of 7 to 9 percent in the coming years.

Future Outlook And Industry Adaptation

With the merger of Schaeffler and Vitesco, synergies of €600 million annually are expected, allowing investments in both EV and combustion engine technologies. The combined group aims to cater to the EV market while also serving the existing combustion engine market. German suppliers are adapting to the changing landscape, with some like Vitesco nearing the end of their transformation journey, while others are just beginning to navigate the shift towards electrification.

Subscribe to our newsletter and follow us on X/Twitter.

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to REX Wire.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.