In the realm of automotive manufacturing, German car providers are encountering increasing competition from China.
As per the analysis done by PwC, German automotive suppliers are losing their grip in the market to their Chinese competitors. Despite boosting their investment in research and development, significant innovations are now more frequent from Asia rather than Germany. Analyzing the key figures of 84 significant suppliers, generating over half their revenue from the automotive sector, PwC found out that the global market share of German suppliers decreased from 27% to 25% since 2020, while the share of Chinese suppliers nearly doubled to almost 10%.
The surging demand for batteries and heavy Chinese investment subsidies are contributing factors to this shift. Chinese suppliers are even making substantial investments despite uncertain sales prospects, as referred to in the study. Over the past six years, they have quadrupled their investments, leading to a notable revenue growth advantage, though at the cost of lower capital efficiency. The experts believe that the competition is becoming tougher for German automotive suppliers.
Lack of Risk Appetite, Lack of Innovation
The applied technological advancements, new competitors, and volatile political decisions have made it hard to forecast the industry's future. Study author Henning Rennert remarks, "The automotive industry, with its extensive supplier network, has been the backbone of the German economy for decades. Currently, this well-balanced system is showing signs of instability."
Despite enhancing their research and development spending, German suppliers are struggling to keep up with crucial innovations. Instead of making substantial investments aiming for technological leadership, they tend to play it safe, according to PwC's strategy consultants. The limited access to capital adds to their pressure, especially smaller companies that cope with the looming refinancing within a few months.
The Commission, likely referring to regulatory bodies or organizations, is currently examining the competitive landscape of the automotive industry in light of the shifting market dynamics. Due to the lack of risk appetite and innovation among German suppliers, The Commission is concerned about their ability to maintain their position against the rapidly advancing Chinese competitors.
