The automotive supplier industry and strategies out of the crisis

The automotive supplier industry in Germany is facing one of the greatest challenges in its history. The industry, which is traditionally considered the backbone of the German economy, is confronted with a rapidly changing market environment. Factors such as increasing e-mobility, falling sales figures, intensified competition, high energy costs, and import competition from China are putting companies under pressure. In addition, there are regulatory requirements, such as stricter CO2 legislation, as well as challenges due to smaller batch sizes and location difficulties. But how can suppliers counter these problems and position themselves sustainably? A look at current developments shows ways out of the crisis and provides clues as to which strategies are promising.

?The crisis in the automotive supplier industry

?The automotive supply industry has come under pressure from several sides. One of the main reasons is the growing importance of electromobility. The transition from the combustion engine to electric drives means that numerous suppliers that previously specialized in conventional vehicle components are losing their market position. This applies in particular to companies that focus on engine and transmission parts.

?E-mobility: The switch from combustion engines to electric drives is confronting many suppliers with fundamental changes. Companies that traditionally produce parts for combustion engines are seeing their market shares shrink. The demand for battery cells, electronic controls and lightweight materials, on the other hand, is growing.

?Declining sales figures: Another significant factor is the falling sales figures in the automotive industry. Demand for new cars in Europe and other traditional markets is declining, partly due to consumer uncertainty in economically turbulent times and the ongoing trend towards sustainability, which is causing many people to refrain from buying their own car. The entire automotive industry is struggling with declining sales figures. The reasons for this are economic uncertainties, but also the trend towards shared mobility and a lower demand for individual vehicles.

Smaller batch sizes: The trend towards individualized vehicles requires flexibility and the ability to produce smaller batch sizes economically. This puts traditional production processes to the test.

Competition from China: In addition, there is massive competitive pressure from imports from China. Chinese manufacturers are increasingly pushing into the European market and offering products at significantly lower prices. This is facilitated by the increasing shift in global value chains, which is also fueled by the ongoing technology transfer between Western companies and Chinese manufacturers. The increasing quality of products from the Far East is increasing the pressure on European suppliers to rethink their cost structures and become more efficient.

?CO2 legislation: Stricter environmental regulations and the need to reduce CO2 emissions are putting pressure not only on car manufacturers, but also on their suppliers. The development of lower-emission products and processes is essential.

?Location difficulties: High wages, taxes and infrastructure costs make Germany less attractive as a production location. At the same time, energy costs are rising, which further affects competitiveness. These lead to an increase in the cost of production and put further pressure on suppliers' margins.

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Strategies for the future

?Diversification: Many suppliers are focusing on diversifying their product portfolios. Companies such as Bosch and Continental have begun to focus more on electronics, software solutions and alternative powertrains. They are investing in battery technologies, autonomous vehicle systems and mobility services.

?Partnerships and collaborations: Collaboration with start-ups and technology companies can facilitate access to new technologies and markets. Schaeffler, for example, has entered into strategic alliances in the field of e-mobility and autonomous driving in order to benefit from new developments and strengthen its market position.

?Investment in research and development: A strong focus on innovation is crucial. Companies that invest in the development of new technologies can stand out from the competition. ZF Friedrichshafen, for example, has made extensive investments in research into autonomous driving and e-mobility.

Optimisation of production through Industry 4.0: The digitalisation of production processes makes it possible to produce more efficiently and flexibly. With its "Digital Enterprise" program, Siemens has embarked on a path to increase efficiency and make batch sizes more flexible through networked, intelligent production systems.

?Cost efficiency and relocation: In view of high production costs in Germany, many companies are thinking about relocating production facilities. Lower labor costs and tax advantages in Eastern Europe or Asia are decisive here. However, companies should keep an eye on quality and delivery times.

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Examples of successful and failed approaches

?There are numerous successful examples in the industry. To meet these challenges, some companies have already implemented successful strategies. For example, the supplier Schaeffler focused on electromobility at an early stage and expanded its product range to include electric drive components. The company invested heavily in research and development and was thus able to establish itself as an important partner for car manufacturers in the field of e-mobility.

Another successful example is Robert Bosch GmbH, which focuses on diversification. Bosch has positioned itself strongly in the field of mobility solutions and autonomous driving. In addition to automotive technology, the focus is also on other areas such as household appliances and industrial automation. This broad positioning enables the company to better cushion fluctuations in the automotive industry. Continental scores with innovations in the field of tire technology and e-mobility. Both companies rely heavily on research and development and have optimized their production through Industry 4.0 approaches.

However, not all strategies have led to success. Some suppliers are trying to increase their competitiveness by simply saving costs and relocating abroad. However, these approaches often led to a loss of quality and know-how, which ultimately weakened the market position of the companies. Strategies that are implemented too late or not consistently are usually also doomed to failure. Companies that rely on traditional business models for too long run the risk of falling behind. In addition, too much dependence on individual markets or technologies is risky. Companies that are not willing to invest in new technologies and markets often lose competitiveness.

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Tips for developing successful strategies

?Market analysis and flexibility: In order to find a suitable strategy for their own company, suppliers should first carry out a thorough analysis of their current situation and their core competencies. Important questions are: In which areas does the company have special know-how? Which market trends could demand this know-how in the future? A deep understanding of the market and customer needs is crucial. Suppliers should be able to react flexibly to changes and adapt their business models.

At the same time, it is crucial to react flexibly to market changes. Companies should make sure to adapt their production capacities and processes in such a way that even small batch sizes can be produced efficiently. This is particularly important in connection with the increasing demand for individual and tailor-made solutions.

Investment in employees: Qualified specialists are the key to success. The training of the workforce in new technologies and processes should be a priority.

Technological adaptation: Companies should invest in testing and implementing new technologies at an early stage. This can be done through our own research or strategic partnerships. A clear focus on innovative technologies and future-proof markets, such as electromobility or alternative drive technologies, can help to assert oneself in the market in the long term. Cooperation with research institutions and other companies can also promote innovation and shorten development times.

Sustainability: A focus on environmentally friendly production methods and products is not only necessary from a regulatory point of view, but also an important factor in the competition for customers.

Long-term planning: Successful strategies are based on long-term thinking. Short-term cost reductions should not come at the expense of innovation and market adaptation.

Customer focus: Working closely with customers is also beneficial. This enables suppliers to react to changing requirements at an early stage and to develop tailor-made solutions. In addition, the use of digital technologies and the automation of production can help reduce costs while increasing quality.

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Result

The automotive supplier industry in Germany is facing major challenges, but they also offer opportunities. Companies that are willing to change, invest in new technologies and enter into strategic partnerships have the best prospects of emerging stronger from the crisis. The key lies in the combination of innovation, flexibility and a clear market and customer orientation. Companies with a clear vision and flexible strategies that successfully follow this path can continue to play a central role in the global automotive industry in the future.