Germany at the crossroads

Trends that were thought to be reliable in the long term now need to be reconsidered in the short term and replaced by new changes at short notice. This uncertainty is still the new normal today, and will probably remain so for the unforeseeable future – and managing directors and decision-makers alike will have to come to terms with it. Suppliers seem to be getting better and better at dealing with the situation.

Beginning with the pandemic, the last few years have been a major and seemingly never-ending crisis for automotive suppliers. This was followed by production losses caused by lockdowns and the collapse of global supply chains, astronomical increases in raw materials and energy costs, and the renaissance of the combustion engine, which had already been declared dead. Last but not least, lengthy commercial negotiations with manufacturers with uncertain outcomes were the order of the day. All in all, a tense situation that has presented suppliers with some tough challenges in recent years.

The supplier industry has learned from these years of crisis and there are the first tentative signs that suppliers worldwide are becoming increasingly confident in dealing effectively with short-term changes. Supplier margins are back at pre-crisis levels and revenue growth is also breaking new records – a welcome development, but one that requires a differentiated view.

Asian suppliers in particular have emerged stronger from the crisis, despite some adverse currency effects. Nine of the most profitable suppliers are based either in Japan, South Korea, or China. The same applies to revenue growth. The three fastest-growing suppliers are all located in Asia.

Looking at Germany, the situation is less encouraging. In no other country are more production sites currently being closed than here in Germany. On the other hand, however, German suppliers are opening plants in China, Mexico, and the USA. The facts are both overwhelming and worrying for Germany as a business location, as on average, four times as many sites are closing as new ones are opening. In fact, Germany is currently in the midst of automotive deindustrialization.

Although German suppliers are also benefiting from the slowly emerging recovery, the obvious loser is Germany itself, and therefore also the German plants and business locations. The reasons for this development are well known and have already been the subject of numerous controversial and public discussions. What is needed now is not a renewed public controversy, but an effective change of course towards a stable, long-term European industrial policy. Stability creates trust – and trust encourages investment!