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07-05-2024 | Automotive Industry | Editor´s Pick | News

Gap Between Suppliers and OEMs Grows

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Record sales and slightly more jobs: At first glance, 2023 went well for the automotive industry in Germany. However, a new study also reveals problems.

Despite record sales, the gap between automotive suppliers and manufacturers in Germany has widened further according to a new study. Thanks in part to overcoming production bottlenecks, the industry increased its turnover generated in Germany last year by 10 % to 558 billion euros – more than ever before. This is the result of a recent analysis by the consulting and auditing firm EY. 

However, with growth of 11 %, car manufacturers once again performed better than suppliers, who recorded an increase in turnover of 9 %. The ten-year comparison in particular shows the gap between the two groups: "Since 2014, the turnover of suppliers in Germany has increased by 25 %, while manufacturers have grown more than twice as much – by 59 %", the study said.

Many Suppliers with their Backs to the Wall

EY market expert Constantin Gall said: "At first glance, last year was not bad for the German automotive industry". However, the record sales were also a result of high inflation and a sharp rise in purchasing and material prices. The bottom line is that high energy costs and increased wage costs led to falling margins for many companies. "This is particularly true for suppliers, for whom the air is getting thinner and thinner."

Gall sees many of them with their backs to the wall: "If you want to be fit for the future as a supplier, you have to invest massively in new technologies", he said. However, the ramp-up of electromobility is not gaining momentum and the expected and required quantities are far from being achieved. This is currently costing the industry a lot of money and causing uncertainty. Gall therefore expected further consolidation among suppliers. 

Gap between Suppliers and Manufacturers also in Employment

However, the employment situation in Germany as a car location is hardly expected to improve in 2023. Although the negative trend of recent years was halted, with the number of employees in the industry rising by 0.7 % to around 780,000, employment was still well below the 2018 peak of 834,000. 

The gap between manufacturers and suppliers is also evident here: Employment among the latter fell again in 2023 – by 0.2 %. Manufacturers recorded an increase of 1.2 %. Over the past ten years, the number of employees at suppliers in Germany has therefore fallen by 7.5 %, while the number at manufacturers has risen by 4.3 %.

Forecast: Job Cuts in the Current Year

In view of the many uncertainties, Gall expects a reduction in employment in the current year. "Recently, employment has risen slightly, which is mainly due to the expansion of software expertise", he said. However, the long-term trend is clearly pointing downwards: "Most large companies in the sector are focusing on cost-cutting programs". Artificial intelligence will also ensure that there will be fewer jobs in indirect areas such as IT, HR, marketing, finance and accounting.  

"Companies are therefore increasingly focusing on hiring freezes and the reduction of management levels", said Gall. The ramp-up of e-mobility will inevitably lead to lower employment in Germany. This is due to the fact that the production of e-vehicles is less labor-intensive than that of combustion engines. 

EY evaluated figures from the Federal Statistical Office and the Federal Employment Agency to analyze employment and sales trends. The study focused on companies in Germany with at least 50 employees. 

This is a partly automated translation of this German article by dpa.


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