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In recent months, the German automotive supply sector has found itself at a critical juncture, with significant concerns regarding potential deindustrialization. The IG Metall union has voiced alarm over the situation, indicating that many companies are grappling with strategic missteps and political uncertainties.
Jörg Köhlinger, the head of IG Metall's Central District, which includes Hessen, Rheinland-Pfalz, Saarland, and Thüringen, noted the precarious state of the industry. Approximately 70% of firms in the metal and electrical sectors are heavily reliant on traditional combustion engine technology. However, automakers have been scaling back their operations due to a combination of factors, including the ongoing shift to electric mobility and a persistent slump in demand for conventional vehicles.
The situation in the Central District is particularly alarming. Köhlinger pointed out that both automobile manufacturers and suppliers have failed to adequately adapt their strategies. The industry has long underestimated the importance of investing in electric mobility technologies, resulting in a troubling dependence on Asian manufacturers for battery cells.
Adding to the challenges, the recent reduction in affordable natural gas supply has created a significant competitive disadvantage for medium-sized auto suppliers. According to Köhlinger, this situation has placed many such firms in a vulnerable position. Political decisions, such as abruptly ending subsidies for electric mobility, have exacerbated the decline in demand for new electric products, leaving many companies struggling to find customers for their new offerings.
Moreover, the unpredictable trade policies of former U.S. President Trump, including tariffs against China, Mexico, and Canada, pose additional risks for German suppliers. The industry's global supply chain means that even small localized firms could be adversely affected by such policies.
Industry expert Ferdinand Dudenhöffer painted a bleak picture of the future, attributing the crisis to high energy costs and a lack of coherent political strategy. He emphasized that smaller enterprises are facing the most severe challenges, with high labor costs and limited financial resources compounding the difficulties. Uncertainties regarding potential changes to EU emissions regulations further complicate the outlook.
The KfW Development Bank recently reported a significant decline in credit demand among small and medium-sized enterprises, reflecting a general reluctance to commit to long-term financial agreements due to pessimistic business forecasts. Many firms are facing stringent lending conditions from banks, which are growing increasingly wary of potential loan defaults.
As job cuts loom across the sector, Köhlinger stressed the urgent need for both industry and government to invest in the transition to new technologies. He warned that any perception that the transformation to electric mobility is unnecessary could lead to reduced investments, ultimately harming competitiveness and employment.
Dudenhöffer argues that the future of many suppliers hinges on forging partnerships with Chinese companies. The balance of power in the automotive sector has shifted, with Chinese manufacturers now leading in critical areas such as software, electronics, and battery production. For many mid-sized firms, establishing collaborations with Chinese counterparts may be essential for survival.
For instance, a foundry in Central Hesse that has traditionally produced transmission housings might find it beneficial to pivot towards pressure die-casting for larger body components, a sector where Chinese interest is burgeoning. This adaptability could be vital for maintaining relevance in a rapidly evolving market.
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