German automotive suppliers are losing market share to Chinese competitors, according to a PwC study. The shift is largely driven by the growing demand for electric vehicle components and batteries.
A recent study by consulting firm PwC reveals that German automotive suppliers are losing ground to their Chinese counterparts in the global market. The analysis, which examined key figures from 84 large suppliers generating more than half of their revenue in the automotive sector, shows that the global market share of German suppliers has dropped from 27% to 25% since 2020. In contrast, Chinese suppliers have doubled their share to nearly 10% during the same period.
The shift is primarily attributed to the increasing demand for batteries and other components related to electric vehicles. PwC industry experts note, “Although they are increasing their spending on research and development, crucial innovations are rarely coming from Germany and increasingly from Asia.”
Chinese investment and government support
The study highlights that Chinese suppliers are making significant investments in the industry, often with government support, despite uncertain sales forecasts. This strategy allows them to “stake their claim for the future,” as stated in the report. Over the past six years, Chinese suppliers have quadrupled their investments.
As a result, “Chinese competition is pulling away in terms of revenue growth – albeit at the expense of capital efficiency,” the experts write. They warn that “the air is getting thinner for German automotive suppliers.”
Challenges and need for greater risk-taking
The automotive industry of Germany is facing unprecedented challenges due to technological leaps, new competitors, and volatile political decisions, making the transformation in the sector difficult to predict. Henning Rennert, the study’s author, states, “The automotive industry and its extensive supplier network have formed the backbone of the German economy for decades. Currently, this finely balanced system is becoming unstable.”
While German suppliers have increased their research and development spending, they are increasingly struggling to score points with important innovations. The PwC strategy consultants criticize German suppliers for being too cautious instead of investing heavily with the goal of technological leadership.
Financial constraints and future outlook
Limited access to capital is putting additional pressure on German suppliers. Smaller companies, in particular, are struggling with refinancing, which is often due within just a few months.
The study suggests that German automotive suppliers need to adopt a more risk-taking approach and increase their investments in innovative technologies to maintain their competitive edge in the global market. Without significant changes, the longstanding dominance of German suppliers in the automotive industry may continue to erode in favor of their Chinese counterparts.
