Text | Little Lou Fish
Edit | Yang Xuran
Germany's automotive industry seems to be experiencing its toughest moment since the pandemic, not so badly by the decline in BBA sales, but by an unprecedented wave of bankruptcies among its auto parts suppliers.
According to the consulting firm Falkensteg, 20 auto parts suppliers with annual revenues of more than 10 million euros have filed for bankruptcy, a 60 percent surge year-on-year.
Earlier, the wave of layoffs had already spread among Germany's leading auto parts suppliers. At the beginning of this year, both the Bosch Group and ZF announced plans to reduce their workforce in Germany, and tens of thousands of jobs will be eliminated in the next few years.
Weak demand is seen as the root cause of the difficulties faced by Germany's automotive suppliers. But if you combine this with the news that BBA has recently pulled out of the price war in the Chinese auto market, it is not difficult to find that the old order of the mid-to-high-end auto market, once dominated by Germany companies, is collapsing.
Competition from Chinese companies may be imminent, but the more insidious crisis lies within Germany and the EU.
Thirty years ago, Germany's automotive industry achieved unprecedented prosperity thanks to the wave of globalization, especially the rise of developing markets represented by China. With the automobile as the pillar industry, the whole of Germany has also completed economic recovery and social welfare improvement.
However, when Germany and Europe began to frequently concoct various anti-dumping and countervailing laws to restrict the development of Chinese enterprises and restrict the entry of Chinese goods in various ways, did they not imagine that they would eventually bear the consequences of these anti-globalization measures?
01 Backwards
In 2023, Germany's economy will surpass Japan in the world economic ranking and become the world's third largest economy. But Germany's gross domestic product (GDP) actually fell that year: by 0.5% compared to 2022, the industrial production index fell by about 1.2%, and the unemployment rate rose from 2.9% to 3.1%.
Although both the IMF and the Germany government have shown sufficient optimism in forecasting their economic trends this year, with the release of various economic indicators in the first half of the year, the question of the dynamics of Germany's economic growth can no longer be ignored.
On the one hand, the eurozone as a whole is recovering less than expected. On July 24, data released by S&P Global and Commerzbank Hamburg showed that the preliminary composite PMI in the Eurozone fell to 50.1 in July from 50.9, the lowest reading since February this year and lower than the expected 51.1.
On the other hand, Germany's economy is lagging behind the eurozone as a whole. The latest Germany composite PMI fell sharply to 48.7 from 50.4 in the previous month, while the manufacturing PMI was only 42.6, back near the lows of the pandemic, and Germany's output fell for the first time in four months.
From a structural point of view, whether it is Germany or the euro area, the performance of economic sectors is clearly differentiated, the service sector continues to strengthen, but the manufacturing industry continues to be under pressure, and the increase in orders in the service sector cannot make up for the decline in manufacturing orders.
This sluggish manufacturing order volume is also in line with the decline in Germany's exports to third countries. According to Trading Economics, Germany's exports grew by 1.6% month-on-month in April, but fell by -3.6% in May. By June, Germany's exports to third countries (non-EU countries) continued to decline, with exports down 2.6% month-on-month and almost 9% year-on-year.
At a time when trade protectionism and anti-globalization are on the rise, Germany can no longer count on exporting to stimulate economic growth, as it has done in the past. And Germany's economy has always been highly dependent on foreign countries, and it can even be said that Germany's entire "business model" is based on global free trade.
For Germany, the upheavals in Eastern Europe, the collapse of the Soviet Union, the establishment of the European Union and other important historical nodes in recent history have almost all been favorable to its industrial and economic development - these factors have brought Germany a large number of new markets, as well as enough cheap resources and labor.
What's more, at that time, the United States had not yet swung the scythe of monetary harvesting to Europe.
Now Germany has not only lost the cheap energy delivered by the Nord Stream pipelines, domestic factories have encountered production difficulties due to power problems, but also has to see a large outflow of domestic capital.
In 2023, Germany companies announced a record $15.7 billion in capital commitments to United States projects, nearly double the previous year's $8.2 billion, corresponding to 185 investment and construction projects in the United States, of which 73 were manufacturing projects.
Wherever capital flows out, jobs are reduced, and it is no wonder that the outlook for Germany's labor market is not clear. However, looking at what Germany and the EU have done in this round of deglobalization, it is not innocent.
Taking Chinese electric vehicles as an example, the EU plans to impose separate tariffs of 17.4%, 20% and 38.1% respectively on BYD, Geely and SAIC from July 4, with other companies cooperating with the survey being subject to a weighted average tariff of 21% and those not cooperating with the survey being subject to a residual tariff of 38.1%.
But protectionism and populism are Pandora's box, and those who open it often have no guarantee of how they will be affected, or when or where they will be able to close it again.
02 Status
In fact, countries that have "self-confidence" to take the lead in engaging in trade protectionism should rely on the fact that their own market demand is large enough, and that other countries' demand for their own goods is strong enough. However, when the competitive landscape and industry order change, this kind of "self-confidence" is easy to become "general trust".
In the past, automobiles and parts, machinery and equipment, and electrical products have always been the dominant categories in Germany's foreign trade, and behind these industries are strong German car brands. When Mercedes-Benz, BMW, Audi, Porsche, and Volkswagen gain market share overseas, their preferred Germany suppliers are naturally very confident.
In the list of the top 100 global auto parts suppliers in 2020 released by the United States automotive media Automotive News, Germany's five major parts giants all ranked in the top 20 on the list, fully demonstrating the outstanding position of Germany's auto parts industry in the world.
In the list of the top 100 global auto parts suppliers in 2024, although the performance of Germany companies has not pulled their hips, the progress of Chinese companies is more eye-catching. The total number of Chinese companies on the list is 15, a record high, and none of the Chinese companies on the list have regressed.
Desay SV and Ningbo Tuopu have made great progress, advancing 15 and 13 places respectively, while CATL is firmly in the top five on the list, reflecting the steady improvement of the global market competitiveness of Chinese auto parts suppliers, and also reflecting the rapid changes in the automotive supply chain in the era of electrification, and the competition between new and old forces has become more and more intense.
More striking alternating between the old and the new are taking place in the field of vehicles. BBA was first coerced by the menacing Chinese auto brands to participate in the price war, and after finding that the price reduction could not guarantee the quantity, it pinned its hopes on price increases to protect the brand image and profit margins, and finally caused many consumers to be dissatisfied.
In business competition, there has never been a retreat, not to mention that before the strong rise of electric vehicles, Germany failed to grasp the development of the information industry, which has laid hidden dangers for today's automotive zero industry.
Only 26% of households in Germany's fiber optic network will be connected in 2022 (even 10% in the capital Berlin), and the IT talent gap in Germany will reach 149,000 in 2023, and 70% of companies say there is a serious shortage of IT talent.
Through these appearances, it is not difficult to understand why Germany has not given birth to a well-known Internet technology company, and why it has been so slow to respond in the historical process of digitalization and intelligence. This lack of industry since the era of the IT wave has also directly caused the backwardness of German car intelligence, especially in the intelligent voice system and human-computer interaction experience, which can no longer meet the needs of Chinese consumers.
Although European and American consumers are not as concerned about intelligence as Chinese consumers, it is difficult to imagine that after the large-scale popularization of L3-L4 autonomous driving, the slow intelligent BBA will be able to be regarded as high-end in terms of technical content and driving experience.
Germany's automotive giants have been alarmed, Bosch has established the Intelligent Driving and Control Systems Division, adjusted and restructured the automotive and intelligent transportation technology business, Continental will reorganize its smart mobility business area, and even the semiconductor supplier Infineon will focus on digitalization in the automotive field to bring new profit growth.
The giants still have the strength to adjust, reorganize, and seek transformation, and those small and medium-sized automobile manufacturers that can only manufacture a single traditional mechanical component can only face a more cruel knockout.
03 Revelation
If a country wants to cultivate a strong industry, it cannot be the only one that is strong.
In the era of fuel vehicle domination, Germany has not only world-famous vehicle manufacturers, but also many excellent parts suppliers, raw material suppliers, R&D service providers, and a first-class engineering and technical education system, forming a highly coordinated industrial ecology, which other countries cannot match.
When German automobiles are selling well all over the world, it is also a time for Germany automobile, automobile, machinery, and electrical companies to expand overseas.
At present, China's auto industry has basically completed the overall localization of large-scale production. On this basis, China can realize the internationalization of the entire automotive industry chain from production to sales, just like Germany did in the past.
This process can be divided into three stages, export is the first step, mainly part of the export of domestically made vehicles and parts, and the product type is mainly in the low-end market.
Going overseas is the second step, exporting more cost-effective and competitive smart electric vehicle brands, as well as supporting sales channels, after-sales service, charging and swapping and other supporting operation facilities, and starting to build overseas production capacity in some areas with strong demand.
From export to going to sea, in order to form a new energy industry chain overseas as soon as possible under the uncertainty of free trade around the world, and then rely on the technical capabilities of independent new energy vehicles to reduce dimensionality and accelerate the seizure of global market share.
After all, the price war of automobiles cannot be fought endlessly, and when the price war enters a relatively stable state, the competition for market share will rely more on capital operation and industrial chain coordination. For an old player like Fuyao Glass, the lessons learned from other Chinese enterprises are worth learning from.
Looking at the global automotive glass market, the major players are in a state of low expansion intentions, only Fuyao Glass's capital expenditure is currently at a high level, and the company is entering the third round of capital expenditure cycle, with high enthusiasm for expansion. This has become a representative of the evolution of the global automotive industry chain pattern.
Fuyao Glass is currently the only player in the global automotive glass company that has maintained a stable increase in market share, and its global share has continued to increase from 2.6% in 2001 to 30.1% in 2023. With the subsequent release of production capacity such as expansion projects in the United States, the company's global share is expected to further increase.
Although Fuyao Glass encountered various difficulties at the beginning of the construction of the factory in the United States, now the Fuyao United States factory is continuing to contribute revenue and profit increment. Even in 2021, when the epidemic was raging, it quickly returned to revenue growth, and in 2023, the factory achieved revenue of 5.57 billion yuan, a year-on-year increase of 21.83%, and the net profit margin also steadily increased to 8.87%.
The capital market was once panicking about what happened to its United States companies, and Fuyao also tried to reassure the market.
On the same day, Fuyao Glass released a performance report, in the first half of 2024, the company's consolidated operating income was 18.34 billion yuan, a year-on-year increase of 22.01%, and the net profit attributable to the parent company was 3.499 billion yuan, a year-on-year increase of 23.35%.
It can be seen that Fuyao Glass has set an example for China's auto industry chain enterprises, and other Chinese auto parts companies will have the opportunity to achieve greater scale advantages in a similar way, as well as the competitive advantages of their products in the world.
When overseas production bases like Fuyao United States are connected by dots to form a whole industry chain covering raw materials, parts, vehicle manufacturing and software services, Chinese investors will no longer be frightened by a "door-to-door investigation".
At that time, more auto parts companies from Germany and Japan will withdraw from the stage of history. It's not that their products aren't good enough, but like Hermès harnesses, no matter how beautifully made, they have nothing to do with cars.