According to a study, the gap between suppliers and automakers continues to widen.
Despite record revenues, the gap between automotive suppliers and manufacturers in Germany has continued to widen, according to a new study. Thanks to overcoming production bottlenecks, the industry increased its domestically generated revenues last year by ten percent to 558 billion euros—more than ever before. This is shown by a current analysis by the consulting and auditing firm Ernst & Young (EY).
The automakers, however, performed better with an eleven percent growth compared to suppliers, who recorded a revenue increase of nine percent. Especially a ten-year comparison shows the gap between the two groups: “Since 2014, the revenue of suppliers in Germany has increased by 25 percent, while manufacturers have grown more than twice as much—by 59 percent,” according to the study.
EY Expert: Many Suppliers with Their Backs Against the Wall
EY market expert Constantin Gall stated, “At first glance, last year was not bad for the German automotive industry.” The record revenues, however, were also a result of high inflation and significantly increased purchase and material costs. Ultimately, high energy and rising labor costs led to a declining margin for many companies. This applies especially to the suppliers, “for whom the situation is becoming increasingly precarious.”
Many of them are with their backs against the wall, according to Gall: Suppliers who want to be sustainable must invest massively in new technologies. However, the ramp-up of electromobility is not gaining momentum, and the expected and needed quantities are far from being achieved. This currently costs the industry a lot of money and creates uncertainty. Gall therefore expects further consolidation among suppliers.
Gap Between Suppliers and Manufacturers Also Evident in Employment
According to the information, the employment situation at the automotive location Germany has hardly improved in 2023. Although the negative trend of recent years has been halted, the number of employees in the industry increased by 0.7 percent to about 780,000. However, employment stayed significantly below the peak of 834,000 from the year 2018.
The gap between manufacturers and suppliers is also evident here: Among the latter, employment decreased again in 2023—by 0.2 percent. Manufacturers saw an increase of 1.2 percent. In the past ten years, the number of employees among suppliers in Germany has decreased by 7.5 percent, while it has increased by 4.3 percent among manufacturers.
Forecast: Job Reductions in the Current Year
In light of many uncertainties, Gall expects a reduction in employment in the current year. “Recently employment has slightly increased, mainly due to the build-up of software competencies,” he reported. However, the long-term trend clearly points downward: “Most of the major companies in the industry are pursuing cost reduction programs.” Additionally, artificial intelligence will ensure that there will be fewer jobs in indirect areas such as IT, human resources, marketing, as well as finance and accounting. Companies are increasingly resorting to hiring freezes and the reduction of management levels, according to Gall. The ramp-up of E-mobility will inevitably lead to lower employment in Germany. This is because the manufacture of electric vehicles is less labor-intensive than that of internal combustion engines.
For the analysis of employment and revenue development, EY evaluated figures from the Federal Statistical Office and the Federal Employment Agency. The study focused on companies in Germany with at least 50 employees.
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