【By Liu Bai, Observers Network】"Chinese automotive parts are flooding the German market at low prices, putting great pressure on the German supply chain."
Bloomberg reported on November 27 that due to Chinese products rapidly capturing market share in areas such as electrical systems and forged metal parts, and with their quality improving, leading automotive industry giants such as Bosch, Mahle, and PWO have been severely impacted. This trend "is shaking the core of German industry." Industry associations warned that without decisive measures, the European parts manufacturing sector may face the risk of companies relocating or going bankrupt, with some German companies calling on the EU to consider requiring foreign manufacturers to carry out some production locally in Europe.
The report cited local labor organizations' statements, saying that the influx of low-cost Chinese auto suppliers has further pressured domestic manufacturers already facing weak demand and rising costs. In the past, German companies could still compete with their quality advantage, but now China's industrial upgrading is rapidly narrowing this gap.
Andreas Bonat, chairman of the labor committee at PWO, which mainly produces steering columns and other precision metal parts, said: "Chinese automotive parts are flooding the German market at an astonishing speed. And we must admit that the quality level is quite good; the Chinese have indeed put in a lot of effort."
On October 21, Bamberg, Germany, the factory campus of Bosch in Bamberg IC Photo
The report describes the squeeze on the German supplier system as reflecting the growing competitiveness of Chinese industry, a situation that is shaking the core of German industry. China was once an important driver of sales and profits for German car manufacturers, but is now increasingly becoming a formidable competitor. Since the pandemic, the import of Chinese cars and parts into Germany has surged, with companies like BYD and CATL already dominating the electric vehicle and battery sectors.
This shift is profoundly affecting the supply chain landscape. Executive officers stated that the acceleration of low-cost Chinese parts imports is compressing profit margins, eroding order volumes, and testing the resilience of supply chains already under pressure from the transition to electric vehicles and a long-term market slump. Many companies have begun to cut production and lay off workers.
New data has intensified these concerns. An analysis released last week by the Cologne Institute for Economic Research showed a significant increase in Chinese exports in multiple parts categories, with the import volume of parts for internal combustion engine transmissions almost tripling.
The European Association of Automotive Suppliers (CLEPA) released a survey on the 27th showing that nearly 70% of European parts manufacturers are currently facing direct competition from Chinese imports, up 12 percentage points from the previous survey in March. The association stated that this pressure has caused serious impacts, with most suppliers expecting profit margins to fall below the minimum 5% required for investment.
CLEPA Secretary General Benjamin Krieger pointed out: "Without decisive measures, the European parts manufacturing industry may face the risk of extinction, forcing companies to relocate or go bankrupt, threatening employment and expertise."
Some companies have already felt the squeeze. Boris Schultze, chairman of the labor committee at Mahle Group, said that Chinese competitors are entering product areas long dominated by German manufacturers. He said that some quotes to car manufacturers "are clearly below the cost of production in certain cases."
He added that Volkswagen, BMW, and Mercedes-Benz are all purchasing these Chinese parts.
Frank Selle, a labor representative at Bosch Group, believes that the similar products offered by Chinese suppliers are "20% to 30% cheaper," and Europe may need to reconsider whether it should require foreign manufacturers to carry out some production locally in the region.
Last year, Fortune magazine also published an article stating that as more Chinese electric vehicle manufacturers expand globally, just like German car giants, the good days for German auto suppliers are over, and they now have to face more intense competition.
"Who is the winner and who is the loser is changing," said Christy Cammes, a senior executive at Lazard Asset Management. He noted that emerging suppliers enjoy higher profit margins, many of which are located in Asia, focusing on the battery, software, and semiconductor industries.
Cammes pointed out that against the backdrop of Germany's economic recession, German suppliers face both inflation and rising interest rates, while also needing to invest in electric vehicles while maintaining their traditional car market share. "Fighting on two fronts" has led to their costs doubling.
A member of the management board of ZF said that the expansion of Chinese electric vehicle manufacturers means increasingly fierce competition in the automotive parts sector. "We can say that today's competition from China will also spread to Europe. To survive, you must take this development trend very seriously and adapt to it."
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