GERMAN seat manufacturer Recaro Automotive, known for supplying luxury brands like BMW, Mercedes-Benz, and Lamborghini, has filed for bankruptcy amid a wider trend of German automotive component suppliers facing financial challenges.

Germany, a major player in the global automotive industry, is witnessing a surge in bankruptcies and layoffs among its suppliers.

German automotive suppliers are implementing substantial layoffs due to the ongoing economic downturn. ZF Group plans to cut 11,000 to 14,000 jobs in Germany by 2028. Continental has announced layoffs impacting 7,150 employees, and Bosch is set to reduce 1,200 jobs in its software division.

Larger suppliers have shown more resilience, whereas smaller suppliers are approaching insolvency. In the first half of 2024, 20 German automotive component suppliers with annual revenues exceeding 10 million euros (US$ 10.99 million) filed for bankruptcy, marking a 60% increase from the previous year, according to management consultancy Falkensteg. This surge in bankruptcies is attributed to factors such as inflation, rising energy costs, and weakening consumer demand.

In addition, the declining German economy has contributed to reduced demand from German car manufacturers. The German Association of the Automotive Industry reported that car production in 2023 declined by over 10%, with 4.1 million cars manufactured compared to 4.7 million in 2019.

The global shift towards automotive electrification is putting significant pressure on German automotive manufacturers and component suppliers. It is predicted that employment in the German automotive supplier industry could decrease from 270,000 to 200,000 by 2030, according to Frank Schopp, an automotive industry lecturer at Hannover University of Applied Sciences. This trend indicates a gradual erosion of the German auto industry’s hiring capacity.

German components focused on internal combustion engines are increasingly being replaced by batteries and electrification components. Some German automotive suppliers are compelled to invest in both technology platforms, leading to rising R&D costs.

Furthermore, the German government’s decision in December 2023 to prematurely end electric vehicle (EV) subsidies has contributed to consumer hesitancy. New EV registrations in July decreased by 36.8% year-on-year, according to the Federal Motor Transport Authority.

German automakers have slowed down their electrification initiatives and are canceling or postponing orders, which adds to the challenges faced by automotive component suppliers.

Mercedes-Benz has delayed its target of achieving a 50% share of EV sales from 2025 to 2030. Porsche has abandoned its goal of having EVs account for 80% of new vehicle sales by 2030. Volkswagen is considering closing its Audi Q8 e-tron production facility in Belgium.

Despite challenges, German automotive suppliers are addressing the transformation. Bosch plans to launch 30 new EV production projects this year. Continental aims to spin off its automotive division and seek an independent listing. Infineon is focusing on automotive sector digitalization for profit growth.(Xinhua)