Cheap Chinese auto parts are flooding the German market and increasing pressure on local manufacturers, who are already struggling with weak demand and high costs in Europe’s largest market, Bloomberg reported today. The influx of Chinese electrical systems and metal products is affecting companies such as Robert Bosch, Mahle, and PWO. It threatens local manufacturers because Chinese companies are managing to reduce the quality differences that previously gave German companies an advantage thanks to innovation.
China’s rapid expansion is shaking up the German automotive sector
Chinese auto parts “are flooding the German market at an incredible speed,” Bloomberg quotes Andreas Bohnert, chairman of the PWO works council. His company manufactures steering columns and other precision metal parts. “The pace at which these products are coming to market—and, it must be said, in relatively good quality—shows that the Chinese have really done their homework,” Bohnert adds.
The pressure on German suppliers is part of a Chinese expansion that is shaking the industrial heartland of Germany. China, once the driving force behind German automakers’ sales and profits, is increasingly becoming an equally capable competitor. Imports of Chinese vehicles and components to Germany have risen sharply since the COVID-19 pandemic. Companies such as BYD and Contemporary Amperex Technology dominate the market for electric vehicles and the batteries needed to power them.
Pressure on the supply chain is growing
The change is reflected throughout the supply chain. Company representatives say that the increasingly rapid influx of cheap Chinese parts is reducing margins, limiting order volumes, and testing the resilience of a supply chain that is already under pressure from the transition to electric vehicles and a long-term decline in European car production.
Several companies have already begun to cut production and lay off workers. Bloomberg notes that the German automotive industry plans to cut nearly 100,000 jobs by 2030. The sector is crucial to the German economy, as it accounts for a significant portion of gross domestic product.
Source: Reuters
