German automotive suppliers calls for EU industrial strategy amid poor results

Dusseldorf, Germany – German automotive supply industry association  (ArGeZ) has called on the new European Commission – taking over in June – to “swiftly present and implement a valid industrial strategy.“

The new strategy, according to a 22 April ArGeZ statement, should make Europe "competitive again" in the long-term compared to the US and Asia.

The Green Deal and issues such as sustainability reporting and supply-chain due diligence, "can no longer dominate the political agenda in Brussels alone,” said ArGez.

The focus, argued the association, must now be on giving priority to industry to avoid falling further behind.

Stated ArGez spokesman Christian Vietmeyer: “The EU taxonomy must not be introduced, as it leads to deindustrialisation of the EU without actually promoting climate protection."

According to ArGeZ, the German automotive suppliers started 2024 with a positive outlook, but "forecasts for economic development have been successively adjusted downwards in recent months.“

As a result, the trade association said medium-sized suppliers are starting the year "with no order backlog and no prospect of an imminent stimulus in demand."

Over the first two months of the year, the industry's production fell 4.9% year-on-year while sales declined 4.1% compared to the year before.

Expecting the shortage of skilled workers to "worsen dramatically in the coming years", ArGeZ said the number of employees within the automotive supply-chain fell by 1.8% year-on-year in February.

In terms of automotive production ArGeZ said manufacturing had been declining for years, from 5.6 million cars and vans in 2012 to a current annual "maximum of 4 million units.”

With decreasing demand from car makers, ArGez said many suppliers continue to struggle with costs that are high in international comparison.

Higher 'inflation-related' and labour costs, it added, have offset productivity gains within the industry.

Another issue impacting the suppliers is the high cost of energy, and a 'misleading' proposed reduction in electricity tax.

"The price level for electricity and gas, including grid charges and other levies, is still double-to-triple that of countries like China, France, and the US," said ArGeZ.

Such high costs, the association noted, will particularly impact energy-intensive industries such as rubber, plastics, textiles and metals.

"In this environment, where costs continue to rise, legislators have unfortunately still not found answers to dramatically growing competitive disadvantages," the association concluded.