China’s EV Tech Lead ‘Uncatchable,’ Say German Suppliers

German automotive industry suppliers are bracing for a major upheaval as Chinese competitors gain ground, finds a survey among industry executives.

Polled by consultancy Baker Tilly, 67% of executives expect a “significant number” of companies in their industry will go out of business over two years. Competing suppliers from China (65%), other European countries (55%) and from the United States (35%) are expected to enter the German market, the car industry mangers said in the survey.

Only 6% of respondents said that Germany is a “vanguard” in the global car industry, whereas 51% said that Asian competitors have an “uncatchable lead in key technologies”. By contrast, 28% said the German car industry is currently “in arrears” in automotive technology.

“The analysis shows the great transformation pressure at a time of geopolitical tension,” said the consultancy’s auto industry expert Jannik Bayat.

Most German suppliers see the need for investments but already suffer from cost pressure, which the new government had to urgently address, Bayat added. Almost three out of four respondents said the government must bring down energy and production costs, followed by a call for tax cuts, reduced bureaucracy and faster licensing, and greater support for future technologies like electric mobility or hydrogen.

But the survey also revealed a “surprisingly optimistic self-perception” among industry managers, Baker Tilly said: 78% said their own company’s situation is “rather good” or “very good,” even if 79% also reported that the industry as a whole is performing poorly.

“There is a drastic gap in perception,” said Bayat, arguing that companies could see upcoming risks but remained complacent about their own need for change.

Three in four respondents said their company’s business model was “largely independent of the transformation of propulsion technology”, the consultancy said. Many suppliers could also sell their products to electric vehicle producers and more than half said they were able to adapt their business to predominantly serve EV production.

However, Bayat warned that the industry is still moving too slow and that the next five years could prove decisive in the race for future market shares. “We see that the transformation must be sped up,” he said.

In a bid to preserve the country’s leading position in internal combustion engine (ICE) technology, Germany’s car industry lobby group VDA is reportedly aiming for a de facto reversal of the EU’s 2035 ban on the sale of new ICE cars.

However, many car industry experts have said the battle over the 2035 ICE ban is largely symbolic. It appears unlikely that many consumers would opt for a combustion engine car in ten years’ time, given recent technological advancements and price reductions for electric cars.

This post was originally published by Clean Energy Wire under Creative Commons licence.