Car industry experts expect rapid rise in insolvencies among German suppliers

Germany's massive industry of car suppliers faces a wave of insolvencies because the companies are unprepared for the shift to electric mobility, digitalisation, and current market developments, according to sector specialists, reports Oliver Götz in Focus Online. According to auditing firm PwC, only 24 percent of suppliers can count on a solid financial base, while 42 percent find themselves in a "financially strained situation”. Chip shortages, high inventories due to a collapse in sales, and the rapidly rising costs of raw materials and energy are combining to a perfect storm, Götz writes. "If the situation does not ease soon, many suppliers will feel compelled to initiate further and tougher restructuring measures," PwC industry expert Thomas Steinberger told the author, who notes that large and listed German suppliers Continental, Hella, and Schaeffler all warned recently that profits will be below expectations.

But small and medium-sized companies in particular face an existential crisis, according to the article. Michael Karrenberg from credit insurer Atradius said he expects "a significant increase in insolvencies among suppliers in the coming year," adding that many companies are much too slow to switch to electric mobility. Even though the overall level of insolvencies in Germany remains low, car suppliers already stand out. In the third quarter alone, four companies with sales exceeding 100 million euros each went insolvent, according to engineering paper VDI Nachrichten, the article said.

Estimates differ widely on how many existing jobs will eventually be lost in Europe's automotive industry during the transition to sustainable mobility, and to what extent they can be compensated by new jobs emerging in the sector, for example in battery production. Europe's massive supplier industry looks set to be more heavily affected than carmakers, as many smaller companies depend on making parts for combustion engines that will no longer be needed in electric cars.