Suppliers to the European automotive industry warn that the continent’s industrial base is under increasing pressure. Weak profitability, decreased production capacity and increased foreign competition compromise the sector’s ability to invest and remain competitive on a global level.
According to the latest CLEPA Pulse Checka biannual European Automotive Suppliers Association survey on business sentiment carried out in partnership with McKinsey, the results point to a structural competitiveness deficit that Europe can no longer ignore.
“A persistent low profitability is taking the sector down a dangerous path”, he says Benjamin KriegerSecretary General of CLEPA, in the association.
“Without decisive measures, the production of automotive components in Europe is running risk of disappearingas companies are forced to relocate or close operations, putting employment at risk and specialized knowledge”, highlights Krieger.
“The EU has strengths as a destination for investment and production, but it is urgent to take measures to strengthen competitiveness, namely by reducing electricity costs, administrative simplification and improving financing conditions”, the person in charge also notes.
According to Pulse Check, 70% of suppliers expect profits below 5%the minimum threshold necessary to sustain investments in technology, skills and productive capacity. 1/3 predict very little or no profitswhich puts jobs, R&D activity and future growth at risk.
The problem is structural, not cyclicalnotes the report. With results stagnating, companies postpone investments or transfer production to more cost-competitive regions, compromising Europe’s ability to lead in next-generation mobility technologies.
The document highlights that the increased costs and the slowdown in demand growth are weakening the automotive production base of Western Europe.
Half of suppliers plan to reduce production capacity in this region over the next five years, while only 10% plan to expand. In contrast, in the U.S. 49% anticipate growth, 42% in Asia and 35% in China – clear evidence that investment is moving towards most competitive regions and with more predictable markets.
According to the report, industry priorities have changed decisively. TO competitiveness is now cited as the main challenge by 86% of suppliers, 14 percentage points more than in the last spring survey.
A decreased demand and faster adoption of new technologies outside Europe are increasing the pressure, making the European industrial base increasingly fragile, at a time when Competition from Chinese suppliers has accelerated quickly. Benefiting from cost advantages, substantial subsidies and a strong domestic base, Chinese operators are gain ground across the EU.
Currently, 69% of European suppliers already face competition from Chinese imports – an increase of 12 points compared to the spring survey.
75% of suppliers expect the import pressure increases even more, up to 26 percentage points above that observed in the previous survey, which raises serious concerns about future capacity of Europe to maintain a robust automotive value chain, the report concludes.
