The gap between suppliers and car manufacturers in Germany grew last year. “While car manufacturers are currently earning splendidly despite the crisis, many suppliers have their backs to the wall,” said Constantin Gall, head of the mobility division for Western Europe at Ernst & Young (EY).

Last year, the German automotive industry boosted sales by 23% to a record € 506,2 billion, according to a study by the consulting firm Ernst & Young. However, with a plus of 28%, the manufacturers grew much more strongly than the suppliers, whose turnover increased by 6%, the study found.

According to EY, the number of employees in the automotive industry declined for the fourth time in a row in 2022, falling by 1,5% from 786 000 to 774 000. While employment among manufacturers grew slightly by 1%, it fell by 6% among suppliers.

Distribution battle

“Car manufacturers are taking the production of batteries and electric motors into their own hands, entering into partnerships with battery companies and relying less on their long-established suppliers,” EY’s Constantin Gall said.

On top of that, there are bitter disputes about conditions, delivery quantities, and price adjustments. “In view of the transformation towards electromobility, a distribution battle has broken out between manufacturers and suppliers, in which the suppliers often have the worse cards,” Gall added.

Higher investment, lower employment

“Despite the recent growth in profits, the German automotive industry is currently making cuts across the board,” said Peter Fuß, an industry consultant also working at EY. For the current year, he expects, at best, stable employment growth at the manufacturers and further job cuts at the suppliers.

“The need for investment is enormous, and at the same time, companies are doing everything they can to continue to generate high margins,” he continued. “Only a profitable business creates sufficient financial leeway to be able to invest in new technologies and products,” according to Fuß.

“The production of e-cars is less labor-intensive. The electric motor will prevail and displace the combustion engine. This will inevitably lead to lower employment in Germany as a business location,” Fuß.concludes.

In its study, EY analyzed changes in employment and turnover in the German automotive industry. The subject of the study was German companies with at least 50 employees. According to EY, the Federal Statistical Office and employment statistics from the Federal Employment Agency were used as sources.