In his guest article dated May 3, 2023 at SpringerProfessional, Atreus partner and director Stefan Randak questions the strategy of German automakers, as they have fallen behind Chinese OEMs.DEUTSCHE
German car manufacturers focus on premium and electrification
The boards of directors of the German vehicle manufacturers have specified their strategy: concentration on the premium segment, renunciation of lower vehicle classes, combustion engines with parallel electrification, in-house production and cost pressure on suppliers. But the 2022 annual reports and the 2023 Shanghai auto show raise questions.
German carmakers lose electric race in China
German vehicle manufacturers sold a total of 4.4 million cars in the Chinese market in 2022, achieving a market share of 19.1%. However, they have fallen behind in the electric vehicle market, with a market share of only 5% and the absence of their models among the ten best-selling electric vehicles. In view of the Chinese electric car sales share of already 25%, the German manufacturers have signalled alarm mood at the auto show in Shanghai. VW has announced that it will accelerate its electrification strategy for the Chinese market, while Audi and Mercedes are looking to expand their range of vehicles. The German manufacturers are struggling to compete with the Chinese providers in terms of offer, price and software development. VW is investing one billion euros in a new Chinese center for development, innovation and procurement to develop fully connected electric cars.
The struggle over software and equipment problems
German car manufacturers are lagging behind the competition in software and car connectivity, which leads to shortcomings in the equipment. For example, Volkswagen struggled with software issues in 2022, despite bringing in external software service providers. To cope with the lack of resources, manufacturers should refrain from developing their own infotainment systems in the face of competition from smartphone apps and systems such as Android Auto and Apple CarPlay. In contrast, Ferrari has already understood and has not installed its own navigation system in the new “Purosangue”, but only CarPlay and Android Auto.
German supplier industry in danger
While the car manufacturers in Germany were able to increase their sales and earnings, things are looking increasingly bleak for the supplier industry: The average margin is only 0 to 5%, and many companies are getting into difficulties due to the change in their product portfolio and the discontinuation of engine development. In addition, employment at suppliers has fallen by 6%.
Car makers cancel small car models and focus on luxury segment
The Corona pandemic has accelerated the decision of car manufacturers to use scarce material only for high-priced models and to phase out lower vehicle segments. Daimler, Audi and BMW are removing small and micro cars from their ranges. VW board member Oliver Blume wants to build the most sustainable luxury car brand, which is not only met with acceptance. Experts see calculable cost problems with e-mobility and software. With the elimination of the lower vehicle segment, a traditional market will be abandoned and the basis will be laid for others, especially Chinese suppliers, who will be able to offer low-cost and high-performance electric cars.
Chinese carmakers conquer the german market: how they’re doing it this time around
Chinese automakers intend to enter the German market and fill the gaps in the market created by German manufacturers. They have sales experience and battery expertise. Major European automotive sales companies and vehicle rental companies enable Chinese suppliers to enter the market and offer sales and service infrastructure. For example, BYD will sell and lease through the Hedin Mobility Group and Sixt.
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