German Auto Industry Struggles With Location Challenges

After a cautious year, German car manufacturers are cautiously optimistic about 2023. However, they fear stronger competition from China and government subsidies for American manufacturers in the USA.
The German automotive industry warns of a loss of importance in global location competition and calls for targeted countermeasures. “Without an ambitious program for competitiveness and location, we risk losing the connection globally,” said the German Association of the Automotive Industry (VDA) on Wednesday. The industry fears that Europe could lose touch with funding programs worth billions in the USA and the confrontation with China and that companies could increasingly relocate locations. At the same time, competition from Chinese automakers is increasing.

“Europe must use targeted location and economic policies to ensure that there is no subsequent global shift in axis,” explained VDA boss Hildegard Müller at an online press conference. After the corona pandemic, the energy crisis as a result of the war in Ukraine relentlessly exposed the weaknesses of the location.

Crisis Management Instead of Intense Competition

While intense competition for industrial sites has broken out worldwide, Germany is still dealing with crisis management. “Only if we remain internationally relevant will we continue to have global political weight in the future – and can thus be a role model for climate protection and values,” emphasized the head of the association. The European response to tendencies towards de-globalization should be raw material and trade agreements as well as energy partnerships in order to reduce dependencies.

After a mixed year, the industry is looking to 2023 with cautious optimism. Car manufacturers and suppliers are counting on the supply bottlenecks continuing to decrease and production running smoothly again. At the same time, the special boom, in which the manufacturers were able to push through high prices and bring in substantial profits due to strong demand, is coming to an end.

Global Market With Moderate Growth

In Germany, the Association of the Automotive Industry expects the car market to grow slightly this year by two percent to a good 2.7 million units. That would still be a quarter less than in the pre-crisis year of 2019. For Europe (EU27, EFTA, UK), the association expects sales to increase by five percent to 11.8 million vehicles.

In the USA, the market for so-called light vehicles should increase by four percent to 14.2 million units. The VDA is forecasting growth of three percent to 23.7 million units for China, the world’s largest passenger car market. This results in moderate growth of four percent for the global market to 74 million vehicles, 6.5 million fewer than in 2019.

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