Reflecting the growing difficulties of the German automobile industry, bankruptcies among equipment manufacturers are increasing. Twenty companies in the sector, each of which generates more than 10 million euros of turnover per year, declared bankruptcy during the first six months of 2024, almost double that of 2023, in the same period.
According to a study by the consulting firm FalkenSteg, specialized in business restructuring, more than 10,000 jobs are affected by these bankruptcies. “I expect 60 large-scale bankruptcy filings in 2024, up from 34 in 2023”explains Jonas Eckhardt, FalkenSteg expert, quoted by the newspaper image, on September 23.
Subcontractors are the first victims of the decline in automobile production. The decline in sales in China, which recently forced all German manufacturers to revise their forecasts downwards, weighs heavily on the activity of equipment manufacturers, who earn their margin on volumes. Many of them currently have to finance expensive investments in electricity with the profits obtained from the heat engine. The current drop in demand is a fatal blow for them.
Dangerous excess capacity
According to a study by the Cologne Economic Institute, published on September 22, total car production in Germany in 2023 has fallen to the level of the 1980s. Since 2018, it has decreased by a quarter. Exports are at their 1998 value. However, German factories produce mainly for abroad: 75% of the vehicles manufactured are destined for export, especially to Asia and China, which has become the center of gravity of the automobile industry around the world.
In 2023, the region absorbed almost half of the vehicles produced in the world, 60% were manufactured there. Thanks to the long-standing success of German manufacturers in this market with high-end vehicles, they managed to maintain their production across the Rhine at a high level until 2017, unlike many of their Western competitors.
You only need to look at the utilization rates of German car factories in 2023 to understand the magnitude of the crisis: of the twenty largest production sites, only half were producing at more than 68% of their capacity. Wolfsburg, the country’s largest factory, has a utilization rate of 56% and fewer than 500,000 Volkswagens are produced. “Without a significant increase in production, the existing excess capacity in Germany will become an economic risk”, underlines the report.
