More than half of all suppliers are below a 5% threshold for a sustainable business, CLEPA says.
in Automotive News Europe, by Peter Sigal, 20-01-2024
More than half of automotive suppliers are below the threshold of 5 percent profitability needed for a sustainable business, the industry’s European trade group said.
A number of factors have combined to put many suppliers in peril, said Benjamin Krieger, director general of CLEPA, including the need to invest heavily in uncertain future technologies, the impact of the pandemic, inflation and energy cost increases, the ability to pass price increases to automakers, and new rules and regulations.
“That’s the limit beyond which you can say, that’s a sustainably running business that can make the investments needed for sustainable, safer and smart mobility, and for innovation overall,” Krieger said Wednesday in Brussels at a news conference to introduce the group’s new president, Matthias Zink of Schaeffler, and discuss legislative priorities for the coming year.
Krieger and Zink called on the incoming EU Parliament to make sure regulations remain constant and “efficient,” and to take a holistic approach to the Green Deal greenhouse gas targets.
“To become a success it requires contributions from more than one industry,” Krieger said of the Green Deal, which calls for a CO2-neutral Europe by 2050.
The auto industry has won concessions from EU regulators in the past year, including a commitment to allow synthetic fuels in some form in 2035 rules requiring that all new cars have zero CO2 emissions, and a proposal for Euro 7 emissions rules that is largely unchanged from the status quo.
Incoming EU Parliament
A new European Parliament will be chosen this spring, so the details of some of those regulations could be pushed back a bit, Krieger said. “The closer we go toward the elections the less likely it is we see new proposals from the European Commission,” he said, particularly on synthetic fuels and on vehicle data protection.
Krieger and Zink said that with the largest regulatory questions largely settled, especially on the transition to zero emissions vehicles, the focus for CLEPA in the next five years will how to enact them in a way that minimizes job losses and threats to its 120 members.
“If you change regulations every two years you can’t hold this critical financial phase for long,” said Zink, the CEO of automotive technologies at Schaeffler. “That’s why we are calling for stability.”
A study commissioned by CLEPA in 2020 found that by 2040, up to 500,000 automotive supply jobs out of 1.7 million could be lost, depending on whether Europe can develop a robust EV supply chain. A more optimistic scenario puts job losses at 276,000, Krieger said, but a commitment to “technology openness” could further reduce that number, he and Zink said.
“There is still a chance to keep the employment we have, but in the end it goes together with competitiveness,” Zink said. “If Europe goes with the strengths it has in innovation and added value, then it’s possible.”
‘Real competition’ from China
The European Commission took a step to address issues of competition last year when it opened a probe of the Chinese government’s support for domestic EV makers, with the potential to impose punitive tariffs. European automakers and regulators have warned that low-cost Chinese vehicles could “flood” the European market.
Zink said that, in general, protectionism is not a solution if it results in tariffs.
“For sure, China has cost advantages, and that’s something we need to work on here in Europe, whether it’s in labor or energy,” he said. “We have to find our own solutions.”
He said Chinese cars are competitive not only on price, but also on technology, which he said was a “loud call for innovation in Europe.”
“We have real competition there, and we better prepare for it,” Zink said.
“We have real competition there, and we better prepare for it,” CLEPA president Matthias Zink said about Chinese automakers.