China’s low-cost auto parts flood Europe’s biggest car market

Seven in 10 European parts makers now face direct competition from Chinese imports: survey

Chinese automotive suppliers are inundating Germany with low-cost components, piling pressure on local manufacturers that are already grappling with muted demand and elevated costs, said labour officials.

The influx of electrical systems and forged metal parts is hitting companies including Robert Bosch, Mahle and PWO. The imbalance threatens local production, with China’s industrial upgrades narrowing the quality gaps that used to protect German firms.

Chinese car parts are “pouring into the German market at incredible speed”, said Andreas Bohnert, who chairs the works council at PWO, which makes steering columns and other precision-metal parts.

“The pace at which these products are arriving – and, one has to admit, at a relatively good level of quality – shows that the Chinese have really done their homework,” Bohnert added.

The squeeze on Germany’s supplier base is part of a Chinese expansion that is rattling the country’s industrial core. China, once a driver of sales and profit for German automakers, is increasingly becoming an equally capable rival.

The imports of Chinese vehicles and components into Germany have surged since the pandemic, and the likes of BYD and Contemporary Amperex Technology are dominant in the markets for electric vehicles (EVs) and the batteries needed to run them.

The shift is reverberating through the supplier landscape.

Company officials said the accelerating flow of low-cost Chinese inputs is squeezing margins, eroding order volumes and testing the resilience of a supply chain already strained by the transition to EVs, and a protracted downturn in European car production.

Fresh data has reinforced the concerns.

An analysis from the Cologne-based German Economic Institute last week identified sharp increases in Chinese imports across several component categories, including a near tripling of gearbox parts for combustion-engine vehicles.

A survey released on Thursday (Nov 27) by the European Association of Automotive Suppliers (CLEPA) found that nearly 70 per cent of European parts makers now face direct competition from Chinese imports – a 12-percentage-point increase from the previous study from late March.

The pressure is taking a toll, the group said, with a majority of suppliers expecting profitability to fall below the 5 per cent minimum needed to sustain investment.

“Without decisive measures, parts manufacturing in Europe risks disappearing, as companies are forced to relocate or shut down, jeopardising employment and expertise,” said Benjamin Krieger, secretary-general of CLEPA.

Some firms are already feeling the squeeze. At Mahle, general works council chairman Boris Schwürz said Chinese rivals are moving into product areas long dominated by German manufacturers.

Some offers reaching automakers arrive at “prices that in certain cases are clearly below manufacturing cost”, he said, adding that Volkswagen, BMW and Mercedes-Benz Group are buying the Chinese parts.

The suppliers from the Asian country are now offering equivalent products “20 to 30 per cent cheaper”, said Bosch labour representative Frank Sell.

Europe may need to reconsider whether foreign manufacturers should be required to carry out part of their production within the region, he said. BLOOMBERG

Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.