The automobile industry, that giant movement that has driven the global economy for decades, is today experiencing an existential crisis. After being an engine of growth and innovation, it has become a battleground between traditional and electric technology. In the midst of this battle, suppliers small and large are paying the price, thousands of jobs are disappearing, and supply chains threaten to collapse.
A company like Gerhardi Konstoftechnik, founded in 1796, was able to withstand Napoleon’s invasion, the Great Depression, and two world wars. But the current crisis hitting the European auto sector caused this ancient factory, which was a symbol of German industrial creativity, to declare bankruptcy last month.
Gerhardy, known for its mastery of making plastic components such as Mercedes-Benz’s distinctive star badges, has been a symbol of the small and medium-sized companies that form the backbone of the European automotive industry’s supply chain.
However, increasing costs and falling demand weighed heavily on the company, resulting in the loss of the future of 1,500 employees.
A storm hits suppliers
According to a report published by Bloomberg, the current crisis is afflicting hundreds of suppliers who are suffering as a result of the decline in car sales and the slowdown in the shift towards electric cars.
Bloomberg notes that another affected company is the French company Forvia, a supplier to companies such as Volkswagen and Stellantis, which announced the reduction of thousands of jobs due to the decline in demand for traditional products such as exhaust systems and transmissions.
But the crisis was not limited to traditional component manufacturers. Even suppliers that indulged in the production of electric vehicle components are suffering from cuts in government support and a decline in sales, according to the agency.
For example, Swedish company Northvolt was forced to declare bankruptcy in the United States, while 11 of 16 planned European battery factories were delayed or cancelled, according to an analysis by Bloomberg.
Devastating impact on employment and investment
According to statistics from the European Automotive Industry Association (CLEPA), European suppliers announced the elimination of 53,300 jobs in 2024, most of them in Germany.
These losses exceeded what happened during the Corona pandemic, according to a comparison made by Bloomberg. Matthias Zinke, president of the association, indicated in an interview with the agency that “companies have invested heavily in the hope of increasing demand for electric cars, but this increase has not yet occurred.”
The agency states that small companies are not the only ones affected, as the repercussions have extended to large entities such as Robert Bosch, which face severe challenges, with an expectation that 20% of car suppliers will achieve losses next year.
Experts, such as Andrew Bergbaum of Alex Partners, believe that the automobile industry has become one of the most turbulent sectors in the world. He stressed that “manufacturers are slowing down or stopping production lines, causing a profound impact on the supply chain.”
Despite these challenges, the solutions lie in supporting small suppliers, stimulating investments in clean technologies, and rethinking production and supply strategies, according to Bergbaum.
