The European Automotive industry faces various challenges such as electrification, autonomous driving, changing behaviours of customers, or industrial modernisation to meet digitalisation and greening expectations. These challenges are now topped by the impacts of the sanitary crisis and the Russian invasion to Ukraine putting automotive suppliers with their low margins in danger.
Urgent measures are necessary to save the ecosystem
Reduced production volumes, unpredictable production cycles, exploding prices for raw materials, parts, energy, or transport, and foreseeable increases of salaries are burdens suppliers cannot face based on existing contract conditions.
Thus, to avoid the collapse of the European automotive industry, EACN invites stakeholders on all levels of the value chain to
- Consider re-examining and adapting existing contracts
Existing contracts have been concluded based on today any more existing conditions on volumes and purchasing prices for raw materials and parts. Considering this as well as usual low margins for suppliers, adapting existing contractual conditions seems essential for the survival of many of them. Avoiding additional difficulties resulting from bankruptcies of suppliers is neither in the interest of the supplier nor of the one of the customers (generally the OEM or Tier-1).
- Include more flexibility in future contracts in the short-term
The next years remain characterized by uncertainties regarding production volumes and all kind of prices. Including flexible paragraphs allowing responding to (mayor) changings improves the planning abilities for suppliers and enables them to better resist on the market.
- Create long-lasting partnerships between stakeholders on a European level
Long-lasting partnerships where suppliers are considered and just honoured for their efforts enables them adapting to the overall challenges such as evolving markets due to electrification and automatization of vehicles or greening, digitalisation, and flexibilization of production and supply chain. These evolutions request important investments in design and production tools, in digital infrastructures, or in up- and re-skilling of employees. Investments that need long-lasting and predictable partnerships including sufficient margins for suppliers.
- Review the automotive sector’s internationalisation strategies
Recent impacts of the Coronavirus pandemic or the Russian invasion in Ukraine highlighted weaknesses in the current organisation of vehicle productions with the global purchasing strategies: Raw materials and parts that are not any more delivered ‘just in time’ as in the past. Transport costs will raise and weigh more in the final price without even considering sustainability and zero-CO2 aspects. And different raw materials become even less available. Taking this into account, developing strategies based on a European circular economy idea where vehicles for the European market are produced in Europe with parts from European suppliers and raw materials issued from recycled materials wherever possible, thus giving OEMs and suppliers a clearer outlook.
Read the full Press Release.