For many decades, the German automotive industry was the technological leader in efficient combustion engines with low emissions and high-precision transmissions, which made it very successful economically. Could it be that this particular strength and the associated success have led to complacency and blindness to the shift toward electric mobility, which has been looming in the automotive industry for 20 years?
The rapid technical development of the electric mobility is not just a further development of existing technologies. It is in the process of replacing the combustion engine concept, thereby devaluing the expertise required for this key technology for the production of combustion engines and transmissions. In addition, it is rendering obsolete the established supply chains and resources that were necessary for the production of these core components of German automotive engineering. The German automotive industry seems to have missed the boat when it comes to current developments.
This has consequences for system suppliers (1st-tier suppliers) and component suppliers (2nd-tier suppliers), who are losing their customers with their eyes wide open.
Some German car manufacturers are even already withdrawing from the electric mobility business. This in turn means that in Germany, work on manufacturing components for fossil fuel drive systems will not being replaced by other work on manufacturing components for electric drive systems. If the companies affected are unable to completely convert their operations, this future loss of output in Europe will lead to the demise of component manufacturers, mechanical engineering companies, and industry-related service providers. While many system manufacturers have a global presence and are therefore more robust, and are setting the course for electric mobility in parallel with their core business of fossil fuel drive systems, many component manufacturers in Germany and in other European countries are facing the major challenge of completely converting their business.
Such a conversion requires a critical review of the business model of component suppliers and a realignment of their strategic direction. High volumes, such as those purchased by the automotive industry, will be difficult to achieve in any other customer industry. Therefore, a transition will likely require a shift from large-scale production to small-batch production. Modular product concepts will become increasingly important. Completely different production facilities will be needed, with a focus on optimizing setup times. And after decades of supplying existing automotive industry locations, rapid access to attractive new markets will also play a decisive role. Implementing all of this is very challenging for an organization. A well-funcioning innovation management is needed. Above all, however, the transformation must not be initiated too late, because the window of opportunity will close as time progresses. What is required is business development at “China speed.”
With our experience in the transformation and turnaround of industrial companies, which is reflected in Dr. Boysen’s reference book on the sustainable management of corporate crises, published in February 2025 by Haufe, we are happy to assist you.