Medium-sized Automotive Companies: Red Tape and high Electricity Prices ongoing Major Challenges

Too much red tape is more and more entangling medium-sized automotive companies and is currently the biggest challenge for companies. This is one of the results of a current survey that the Association of the Automotive Industry (VDA) conducted among automotive suppliers (manufacturer group III) and medium-sized manufacturers of trailers, bodies and buses (manufacturer group II).*

In the survey, 85% of companies stated that they were heavily or even very heavily burdened by bureaucracy. It has already been one of the top burdens for companies in previous surveys, but the value has never been higher than in the current survey (May: 72%; February: 62%). Many companies complain that the effort required for reports that do not add value is increasing, tying up capacity and causing high costs. In addition, processes in public administration are often time-consuming and complicated, whereas simple and particularly digital solutions are missing.

Another result of the survey: Energy costs - especially for electricity - continue to be one of the central challenges for the automotive supply industry and medium-sized automotive companies in Germany. 71% of companies say they are heavily or even very heavily burdened by the high electricity price. The situation has eased slightly (May: 74%, February: 82%), but a good seven out of ten companies are still suffering from the high electricity price. 59% of companies are still severely or very severely challenged by gas prices (May: 59%, February: 73%).
In addition, the order situation is increasingly coming into focus. While in May 42% of companies said that a lack of orders was currently only a minor or no challenge at all, only 22% said this in the current survey. In contrast, 41% said that a lack of orders represents a major or very major challenge (May: 2023: 31%, February 2023: 21%). This reflects the weak overall economic environment.

The survey also shows that companies' investment shifts are becoming more established: more than one in three companies (35%) are now planning to shift investments abroad (May 2023: 27%, February 2023: 27%, September 2022: 22%). Another 14% are planning to cut investments. Only 1% of companies stated that they wanted to increase their investments in Germany given the current situation. Relocation destinations are: other EU countries, Asia and North America (in that order).

„Germany must remain an industrial location“

Investment activity in Germany is primarily affected by the sales situation and sales expectations. 27% cited this as the greatest impact on investment activity. For 16% of companies it is energy prices and for 15% it is bureaucracy and the density of regulations that prevent them from investing in Germany.

VDA President Hildegard Müller: "Our survey clearly shows that medium-sized automotive companies in Germany suffer immensely from excessive bureaucracy and high energy costs. The fact that more and more companies are shifting investments abroad is a warning signal for Berlin! It is important to take countermeasures and replace the current bogging down in regulatory details with long-term strategies for more competitiveness."

At the same time, the survey results would confirm the need for action identified in the Federal Minister of Economics' industrial strategy. This action is necessary to support the transformation of industry and improve its strategic sovereignty and international competitiveness. According to Müller, it is all the more important that the findings are now followed by concrete actions and laws, also when it comes to competitive energy prices. "It cannot just be a matter of declarations of intent; Berlin must finally take measures to reduce the price of electricity for industry and strengthen the international competitiveness of companies. “Germany must remain an industrial location," the VDA President stated.

Lack of labour force and skilled workers has less of an impact

For the coming year, one in four companies (25%) expects the situation to worsen compared to the current situation. In contrast, 16% expect their situation to improve. Around six out of ten (59%) expect a sideways movement with a view to 2024.

Against this background, the shortage of labour force in general and skilled workers seems less severe than before: Compared to the last survey in May of this year, the proportion of companies suffering from a shortage of skilled workers and workers has fallen to 71% (May: 85%, February: 78%). While in May 57% of companies were looking for employees for their locations in Germany, now the figure is 43%. Accordingly, in May 19% of companies planned to reduce employment in Germany whereas now this is stated by 40% of companies.

*The survey was conducted from October 9th to October 16th, 2023. 113 companies took part. This means that the VDA has representative statements on the current situation and prospects for the automotive industry.