"Better planning and timeliness of the transformation have a stabilising effect on new financing projects"

Frick: The automotive industry remains in the midst of its transformation toward electromobility, which also affects the further trends of software-based vehicles and shared mobility. The discussion focused on the supplier side of SMEs and new impetus for financing this major task. Suppliers operate in the tension field of global economic developments as well as national and international framework conditions. European regulations, such as renowned ESG requirements (Environmental, Social and Governance), in particular, challenge the automotive industry to implement these within a realistic timeframe.

At the same time, suppliers must respond to their customers' preferences, develop innovative technologies, and face intense competition. Furthermore, the market environment is exacerbated by geopolitical tensions and conflicts, as well as protectionism and trade barriers. Suppliers are therefore under considerable pressure.

Frick: The structural scope of the transformation requires all parties involved to contribute to overcoming the challenges. Policymakers must create the framework conditions that promote the transition to electromobility and reliably support the transformation process. One task is to increase the predictability and timeliness of the transformation for the industry, which will have a stabilizing effect on new financing projects. Not only support programs for electrified vehicles and investment incentives are supportive, but also concrete measures such as reducing bureaucratic hurdles to facilitate lending between suppliers and financiers.

Suppliers themselves must also act. They must make significant investments in research and development to develop innovative technologies and remain competitive. Cost control is particularly important, as the current duality of electric mobility and conventional combustion engine business, along with the regulations and associated reporting, significantly impacts the development of new financing sources. Continuous communication about individual transformation strategies with major banks, which support the company in operational and strategic implementation, as well as with a broad group of investors, can strengthen confidence in the necessary financing projects.

Frick: Since every company asserts its unique selling point in the market, it should emphasize its ability to develop new technologies and products. This demonstrates its ability to adapt to market changes. Therefore, each case must be considered uniquely. Furthermore, clear and transparent financial reporting is important so that investors can gain an understanding of the company's financial foundation. This includes regular communication with banks and investors and maintaining an active mutual exchange to strengthen trust in the business relationship. By explaining the development of their business to their partners, suppliers demonstrate their future viability to banks and investors and convince them to participate.

Frick: Close partnerships with OEMs or Tier-1 suppliers (which is a direct supplier to an OEM that specializes in delivering complete systems or modules) strengthen investor confidence and signal stability. Both sides need to openly discuss options: On the one hand, long-term supply contracts offer financial security and can serve as a basis for further financing. On the other hand, pre-financing of research and development expenses and investments by OEMs is essential to accommodate the simultaneous nature of technology development during the transformation.

Frick: The inherent strengths of German automotive suppliers lie in their innovative strength and the high quality of their products. The companies benefit from a strong research and development landscape and highly qualified specialists. To ensure competitiveness, several location factors urgently need to be improved. To name just a few: These include reducing high energy costs, which are currently above the EU average. This makes new technologies more expensive in Germany - especially given that, in addition to electrification, the industry must further evolve its focus from high-quality mechanics to software-based vehicles.

Furthermore, there is an urgent need to simplify bureaucratic processes to allow companies to focus on their business processes and accelerate innovation in times of increasing competition. Investments in digital infrastructure and the training of specialists in the fields of electromobility and software development will also help. And the truth is: labor costs in Germany are high compared to other countries with strong automotive industries - we shouldn't lose sight of this.

Photo credits: Benjamin Westhoff