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CE Automotive Newsletter
Q2 2023
Dear Readers,
we are thrilled to introduce our new CE Automotive Newsletter! We would like to bring you a collection of valuable content featuring Deloitte studies, market research, and expert opinions, covering various aspects of the automotive industry.
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According to the findings, 46% of managers from diverse manufacturing industries in Germany expressed Eastern Europe as one of the most attractive regions for industrial location.
A recently published Deloitte survey on supply chain trends among German companies has revealed several concerning findings. In addition to addressing the latest supply chain disruptions, the survey polled managers about their perception of Germany as an industrial location. According to the results, over half of the respondents believe that Germany's attractiveness as an industrial location is declining and will continue to do so in the future. Additionally, 45% of the respondents see a strong risk of future deindustrialization in Germany. That appears to be a concerning signal, as it is widely recognized that the development of the German industry holds significant importance not only for Germany but also for Central Europe.
Regarding potential locations, a majority of the respondents indicated North America (56%) and Eastern Europe (46%) as the most appealing regions. Respondents highlighted several benefits of these regions, such as lower labour costs, good transportation infrastructure, skilled workforce, easy market access, less regulation or bureaucracy, and low energy costs.
Energy costs have become one of the most significant disruptors for several industries across Europe, leading to numerous struggles to remain operational. Energy costs and inflation have had a significant impact on producer margins, particularly in the automotive industry. It is therefore unsurprising that many producers are now exploring the possibility of shifting their operations from Europe to other locations, which puts not only Germany but also Europe as a whole at risk of losing its manufacturing.
Eastern Europe is also being affected, as evidenced by Volkswagen's recent postponement of its decision on a battery plant in the Czech Republic. North America is becoming an increasingly attractive manufacturing location, particularly with the introduction of the U.S. Inflation Reduction Act, which puts European producers at a disadvantage. Another notable example is Scottish battery manufacturer AMTE, which is considering relocating its production site to the U.S. due to the absence of competitive advantages in the UK and the unavailability of incentives.
To address these challenges, the European Union should offer greater support to its industry. Introducing incentives and postponing initiatives like the EURO 7 implementation to the latest deadline are two potential strategies to encourage industries to remain in Europe and prevent deindustrialization. There are already some initiatives on country or Union level, however, there is still much work to be done to address the challenges facing Europe's industrial sector. To address them it will require a coordinated effort across different stakeholders, including governments, businesses, and industry associations, to promote innovation, investment, and competitiveness.
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