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The mood among German car manufacturers is really bad. What has been felt for some time in the neighboring country is also statistically well documented: in June, business expectations fell at VW & Co. almost to the level of 2008. That was the year in which nobody really knew if and how the world economy would continue. In June, the fall in the mood index of the economic research institute Ifo in Munich was particularly spectacular – just as strong as in March 2021, when the war in Ukraine had just broken out.

A specific reason for this is not obvious. “More and more I find that you have to look to China to understand such mood swings,” said Oliver Falck, head of the Center for Industrial Economics and New Technologies at the Ifo Institute. “There is a very high degree of uncertainty in the German car industry about the extent to which its own brands can capture market share in the Chinese electric vehicle market.”

VW has just throttled electric car production in Emden, northern Germany. Demand is 30 percent below plan. VW wants to increase emissions from electric vehicles from 7 percent now to 50 percent in 2030. But in China, the largest and fastest growing market, the Wolfsburg-based company recently had to surpass its Chinese competitor BYD as market leader.

Germans love combustion engines

Falck says it cannot be argued that German automakers have missed the technological change in e-mobility. “But what can you do if German car buyers – unlike the Chinese – absolutely do not want to part with their internal combustion engines.”

The hesitant purchasing behavior in Germany also shows characteristics of a vicious circle: the sale of used electric vehicles is still in its infancy. Why would a consumer buy an expensive electric vehicle if he has no idea at what price he can sell it in a few years? So many decide to wait and finally opt for the internal combustion engine again. “Consumer behavior has clearly slowed down German industry,” says Falck.

The depressed mood in the once self-confident German car strongholds of Wolfsburg, Stuttgart and Munich has also affected Swiss suppliers. “Depending on the application, we see the uncertainty in the volatile customer queries,” says Feintool’s Karin Labhart. The company in Lyss in Bernese Zealand produces parts for the powertrains of traditional cars, among other things. But it goes without saying that Feintool is already in the midst of technological change.

downturn is expected

Karin Labhart does not want to speak of a bad mood: “In Europe, where the transformation is fast and consistent, we are winning exciting new projects in e-mobility and we are one of the largest suppliers of main drives for e-cars and e-mobility. commercial vehicles.”

To what extent the optimistic picture painted by Feintool’s spokeswoman corresponds to that of the rest of the Swiss automotive sector is currently unknown. “The business situation of the Swiss automotive suppliers improved in the first quarter, but we expect a downturn in the second half of the year – industry-wide, by the way,” said Michael Koller, head of the automotive division of the Swissmem industry. association.

However, the relevance of this branch to the export performance of the industry and hence to the prosperity of the country is well known. Four years ago, the Swiss Center for Automotive Research at the University of Zurich counted 574 companies with 34,000 employees producing components for foreign car manufacturers in Switzerland and generating an annual turnover of 12 billion francs in a large-scale industry study. “I don’t expect these figures to have changed much,” says institute director Anja Schulze.

The industry is very competitive

The questionnaires for the next major industry study have just been sent out. “I expect that we will receive a lot of valuable information about the fundamental decisions in the industry,” says the chairman of Mobility and Digital Innovation Management.

E-mobility is of course a central theme in the company’s research: can the products manufactured for the combustion engine industry be adapted to electric-powered vehicles? Do you have the money, knowledge and staff to make the necessary adjustments? Anja Schulze does not want to anticipate the answers. However, a glance at the neighboring country suggests that dramatic results are to be expected. There’s a lot going on in the industry beneath its seemingly smooth surface.

“The automotive industry is extremely competitive. It demands the utmost from its suppliers in terms of innovative strength, dynamism and process orientation,” says Swissmem expert Koller. “Many Swiss suppliers have used these qualities in recent years to diversify into other sectors that have similar requirements to those of car manufacturers.”

Suppliers are changing industries

Feintool is a striking example of the diversification trend among Swiss automotive suppliers. In 2022, 48 percent of the company’s total turnover of 861 million francs depended on the internal combustion engine. A year earlier that was almost two-thirds. With the acquisition of the German company Kienle + Spiess, Feintool not only acquired about 30 percent more turnover, but also gained important industrial customers outside the automotive sector.

Is the Swiss automotive supply industry prepared for the future? “With our wide range of advanced technologies, we are very well prepared for the future,” says Feintool’s Karin Labhart. You don’t get the sense that she just wants to soften the situation.

Ironically, the innovative power of industry, which is so important for the development of more climate-friendly forms of mobility, could be shifting to other areas where it might be more beneficial. Swissmem expert Michael Koller puts his concerns as follows: «The great strength of an innovative industry has always been to find the best technical solution for an existing, given problem. At present, however, the direction of development in the field of mobility is strongly influenced by politics. This encourages car suppliers to offer their technologies in other sectors.”