Why automotive supply chains are the least of the problems

REUTERS / Andreas Geber

At the annual general meeting in 2020, the BMW boss and supervisory board chief spoke of various challenges that BMW had to overcome in 2019.

The year 2020 is likely to be a bit more difficult: Now, like many others, the company has to adapt to the Corona crisis.

According to auto expert Ferdinand Dudenhöffer, the hope for German automakers is China. Because while purchasing power in Germany and America is likely to decrease, China will soon introduce stimulus programs.

It was the 100th Annual General Meeting of BMW last Thursday and at the same time the first that the group held exclusively digitally – including a short roadshow in its own rooms and an exhibition of the company’s vehicles during the speech by BMW CEO Oliver Zipse. But in addition to Zipse, chairman of the supervisory board, Norbert Reithofer, also said things that showed that it no longer looks so glamorous behind this facade.

Both spoke of the diverse challenges the company faced in 2019. Despite increasing sales, the group result fell by 26.1 percent compared to the previous year. This year there is also the corona crisis, which reduced sales by 41 percent in April alone. Zipse sums up: “The forecasts for 2020 are bleak.”

Dudenhöffer: “China is a stroke of luck”

But the goals are no less ambitious for that. As early as 2021, a quarter of the new car fleet in Europe should be electrified; 2025 one third; 2030 half. And above all, one sales market offers hope: China. Sales there are 14 percent higher than in the same period last year.

“China is a stroke of luck for German car manufacturers,” said Ferdinand Dudenhöffer from the University of St. Gallen in an interview with “The markets in Germany and America are saturated – but far from that in China.” After all, there are about 170 cars per 1,000 inhabitants in China; in Germany there are 611; more than 800 in America. Read Too

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In addition, it looks as if the Chinese economy is recovering faster than the German one. “So far, German politics has no instruments with which it could get the economy going,” continues Dudenhöffer. Zipse also spoke in his speech of an “economic stimulus package for the entire economy”.

Two suppliers for each component

Things are different in China, where companies in the construction industry report an increase in demand. It is certain that China will launch economic stimulus programs. This will probably be decided at the Chinese People’s Congress on May 22nd.

Given the fear of declining demand, the problems that the corona virus has created in the supply chain are fading. “Supply chains are a minor violation; a trifle, ”explains Dudenhöffer. Nevertheless, it was now important not to act blue-eyed: Hyundai, for example, “obtains most of its on-board power from the central Chinese province of Hubei. With that, Hyundai was on the ground with Corona. This is really not state of the art when it comes to shopping, but naive. “

Instead, manufacturers should have two suppliers for each component. Because now it is a matter of stabilizing supply chains and not relying on just-in-time production. There is no 100 percent protection – but there is a 95 percent.

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