Automotive SMEs: shortage of skilled workers and general staff, electricity prices and bureaucracy place enormous burden on companies

The 23rd SME Day of the German Association of the Automotive Industry (VDA) opened in Bonn today. Titled "Risk and resilience: value chains under scrutiny", the two-day conference’s main topic is the diversification and stabilization of automotive supply chains.

"The transformation is a major challenge for the automotive industry and SMEs in particular are heavily challenged in times of overlapping and intensifying crises. Companies are driving change with maximum determination, with investments and innovations. In order to remain successful, appropriate framework conditions are crucial. The international location competition is in a decisive phase. Berlin and Brussels must react to it more decisively: not with new rules and requirements, but with concrete relief and simplifications. Whether it is energy prices, bureaucracy, taxonomy or a target-oriented skilled worker policy - this is where competitiveness is now being put at risk," said VDA President Hildegard Müller at the opening of the SME Day.

In her speech in Bonn, Müller also referred to the results of a current survey conducted by the VDA among automotive suppliers (manufacturer group III) and among medium-sized manufacturers of trailers, bodies and buses (manufacturer group II).

Electricity price remains a major burden

Compared to the last survey, the proportion of companies suffering from a shortage of skilled workers and workers has increased further. This now applies to 85% of companies (February: 77.6%). In addition, 72% of companies state that they are heavily or very heavily burdened by bureaucracy (February: 62%). The high electricity price is a specific burden for companies: Around three out of four companies (74%) state that they are heavily or even very heavily burdened by the high electricity prices (February: 82%). 59% of the companies are very or even very badly challenged by the gas prices (February: 73.3%).

This shows that energy costs - especially the price of electricity - continue to be one of the key challenges for the automotive supply industry and small and medium-sized automotive companies in Germany. Müller emphasizes: "Our industry needs internationally competitive energy prices in order to master the transformation and to be successful in global competition. It is therefore urgently necessary for politicians to make appropriate decisions and strategies to ensure lower prices and secure access to energy."

In the survey, 7 out of 10 companies (70%) assessed an industrial electricity price under discussion as good for the location. The VDA President emphasizes: "When introducing an industrial electricity price, it is essential that medium-sized industrial companies are also taken into account. The planned 'bridging electricity price' has so far only been intended for energy-intensive companies. But the important industrial medium-sized companies are widely ignored although this sector also relies on competitive electricity prices." On the other hand, according to Müller, it is to judge positively that, according to the current concept, important transformation industries such as battery or semiconductor factories can benefit from the bridge electricity price.

In order to reduce electricity prices, the ancillary electricity costs would also have to be taken into account immediately. "The electricity tax (2 €cents/kWh) must be reduced to the European minimum rate of 0.05 €cents/kWh, and the concession fees (1.66 €cents/kWh) should be completely eliminated," says Müller.

Relocation of investments planned primarily to other EU countries and North America

The survey also shows that companies are relocating investments: As in the survey in February, according to the latest survey results, 27% of companies are planning to relocate investments abroad (September 2022: 22%). Another 5% plan to cancel investments (February 2023: 14%, September 2022: 9%). The companies planning to relocate mainly target other countries in the EU (43%) and North America (30%). After at least 2% of the companies stated in February that they wanted to increase their investments in Germany given the current situation, in the recent survey no company at all stated that they wanted to increase their investments in Germany.

"The current results once again show how important an ambitious program is for competitiveness and location. The competition never sleeps. Other countries like the USA attract investments with inviting location conditions. If we don’t like to be left behind internationally and want to secure employment and prosperity in Germany and Europe, we need a more resolute and courageous industrial policy, emphasizing on enablement instead of preventing: less bureaucracy, more trade agreements, a better secured supply of energy and raw materials, a competitive tax system and simpler, faster approval procedures.This is the only way we can become the leading market for climate protection technologies."

"We keep things ticking over"

Further results of the current VDA survey: In order to increase their resilience, 69% of the companies have made energy savings and more than every second company (52%) has adapted production processes. Four in ten companies (41%) have built up inventories. 36% have adjusted the supplier network, 35% made adjustments in logistics.

"The survey highlights that resilience has really caught on among medium-sized automotive companies. Due to the challenges of the past few years and the lack of availability of preliminary products, companies have increasingly dealt with their resilience. They have taken a whole bundle of measures to increase their resilience and to be able to meet the challenges of our time in the best possible way. Resilience is also the central topic at this year's VDA SME Day, because the exchange among ourselves and with customers and suppliers on it is extremely valuable," says Arndt G. Kirchhoff, Chairman of the Advisory Board of the KIRCHHOFF Group, VDA Vice President and Chairman of the VDA SME Group.

Kirchhoff continues: “The automotive medium-sized company achieves great things. Around every sixth euro (17%) generated in the automotive industry comes from a medium-sized company. We keep things up and running. It is all the more important that politicians recognize these efforts and support them with the appropriate framework conditions. Above all, energy costs must be reduced quickly and effectively to give companies room to breathe. This is immensely important, especially for medium-sized automotive companies."

The survey was conducted from May 15th to May 23rd. 128 companies took part. This means that the VDA has representative statements on the current situation and prospects for the automotive industry.

In a position paper, the VDA recently clarified the framework conditions that medium-sized automotive companies need. The paper "Creating the right framework conditions now - SMEs at the crossroads" can be found here (in German): VDA SME Forum.