European auto component manufacturers warn that the continent’s competitiveness is deteriorating at a rate that is putting its industrial capacity at risk. According to the latest “CLEPA Pulse Check,” prepared in collaboration with McKinsey, as profitability declines, … Production capacity and increasing pressures from Chinese imports determine the structural risk scenario for the sector.
The report reveals that seven out of ten suppliers expect profits of less than 5%, which is the minimum necessary to sustain investments in technology, training and new capabilities.
A third expect no or very low profits, which hurts employment and future business development. The prospects are not improving in the medium term: in 2026, 70% of companies will still be below this threshold.
The loss of competitiveness is already affecting Western Europe’s industrial footprint. Half of the suppliers plan to reduce their production capacity in the region within the next five years, while only 10% plan to expand it. In turn, companies see greater opportunities in more predictable and less expensive markets, such as North America and Asia.
This pressure is increased by the progress of Chinese suppliers. Now 69% of European companies compete with products imported from China, 12 points more than in the spring. Three out of four expect this pressure to increase further in the coming months.
Benjamin Krieger, Secretary General of CLEPA, warns that the situation could lead to industrial hollowing out if urgent measures are not taken: reducing electricity costs, reducing bureaucratic burdens, improving financing conditions and local content policies that retain important knowledge in Europe.
The sector also requires a flexible and neutral technology framework that allows for accelerating innovation and decarbonisation without hindering the transformation process.
“Without decisive action, component manufacturing in Europe is at risk of disappearing,” Krieger warns.