Introduction: Crisis in the German automotive industry

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The German automotive industry, which accounts for 25.2% of total industrial sales, is facing one of its most profound crises in 2025. Vehicle production in Germany has fallen by around 25% since 2018. According to a study by the German Economic Institute (IW), there are several reasons for this:

• High dependence on exports:
  Over 75% of vehicles produced in Germany are exported, around 40% of them to international markets. This poses a risk due to trade wars and tariffs.

• Germany's declining attractiveness as a business location:
  Germany was already overtaken by China as the most important production location for German manufacturers in 2018. With over 30 million vehicles produced per year, China is now the world leader. Lower labor and energy costs make production there much more economical. China also has a clear advantage in electric mobility and battery technology.

While manufacturers such as BYD and CATL are significantly increasing their production of electric vehicles, German manufacturers are struggling. They are battling numerous structural deficiencies. There are too few affordable electric models. There is also a lack of knowledge in software and battery technologies. The charging infrastructure is also not powerful enough.

While we are still debating, China is already producing over 30 million vehicles a year and dominates battery technology. The result: plant closures, job cuts, and bankruptcies in the supplier industry.

A fundamental change is necessary to remain competitive in the long term. Investment in digitalization, new technologies, stable supply chains, and sustainable structures is important. This will enable the German automotive industry to remain competitive and secure its future.

The role of purchasing in the German automotive industry

Direct vs. indirect purchasing

Purchasing in the automotive industry operates on various levels:

In the automotive industry, a distinction is made between direct and indirect purchasing, as well as between automotive manufacturers (OEMs, e.g., VW, BMW, Mercedes-Benz) and suppliers (e.g., Brose, ZF, Continental).

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The secret to success of the winners: They do not view indirect purchasing as a side issue, but as a strategic lever for efficiency and innovation.

Purchasing as a cost factor

Depending on the company, procurement costs account for a significant portion of the total costs of an automotive manufacturer or supplier. This means that even small savings in purchasing can have a noticeable impact on profitability.

Significance for competitiveness:

• High cost pressure: Increasing competition is forcing German companies to continuously optimize their cost structure. Purchasing is at the center of this effort, not only in terms of direct material usage, but also in indirect areas (e.g., services, IT, facility management).
• Total cost of ownership (TCO): Modern purchasing departments consider not only the purchase price, but also the entire life cycle of a product. Factors such as maintenance, energy consumption, reparability, and disposal are all taken into account in the decision-making process.

Cost reduction strategies:

• Product group management: Systematic analysis of product groups allows requirements to be bundled, synergies to be identified, and targeted cost-cutting measures to be implemented.
• Supplier consolidation: Reducing the number of suppliers increases bargaining power and simplifies processes.
• Make-or-buy analyses: Internal production vs. outsourcing, purchasing decisions are increasingly based on comprehensive profitability calculations.
• Global tenders: International tenders and awards create competitive conditions and enable more favorable purchasing terms to be achieved.

Digitalization as an efficiency driver:

• E-procurement systems and automated ordering processes relieve the operational purchasing team and create more space for strategic tasks.
• Key figure-based control: Purchasing controlling is becoming increasingly important. KPIs such as savings rates, maverick buying, and on-time delivery can be used to control processes in a targeted manner and identify weak points.

Companies that strategically position and continuously optimize their purchasing not only secure financial advantages, but also a long-term competitive position.

Based on this, five trends for purchasing in the automotive industry can be identified.

Trend 1: Digitalization and e-procurement accelerate purchasing processes

The reality: Companies with digital purchasing processes respond 50% faster to market changes. Digital purchasing processes offer enormous advantages, especially in the automotive industry, which relies on just-in-time delivery , complex supply chains, and a high degree of product variety.

The advantages at a glance:

Automation reduces manual effort
Digital procurement tools enable extensive automation of ordering processes. Especially in the automotive industry, where many components have to be procured at high frequency, the automation of requisitions, approvals, and invoice comparisons ensures greater speed, fewer errors, and lower process costs.

Real-time transparency along the entire supply chain
Modern e-procurement platforms create full transparency through centralized data storage and seamless interfaces: OEMs and suppliers can keep track of prices, delivery times, availability, and the current status of every order at all times – a decisive advantage in volatile markets and when plans change at short notice.

Better collaboration through supplier integration
The digital connection of Tier 1 and Tier 2 suppliers significantly improves communication. Product catalogs, order confirmations, and delivery documents can be processed automatically, minimizing misunderstandings and shortening response times.

Self-service reduces the burden on purchasing
User-friendly self-service portals enable specialist departments to record their requirements independently, for example when procuring indirect materials or services. Purchasing retains control, ensures compliance, and can concentrate on strategic tasks.

Scalability for growing requirements
Whether new vehicle platforms, international production sites, or the integration of new technologies such as e-mobility – modern procurement systems grow with you. They can be flexibly adapted and thus support the innovative strength of the industry.

In the automotive industry, time is money and transparency equals security.

Practical tip: Start with the digitalization of indirect purchasing, where the quick wins are greatest.

Trend 2: Strategic risk management for resilient supply chains

The semiconductor crisis has shown that those who do not have risk management in place will come to a standstill.

Global crises, geopolitical tensions, and climate change show that the automotive industry is facing a major challenge. There are many problems, especially when it comes to securing supply chains. Production downtimes due to missing components, volatile raw material markets, and regional instability affect OEMs and suppliers alike. This makes strategic risk management all the more important. Risks must be identified early on and targeted measures to increase resilience must be enabled.

The advantages at a glance:

Strategic measures:

• Risk mapping: Make critical weaknesses transparent
• Multi-sourcing: No more single-source dependencies
• Early warning systems: AI-supported analysis of market developments
• Business continuity plans: Develop concrete emergency strategies

Success story: Companies with diversified supplier structures weathered the coronavirus crisis better.

Trend 3: Compliance as a competitive advantage

New laws, new opportunities: Laws such as the Supply Chain Due Diligence Act (LkSG) and the EU Supply Chain Due Diligence Directive (CSDDD) force companies to take action, but also create opportunities for differentiation.

Here is an overview of the most important legal principles in purchasing in the automotive industry:

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Strategic approach: Companies that use compliance as a driver of innovation gain the trust of investors and customers.

Actively leveraging regulations and sustainability is increasingly shaping the role of purchasing. This trend is clearly noticeable, as the German government is also promoting this way of thinking. One example is the federal government's 2020 economic stimulus package with targeted support modules. These modules include the modernization of production facilities and the promotion of regional innovation clusters. This provides active support for the automotive industry's transformation to a " " (smart, sustainable, and digital) economy. The aim is to build resilient supply chains, drive forward future-oriented fields of technology such as autonomous driving, and enable a networked, high-performance industry through digital infrastructure projects such as GAIA-X. Purchasing is becoming the interface for innovation, partnership, and transformation.

Trend 4: Data-driven purchasing with predictive analytics

Data-driven purchasers make better decisions than their colleagues who rely on gut instinct.

• Predictive analytics models help identify future demand, price trends, and potential supply bottlenecks at an early stage. A data-driven view of the future provides a clear competitive advantage. This is particularly important for components that are difficult to plan, such as semiconductors and high-voltage batteries.
• Combining internal data (e.g., order history, consumption behavior, production planning) with external sources (e.g., market analyses, geopolitical developments, raw material prices) creates a sound basis for purchasing decisions. For example, an increase in nickel prices can be taken into account at an early stage in battery production.

Companies with data-based purchasing processes react much more agilely to fluctuations in demand, raw material shortages, or political changes. The ability to act early is becoming a decisive strength in international competition.

Trend 5: Rethinking global procurement: regionalization & nearshoring

Paradigm shift: Instead of "global sourcing," the new buzzword is "smart sourcing." The motto is: regional where possible, global where necessary.

• Shorter delivery routes reduce costs and emissions: By moving production and procurement activities closer to the production site, transport times and costs can be significantly reduced. At the same time, CO₂ emissions are reduced.
• Greater resilience in uncertain times: Regional supplier relationships are often more stable and less susceptible to international crises, natural disasters, or political tensions. Especially with precise scheduling and just-in-time production, regional proximity can be crucial to ensuring delivery capability.
• Less dependence on risk regions: Many companies in the industry are currently rethinking their heavy dependence on individual markets, especially China. Targeted diversification of the supplier structure through nearshoring creates strategic options and reduces the risk of delivery failures or geopolitically induced restrictions.
• Strengthening local economies: The integration of regional suppliers not only strengthens local economic structures, but also promotes trust among customers, partners, and employees.
• Easier compliance and ESG fulfillment: Regional procurement makes it easier to comply with legal requirements.

From theory to practice: your 3-phase action plan

Knowing the five trends is one thing, implementing them successfully is another. Here is your concrete roadmap for future-proofing procurement in your company:

Phase 1: Immediate measures (0-3 months)

Goal: Identify weaknesses and achieve quick wins

Concrete steps:

• Conduct a digitalization audit
  
  • Document all manual ordering processes
  • Measure the time required for each process
  • Evaluate automation potential (start with indirect purchasing)
• Create a risk inventory
  
  • Identify single-source suppliers
  • Categorize critical components according to availability
  • Analyze geographical risk distribution
• Perform compliance check
  
  • Check LkSG requirements against current processes
  • Review supplier documentation for ESG criteria
  • Identify legal gaps

Expected result: Transparency regarding the current situation and an initial 5-10% increase in efficiency

Phase 2: Medium-term transformation (3-12 months)

Goal: Implement systems and establish structures

Specific steps:

• Introduce an e-procurement system
  
  • Evaluate providers based on automotive specifications
  • Start pilot project with one product group
  • Gradually integrate Tier 1 suppliers
• Drive forward supplier diversification
  
  • Establish at least two alternative sources for critical components
  • Evaluate nearshoring options in Eastern Europe/North Africa
  • Qualify and onboard regional suppliers
• Establish predictive analytics
  
  • Define and link data sources
  • Implement AI tools for price forecasting
  • Test initial forecast models for semiconductors/batteries

Expected result: 15-25% increase in efficiency and significantly higher supply chain resilience

Phase 3: Strategic realignment (12+ months)

Goal: Position purchasing as a strategic driver of innovation

Specific steps:

• Develop co-innovation programs
  
  • Joint development projects with key suppliers
  • Establish joint R&D budgets for future technologies
  • Establish Supplier Innovation Days
• Full ESG integration
  
  • Incorporate sustainability KPIs into all supplier contracts
  • CO₂ footprint tracking for the entire supply chain
  • Integrate circular economy principles into product development
• Create a digital ecosystem
  
  • Implement blockchain for supply chain transparency
  • Install IoT sensors for real-time monitoring
  • Digitally connect Tier 2 and Tier 3 suppliers

Expected result: Purchasing will evolve from a cost optimizer to a strategic competitive advantage

Conclusion

The German automotive industry is at a crossroads. While international competitors score points with low costs and rapid innovation, German companies have a decisive advantage: their engineering expertise and precision.

Purchasing is the key to activating these strengths. Companies that strategically transform their purchasing not only secure short-term cost savings, but also long-term competitive advantages.

The decision is yours: Will you remain a reactive cost optimizer or become a proactive driver of innovation?

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