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1. Introduction


industry is going through drastic transformation within itself to support the
needs of the environment and the customers. Due to the impact of emissions from
traditional (IC engine) cars to the environment, there is a need to reduce the
emission levels to reduce the damage caused by cars to the environment.

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Governments of the major market have introduced stringent norms to restrict and
control the emissions from cars.


The stringent
norms compel the automakers to technologically innovate and control the overall
emissions cost effectively. This leads to the transformation from conventional
IC engine based cars to models that emit zero emissions. The transformation
brings changes to the core of production methods adopted over the years. New
platforms, Digitalization and automated production methodologies are a few
changes impacting stakeholders especially the suppliers much dependent on the
IC engine.


The German
automotive supplier industry, with about 300,000 employees 1, has earned a
brand name for innovation and high performance globally. The industry includes
family businesses, medium scale companies and global corporations across


The suppliers of
power train are expected to undergo drastic transformation with the expectation
to satisfy the increasing demand for producing completely new parts that
require new machines, production technology along with intensive research and
development. All of the above requires huge investment. Globalization
influences to realize a cost effective and high quality production technique
that can challenge German suppliers to retain their competitiveness with the
rest of the world.


To support the
suppliers, Federal Ministry for Economic Affairs and Energy made programs such
as “Electric mobility, positioning along the value chain – ELECTRIC
POWER” providing funding for Research and Development towards electric
mobility. The areas of research include transmission technology, battery,
standardization, value chain, grid integration, smart charging stations and
infrastructure. 1


The purpose of
this thesis is to identify the impact of changing market environment in terms
of business operation of the German suppliers who have their expertise in
internal combustion engine part manufacturing. The major limitations faced are
the lack of data in areas of investments, value of production facilities
available, cost of liquidation of existing machines and capacity details of the
suppliers. We identify the impact strategically based on technical and business
aspect declared by the companies in new products and new ventures.

2. German Automotive Market


Germany plans to phase out
traditional CO2 emitting car and completely move into electric by 2030. At the
beginning of October 2016 German Bundesrat passed a resolution to make German
mobility completely carbon free by 2050. The Bundesrat has planned tax
escalation on internal combustion engines and introduction of financial
incentives to the electro mobility for newly registered cars by 2030. 2


The resolution passed by the Bundersrat
influences first to the performance carmakers such as Audi, BMW, Mercedes and
Porsche with a technical leadership in innovation and patents of Internal
Combustion engine to transform the current high performance internal combustion
engines into hybrid and electric platforms. The technology of high performance
cars eventually builds into scalable mass-market cars and makers like
Volkswagen will implement the change for the masses.


The businesses of the power-train
suppliers of Germany with notable expertise of engine part supply chain will be
the fundamentally affected. The change from traditional to electric will impact
jobs as the change is expected require only one third of the work force due to
automation of production lines and globalization. 3 i.e. for every 2 – 3 jobs
lost from the conventional operations, one new job will be created in the
research and development, IT or other areas of the zero emission technology.


The suppliers can still defend their IC
engine technology by retaining their production base to cater the demands of
the international markets that sustain the traditional engines in its market

2.1 Sales


Germany is one of
the major markets in the world with a market volume of 3.3 million cars sold in
2016 3. The electric vehicle market has reached 40% growth rate per year in
2015; this rapid growth of electric vehicles is expected to continue with
improving infrastructure across the country. The financial aid provided by the
government is expected to lure more buyers to opt for electric vehicles
compared to the traditional IC engine options.


Figure 1:
Alternate powertrain car sales Germany 34


From the sales of electric vehicles from
2012 to 2015 displayed above, we can observe that the sales of alternate power
train vehicles doubled its volume in three years. The Hybrid cars are currently
sold 3 times more compared to electric and fuel cell vehicles due to
infrastructure constraints. The price of the electric cars is also a major
setback, as value imparted by electric car adoption to the environment is not
justified by the steep price the customer has to pay. Mass scaling in production
and improvement of innovative technology in terms of cost will set the way to
massive improvement of the electric vehicles in the market.


The market share of the electric vehicles
in German market is at 1.8% in 2015 with around 57,000 vehicles; with a market
size of over 3 million units the potential of electric cars volume is expected
to increase in the upcoming years with strong change of perspective from the
consumers and improvements in the car’s range, price and efficiency 5. The
increasing numbers of electric vehicles can mark the beginning of demise of the
traditional IC engine vehicles to challenge the manufacturers and the suppliers
in their invested production capacity.

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