VDA: Automotive SMEs view future with concern – Current situation dampens expectations

For every second company in the automotive mid-sized sector in Germany (50 percent), the economic performance this year has fallen short of expectations, while another 19 percent see their already low expectations confirmed. This is one of the results of a recent survey that the VDA has been regularly conducting among automotive suppliers (Manufacturer Group III) as well as medium-sized manufacturers of trailers, bodies, and buses (Manufacturer Group II) since spring 2020. Only 5 percent of the companies were able to exceed their expectations, while for a quarter of the companies, things went as well as expected.

The outlook is also bleak: For 2025, only 17 percent of the surveyed companies expect an improvement compared to this year. About every second company (45 percent) assumes that the situation will remain roughly unchanged. And four out of ten companies (38 percent) anticipate that their economic development will even deteriorate.

Order Situation a Major Problem

The order situation is becoming an increasingly major problem for the automotive mid-sized sector, with two out of three companies (65.5 percent) stating it as a large or very large challenge. This indicates that the weak overall economic development and the current weak development of the European automotive market are increasingly affecting the automotive mid-sized sector. The large order backlogs of the past have been completely processed.

VDP President Hildegard Müller: “The supplier industry and especially the numerous mid-sized companies are a key factor for a successful transformation of the German automotive industry. However, the weak demand combined with the site conditions is becoming increasingly toxic, particularly for mid-sized industrial companies. It is all the more important now that the political framework supports them—instead of additionally burdening them. The fact is: The supplier companies are internationally competitive with their products, but the site is currently not for many companies. Politics must finally tackle the causes of the problems. Specifically, this means: We need competitive energy prices, a consistent reduction of bureaucracy, infrastructure investments, measures against the shortage of skilled workers, as well as international trade and raw materials agreements that must be concluded promptly and on a large scale.”

Additionally, suppliers have recently been confronted with significantly more difficult access to bank financing, the VDA President further stated.

“Banks can improve the situation if they view the automotive sector more discretely. There are many successful transformation models among the suppliers," emphasizes Müller.

Investment Cuts at Historically High Levels

The survey shows: Investment activity in Germany remains weak. Faced with business expectations, companies are increasingly holding back on investments. Seven out of ten (69 percent) of the companies surveyed stated that they are postponing, relocating, or completely canceling investments in Germany that were initially planned. Around one in four companies (23 percent) plans to relocate investments abroad—the lowest rate since this survey began.

In the last survey in May 2024, the figure was 37 percent. The current survey shows: Relocation targets are Asia, the EU, and North America (in that order). At the same time, investment cancellations are at an all-time high: 19 percent of the companies surveyed plan to cancel investments. Unchanged from the last survey, only one percent of companies indicates wanting to increase investments in Germany given the current situation. Investment activity in Germany is currently particularly affected by the current sales situation and sales expectations.

Companies Reduce Employment

Another result of the survey in the automotive SME sector: The proportion of companies suffering from a shortage of skilled workers and labor has significantly decreased. Currently, only 37 percent of companies report this shortage, which is a significant reduction compared to all previous surveys. Correspondingly, the proportion of companies reporting difficulties in meeting short- and medium-term skilled labor needs has decreased (26 percent). The figures are an alarm signal, as they indicate that the weak overall economic development, especially in industry, is also reflected in the labor market.

More than every second company surveyed (54 percent) also stated that they are currently reducing employment in Germany. 14 percent are increasing employment, and in 32 percent, employment figures remain constant.

69 percent of companies plan efficiency enhancement programs in response to the current economic situation and medium-term sales expectations. 59 percent are focusing on restructuring measures, while 29 percent aim to diversify into other industries.