Mood darkens among German auto suppliers as investment, hiring fall, survey shows

By Rachel More

BERLIN, June 17 (Reuters) - German automotive suppliers expecting business conditions to worsen over the next year now outnumber the industry's optimists, a survey showed on Wednesday, as domestic hiring sinks to a new low and investment in the sector moves overseas.

The German auto industry's rocky transition to electric vehicles, which could cost 225,000 jobs in the coming years, has strained suppliers as they also navigate trade barriers and high costs, according to the VDA industry association.

Its survey of 116 automotive suppliers, conducted between May 12 and 24 and seen by Reuters, found that nearly a third expect the situation to deteriorate, while only 25% expect an improvement.

That represents a reversal from its previous poll conducted in January when 23% had expected a deterioration and 30% expected improvement.

GERMANY LOSES OUT ON INVESTMENT, ASIA GAINS

The latest survey also showed a continued drain in investment and employment in the German automotive industry.

Around two-thirds of suppliers said their investments planned for Germany would be postponed, moved abroad or cancelled completely.

Asia was the main region benefitting from investment shifts, followed by other parts of the European Union and North America, a VDA spokesperson said.

Over half of companies were cutting jobs in Germany while just 3% were hiring - the lowest rate since the VDA began collecting comparable data in June 2024.

Among those companies shrinking their German workforce, 44% were simultaneously hiring abroad, according to the poll.

"The results of our survey highlight Germany's crisis as a location for industry," VDA President Hildegard Mueller said.

Small and medium-sized automotive companies are under increasing pressure in Germany due to excessive bureaucracy, high labour costs and rigid labour laws, according to the association.

The Middle East conflict has further driven up costs in recent months, with 46% of surveyed auto suppliers saying they are already feeling the effects through higher prices for fuel, energy and components in their supply chains.

(Reporting by Rachel More; Editing by Joe Bavier)