Debt burden grows for German suppliers in embattled auto sector, study shows

BERLIN, Aug 7 (Reuters) - German auto suppliers are more indebted and spend more on interest than their international rivals as competition from China intensifies, according to excerpts from an upcoming study seen by Reuters.

A financial analysis by Strategy&, PwC's German consulting arm, found that average interest expenses at Germany's leading auto suppliers rose for a fourth consecutive year in 2025 to 102% of operating earnings - far exceeding levels in the rest of Europe and China.

"Many companies in the German supplier industry are managing substantial debt loads," said Henning Rennert, partner at Strategy& Germany.

The study, expected to be published later this month, also found that German companies had lower average equity ratios than their competitors, leaving them more exposed to financial stress.

Strategy& looked at German suppliers like ZF, Continental and Schaeffler.

Those companies have overhauled their businesses in recent years as customers like Volkswagen and Mercedes-Benz grapple with the slow and costly shift to electric vehicles, steep tariffs and lost dominance in China.

Suppliers themselves are under pressure to compete. Strategy& said the cost gap between German and Chinese suppliers widened between 2019 and 2025.

While German suppliers' overhead costs worsened during that period, Chinese competitors became more efficient, reducing both overhead and manufacturing costs as a share of revenue, according to the analysis.

(Reporting by Rachel MoreEditing by Ludwig Burger)