A recent survey by the German Association of the Automotive Industry (VDA) has unveiled a bleak perspective among German automotive small and medium-sized enterprises (SMEs) regarding their economic prospects for 2025. The survey, which has been conducted since spring 2020, indicates that a significant number of these companies are facing issues concerning economic underperformance and a challenging order situation. For 2024, half of the medium-sized automotive companies in Germany did not meet their economic expectations, while 19% reported that they only achieved lower-than-expected projections. Only a mere 5% of companies surpassed their expectations, emphasizing the sector’s struggles. As the companies look forward to 2025, the forecast remains grim; only 17% expect an improvement, while 45% foresee no significant change, and a concerning 38% are apprehensive about a potential deterioration in their economic condition.
The VDA’s findings paint a worrying picture regarding the order situation, with over 65% of respondents identifying it as a major challenge. The previously robust order backlog has diminished, reflecting the adverse impacts of sluggish overall economic growth and a lackluster European car market. Additionally, investment activity in Germany is markedly restrained, demonstrated by the fact that 69% of companies have either postponed, relocated, or canceled planned investments. Conversely, the inclination to transfer investments abroad has seen a decline, with 23% of companies considering this option, the lowest rate since the survey’s inception. This decline likely suggests companies are reassessing their investment strategies in the context of the current economic climate, prioritizing stability over relocation.
The workforce landscape in the German automotive SME sector is also undergoing significant changes. Over half of the companies are reportedly reducing their workforce in Germany, while 14% are in a hiring phase, and 32% have maintained stable employment levels. This mixed employment scenario corresponds with the broader economic challenges, suggesting layoffs may be an attempt to stabilize operations in light of reduced demand. To counteract the prevailing economic trends, many companies (69%) are implementing efficiency improvement programs, while 59% are focusing on restructuring. Moreover, 29% of the respondents are actively considering diversification to mitigate risks associated with the existing market environment.
In response to these pressing challenges, the VDA survey highlights a critical need for reduced bureaucracy and regulatory burdens, as 92% of the companies emphasize this as a top priority for the new EU Commission. The automotive SMEs are calling for improved conditions that would bolster their competitiveness and streamline reporting requirements. Additionally, 41% of companies advocate for specialized funding programs tailored specifically for SMEs. This collective push from industry leaders underscores a desperate requirement for governmental and regulatory support to navigate the current economic turbulence and encourage growth in the sector.
VDA President Hildegard Müller articulated the gravitas of the situation, stating that medium-sized enterprises in the supplier industry play a pivotal role in the successful transformation of the German automotive landscape. She cautioned that the combination of weak demand and unfavorable location conditions poses an increasingly toxic challenge for these companies. Müller urged policymakers to take concrete actions to address the root causes of these issues. She highlighted the necessity for competitive energy prices, consistent bureaucracy reduction, infrastructure investments, and strategic measures to combat the shortage of skilled workers. Furthermore, she emphasized the importance of international trade agreements and timely negotiations on raw materials, which are vital for the sector’s recovery and sustainability.
In conclusion, the VDA’s survey reveals a pressing need for the German automotive SMEs to navigate through significant economic hurdles as they approach 2025. With a majority of companies struggling to meet expectations and expressing pessimism about the future, the industry is at a crucial juncture. The urgent call for governmental support, regulatory reform, and strategic investments reinforces the need for a collaborative effort between the industry and policymakers to foster a conducive environment for growth and innovation. With the right measures in place, there remains a glimmer of hope for these enterprises to thrive and contribute substantially to the transformation of the German automotive landscape in the coming years.
