German auto suppliers signal retreat from domestic investment, warn of hollowed industry

A new industry survey presented by Germany’s carmakers’ association (VDA) reveals a decisive shift by suppliers away from investment on German soil: roughly 72% of the 124 small and medium enterprises polled between Jan. 11–25 said they intend to reduce capital spending in Germany, with 28% planning to relocate projects abroad, 25% postponing them and 19% cancelling. The poll captures active decisions rather than distant strategy: just under two‑thirds of respondents cut headcount last year and 49% report continued job reductions within Germany today, versus 7% trimming roles abroad. The survey’s timing coincides with high‑profile corporate moves: Aumovio has announced a restructuring that will remove about 4,000 jobs in Germany, a concrete example of the labour impacts suppliers warned of. Suppliers point to weakening order books, intensified foreign competition—notably from Chinese EV players that have scaled upstream capabilities—and the capital intensity of shifting to electric powertrains and software as principal pressures. Major automakers including Volkswagen and Stellantis are intensifying engagement with EU policymakers, pressing for calibrated, legally defensible measures—clearer domestic‑content rules, targeted financing and selective procurement preferences—to shore up midstream battery capabilities (cathode precursors, active materials and refining) and other strategic nodes. Executives argue some European gigafactories still run below nameplate capacity and that lower‑cost chemistries from Asia are compressing unit costs, altering investment calculus for suppliers. The VDA and industry leaders warn that continued disinvestment risks hollowing regional supplier clusters, increasing dependence on overseas engineering and manufacturing nodes and creating supply‑chain bottlenecks. Policy options being debated include incentives tied to investment and competitiveness, clearer timelines for the transition to zero‑emission vehicles, and public investment in grid, port and skills infrastructure; poorly framed measures, however, could fragment cross‑border supply chains or provoke trade tensions. If policymakers fail to combine short‑term targeted support with medium‑term industrial rebuilding, Germany risks not only near‑term layoffs and factory rationalisations but a longer‑term erosion of manufacturing depth and specialized know‑how that underpin vehicle innovation.