German auto suppliers' debt load deepens as China gap widens

Germany's leading automotive suppliers are carrying a heavier debt burden than their international peers, according to a financial analysis by Strategy&, PwC's German consulting arm. The study, due for release later this month, shows that average interest expenses at major suppliers rose for the fourth straight year in 2025, reaching 102% of operating earnings. That level is significantly higher than comparable figures in the rest of Europe and China.

Henning Rennert, a partner at Strategy& Germany, noted that many companies in the supplier industry are managing substantial debt loads. The analysis also found that German firms have lower average equity ratios than competitors, leaving them more exposed to financial stress.

The study examined companies including ZF, Continental, and Schaeffler. These firms have been restructuring in recent years as major customers like Volkswagen and Mercedes-Benz navigate a slow and costly transition to electric vehicles, face steep tariffs, and lose ground in China.

Competitive pressure is intensifying. Strategy& found that the cost gap between German and Chinese suppliers widened between 2019 and 2025. While German suppliers saw overhead costs worsen during that period, Chinese competitors became more efficient, reducing both overhead and manufacturing costs as a share of revenue.