Germany's rising bankruptcy wave is looming over Czech businesses

The German economy faces another wave of bankruptcies in 2025, especially in the automotive industry, which is expected to heavily impact Czech suppliers.

Expats.cz Staff

Written by Expats.cz Staff Published on 18.01.2025 15:13:00 (updated on 19.01.2025) Reading time: 2 minutes

Germany is bracing for another large wave of bankruptcy filings, particularly within its automotive industry, which is vital for many Czech suppliers. Experts predict that insolvencies will rise by 40-50 percent in 2025, driven by a combination of economic challenges, higher energy costs, and the ongoing transition to electric vehicle production.

Czech suppliers, many of which depend on the German automotive sector, are already feeling the negative effects, with fewer contracts being awarded as production slows down. The situation is expected to worsen over the course of the year.

The growing wave of bankruptcies in Germany has raised concerns about its broader impact on Central Europe, especially for countries like the Czech Republic that rely heavily on cross-border economic ties.

Automotive industry struggles worsen

The German automotive sector, already suffering from financial strain, is facing further instability. According to Jonas Eckhardt, an expert at consultancy firm Falkensteg who recently spoke to industry publication Automobilwoche, the number of insolvencies in this industry is expected to soar in 2025.

Last year, 56 automotive companies went bankrupt, a 66 percent increase from the previous year. This marks the highest level of insolvencies in the sector since the pandemic-induced disruptions of 2020.

Eckhardt noted that as part of the restructuring process, significant workforce reductions and plant closures are expected. The deep cuts in the sector signal continued struggles for companies reliant on traditional automotive manufacturing. Major names like Bosch, Continental, and Volkswagen are already scaling back operations, with thousands of jobs at risk.

Ripple effects on Czech businesses

The knockdown effect of Germany’s automotive crisis is already being felt by Czech firms. As major German car manufacturers cut back on production, Czech suppliers are seeing fewer orders and a slowdown in industry activity.

The Czech Statistical Office reported a notable decline in industrial production in Q4 2024, with a 2.7 percent year-on-year drop in November following a 2.1 percent decline in October.

However, despite the setbacks, some Czech firms are finding opportunities in Germany's weakened state. Companies like Linet, a Czech manufacturer of hospital beds, are already finalizing acquisitions, while logistics companies like VCHD Cargo are actively seeking growth through mergers and acquisitions.

"Right now, a unique opportunity is opening up for strong Czech companies to successfully expand into Germany," Czech Ambassador to Germany Jiří Čistecký told e15 in a recent interview.

While the decline in Germany’s automotive sector poses a serious challenge, it could also open doors for dynamic Czech companies looking to expand their presence in neighboring markets.

Czech businesses specializing in manufacturing and logistics are specifically in a position to capitalize on the slowdown, with the opportunity to secure new partnerships and acquisitions as their German counterparts scale back.

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