N Some of the challenges auto suppliers are bracing for include declining orders from automakers, an influx of Chinese components and high interest costs that are squeezing profits, Automotive News analyzed.
At the same time, suppliers are forced to invest more in new technologies. A key question is whether these negative factors could lead to more bankruptcies in 2026.
Declining global auto production and declining orders to suppliers, particularly for internal combustion engine parts, means that many suppliers, especially smaller Tier 3 and Tier 4 players, risk bankruptcy or at least cash flow strain in 2026.
Research vice president at Gartner, Pedro Pacheco, predicts “risk of bankruptcies for mid-sized or even large vendors.” As a result, he foresees “further supply chain disruptions for automakers.”
“Several automakers will struggle with financial results and are therefore more likely to shift that burden to suppliers,” Pacheco said.
Earnings below the minimum investment threshold
This comes as seven out of 10 suppliers expect annual profits below 5%, the minimum threshold needed to sustain investment in technology, skills and production capacity, European supplier association CLEPA said in its Pulse Check study conducted with McKinsey.
Worryingly, a third of suppliers expect little or no profit, putting jobs, research and development and future growth at risk. At the same time, suppliers must address the challenges and costs of transformation as the industry moves toward electrification and digitalization, Pacheco adds.
Several auto suppliers declared bankruptcy or were experiencing serious financial difficulties in 2025. German auto supplier Voit, whose customers include Audi, BMW and Mercedes-Benz, filed for bankruptcy in January 2025. Marelli Holdings, a major supplier to Stellantis and Nissan, filed for Chapter 11 bankruptcy in the US in June, citing high debt and the impact of tariffs. Germany’s AE Group announced in September that it would cease production after failing to find a buyer during bankruptcy proceedings.
Cost cutting to survive
Suppliers must now cut costs, streamline operations and innovate or risk losing market share, announced Roland Berger in his Global Automotive Supplier Survey.
Small suppliers are not the only ones under pressure. Global giants Robert Bosch, ZF Friedrichshafen and Aumovio (formerly Continental) have announced significant job cuts. Bosch, the world’s largest automotive supplier, is cutting around 13,000 jobs, mainly at its German mobility division, by 2030 to address a 2.5 billion euro annual cost gap. ZF plans to cut 14,000 jobs by the end of 2028. Aumovio plans to cut more than 10,000 jobs in research and development in Germany and abroad.
Drastic steps are now needed as persistently low profitability threatens to lead the industry down a “dangerous path”, said CLEPA secretary-general Benjamin Krieger.
European suppliers are lagging behind their Chinese rivals, who benefit from subsidies and lower price bases. In other words, the European supplier industry is suffering as Chinese automakers become “increasingly important at the expense of their Western competitors.”
Suppliers are exported from Europe
Ongoing geopolitical tensions and tariff regimes are reshaping global trade and disrupting global supply chains, forcing companies to shift production to more cost-competitive regions.
This makes the manufacturing base of Western Europe increasingly fragile. For example, moving German suppliers to lower-cost locations in 2026 could “compensate somewhat for the poor cost structure in Germany” as “Germany is heading straight for deindustrialization,” Ferdinand Dudenhofer, director of the Center for Automotive Research in Bochum, Germany, told Automotive News Europe.
But not only Germany is affected. Half of CLEPA members plan to reduce their production capacity in Western Europe in the next five years and only 10% plan to expand their capacity there. Meanwhile, 49% expect growth in North America, 42% in Asia and 35% in China.
