New financing hurdles exacerbate the supplier crisis

Increasing financing problems

In the last one to two years or so, the financing situation for automotive suppliers has become increasingly challenging. Access to relatively cheap bank loans has become more difficult and many companies are no longer able to obtain financing from commercial banks at all. Instead, they have had to turn to alternative sources of financing such as debt funds. However, this move increases the financing costs considerably, as interest rates for this alternative type of financing are often well over 10%. Even companies that continue to be financed by commercial banks have experienced a drastic rise in their financing costs over the past two years. During this period, the Euribor has increased from below 0% to just under 4%.⁴ With a standard market interest margin of 4%, financing costs have therefore doubled from around 4% to approximately 8%.

German commercial banks are increasingly reluctant to grant loans to the automotive supply industry, especially to SMEs. This is also confirmed by a study conducted by KfW in collaboration with the ifo Institute: According to this, 26.3% of SMEs surveyed in the manufacturing sector reported difficult credit negotiations with banks at the end of 2023, compared to just 14.8% at the beginning of 2019.⁵ This reluctance on the part of banks means that suppliers are even more dependent on more expensive sources of financing, which puts further pressure on their financial situation.