European automotive industry faces investment declines and market shifts

The European automotive industry is facing significant structural challenges. Analysis from ACREDIA and Allianz Trade indicates that investments by European automakers fell by approximately 20 percent in 2026, the sharpest decline since 2018. This trend is attributed to historical over-investment in combustion engine platforms and delayed focus on electrification, software, and AI. Consequently, major German manufacturers have seen value creation per vehicle drop by 30 to 45 percent compared to 2021/22 levels.

In the raw materials sector, AMG is navigating market volatility as Chinese lithium carbonate futures dropped by 11.8 percent. This decline is linked to demand concerns following potential EU-China agreements regarding hybrid vehicle exports. While AMG's lithium projects in Bitterfeld and Zinnwald have received strategic project status from the EU, Citi has lowered its price target for AMG to 50 euros, though it maintains a ‘buy’ recommendation.

Amidst these industry shifts, major supplier ZF Friedrichshafen has confirmed it will continue to pay its contracted employees the traditional year-end bonus (Christmas money) in 2026. This payment, ranging from 25 to 55 percent of a gross monthly salary, comes as the company undergoes a major restructuring to manage significant debt and a planned reduction in workforce.