Germany's manufacturing sector "cools down," Austrian companies face pressure.

The Austrian Institute of Economic Research recently released its latest assessment report, pointing out that since the beginning of this year, overseas demand has continued to weaken, especially with sluggish domestic demand in Germany, becoming a significant factor dragging down Austria's industrial exports. The large-scale cost-cutting and layoffs by German automotive and machinery manufacturing companies have transmitted downward pressure on the industry to Austria, putting the highly Germany-dependent Austrian manufacturing sector at risk of a sustained decline in external demand. The report from the Austrian Institute of Economic Research indicates that in the second quarter of 2026, Austria's real Gross Domestic Product will show zero growth quarter-on-quarter, with industrial added value decreasing by 0.1%. A recent survey by UniCredit Bank reveals that in July, the Austrian manufacturing export order index fell to a year-low, indicating that external market demand continues to weaken. Austria's industries are closely integrated with Germany's, with significant export dependence of advantageous sectors such as machinery processing, metal products, and automotive components on the German market. Tracking data from the Austrian Institute of Economic Research shows that nearly one-third of Austria's industrial manufactured goods are exported to the German market, where fluctuations in German industrial prosperity directly affect Austrian manufacturing orders. Data from the Austrian manufacturing union and the Austrian private sector employees' union monitoring the industry shows that there are about 900 automotive component companies in Austria, employing a total of 190,000 people, deeply embedded in the supply chain of German automotive companies. Monthly research published by the German magazine "Industrie" estimates that 135 Austrian companies supply directly to Volkswagen's German factories, with related businesses indirectly supporting over 6,300 stable jobs within Austria. With an increasing number of German companies reducing capital expenditures and cutting back on outsourcing procurement, many small and medium-sized component manufacturers in Austria mainly focused on fossil fuel vehicle parts are experiencing a gradual decline in new orders. High energy costs, the transfer of manufacturing abroad, intensified global market competition, and enormous investments for electrification transformation are prompting German industrial companies to increase cost-cutting efforts, with the automotive industry being the hardest-hit sector in terms of layoffs. In March of this year, the Volkswagen Group announced plans to cut about 50,000 jobs in Germany by 2030. Recent reports from German media indicate that, in order to reduce costs, BMW Group plans to eliminate about 8,000 jobs worldwide by the end of 2027. Additionally, major German component suppliers such as Bosch and ZF are continuously shutting down domestic production lines. According to industry statistics published by Ernst & Young in May, by the first quarter of 2026, German industrial employment had decreased by 127,300 jobs year-on-year, cumulatively losing more than 340,000 jobs since 2019. Austrias industrial leaders are the first to feel the chill in the market. At the beginning of July, Andritz Group announced that its German subsidiary Schuler would continue to lay off about 500 employees. The company stated that weak demand for automotive forming and battery production equipment is the main trigger for this round of restructuring. This reflects the overall cooling of fixed asset investment in the European automotive industry. Industry analysts believe that the short-term shock of external industry contraction in Austria is concentrated in the upstream and downstream supply chains of traditional fossil fuel vehicles. In the medium to long term, pressure may extend to Austrias advantageous fields such as high-end machinery and metal processing.