Summary of Key Points
The number of German companies going bankrupt has significantly increased for two consecutive years, reaching nearly 190,000 in 2025 (a 10% year-on-year increase), and most of these closures are not due to bankruptcy. Only 13% of the closures were caused by debt defaults; 86% were voluntary decisions made by business owners due to reasons such as high costs, difficulty in hiring staff, or the retirement of owners with no successors. The automotive, hospitality, and healthcare industries have been the most affected. The automotive sector has not only suffered a large loss of jobs but is also shifting production capacity to Eastern Europe. Germany will not immediately abandon its export-oriented economy but is exploring trade diversification. The aging population (with many business owners retiring without successors) represents an invisible challenge for long-term growth.
I. Company Closures: "It's Not About Lack of Funds, But the Ability to Continue Operating"
Many people assume that company closures always mean bankruptcy (when a company cannot pay its debts and is liquidated by the court). However, this is not the case in Germany: only 13% of the closures are due to bankruptcy. The remaining 86% are voluntary decisions by business owners to cease operations. Why do they choose to close?
- Exorbitant Costs: Rising energy prices (such as for natural gas) and labor costs are too much for small businesses to bear.
- Lack of Staff: There is a shortage of skilled workers, including hotel employees and doctors.
- No Successors: In family-owned businesses, 29% of the owners who decided to close were over 65 years old (compared to 14% in 2002). Without suitable successors after retirement, they had no choice but to shut down their businesses.
To put it simply: It's like running a small restaurant where rent and employee salaries double, you can't find a chef, and you're approaching retirement while your children don't want to take over the business. In this situation, it's not about being unable to pay debts; it's really about no longer having the resources to continue operating.
II. The Three Most Struggling Industries: Hospitality, Healthcare, and Automotive
1. Hospitality: 15,000 businesses in this sector closed in 2025 (a 15% increase), with the smallest businesses being the hardest hit. High labor costs and rising prices for ingredients and energy make it difficult to cover expenses.
2. Healthcare: 11,000 healthcare businesses closed, including 5,500 doctor's clinics. The main reason is the retirement of experienced doctors, with younger doctors preferring other career paths or higher-paying jobs in larger hospitals.
3. Automotive: Although the growth rate of closures is not as high as in the other two industries, the automotive sector has seen a significant loss of jobs. As of June 2026, the number of employees in the automotive industry had decreased by 5.8% (42,300 people), more than twice the overall industrial decline. Major companies like Volkswagen and BMW are laying off staff or moving production to Eastern Europe.
III. The Dual Challenges Faced by the Automotive Industry
The automotive industry is one of Germany's key economic pillars, but it faces two major problems:
- Job Losses: The number of employees has decreased, especially among parts suppliers (a 7.6% reduction), due to fewer orders or higher costs.
- Production Capacity Shifting: German companies are moving factories to Eastern Europe (Czech Republic, Hungary) where labor and energy costs are lower, although still higher than in China. Experts point out that 2023 was the most profitable year for the German automotive industry, but the rise of electric vehicles (especially Chinese competitors) has left German companies behind. It will take time for them to adapt and turn things around.
IV. The Export-Oriented Economy: "Unchanged, But with New Strategies"
Germany has always relied on exports for its economic growth (selling cars and machinery worldwide). Some question whether it will shift away from this focus. The answer is not yet; after all, exports have been a cornerstone of the German economy for decades. However, Germany is making adjustments:
- Exploring New Markets: Reducing dependence on traditional markets like China and the United States, and seeking to expand sales in Eastern Europe and Southeast Asia through agreements with the EU.
- Economic Data: Although Germany still had a trade surplus of 105 billion euros in the first half of 2026, exports to the United States decreased by 14.2% month-on-month in June, indicating a need for new growth opportunities.
In other words, it's like if you used to mainly sell products to customers A and B, but now A is buying less, so you try to expand sales to customers C and D to diversify your risks—while still maintaining a strong relationship with A and B (just as China remains an important market for Germany).
V. The Aging Population: An "Invisible Bomb" Looming Large
Germany's aging population is quietly causing many companies to fail:
- Family Businesses Without Successors: 29% of the closed businesses had owners over 65 years old with no successors.
- Shortage in Healthcare: Clinics are closing due to the retirement of experienced doctors and a lack of young professionals willing to take over.
- A Long-Term Challenge: This issue cannot be resolved quickly; demographic changes happen slowly, and more companies may close in the future due to a lack of capable managers.
This is similar to an old store where the owner can no longer manage it, and their children are unwilling to take over, leading to its closure. Essentially, these problems reflect the broader societal issue of aging.
Conclusion
The current difficulties faced by German companies are the result of high costs, a shortage of skilled workers, a lack of successors, and increased competition from abroad. Although Germany will not change its export strategy for now, it needs to find new markets. The automotive industry must adapt to the era of electric vehicles, while the aging population poses a long-term threat to business sustainability. For consumers, these changes may mean higher prices for German products or harder access to certain services (such as healthcare).