The overflow factory of choice for car makers in the UK and Germany is facing an uncertain future after the planned and unplanned ending of contracts leave it with just one vehicle to build.

Magna Steyr in Austria, a division of Canadian automotive giant Magna International, is a contract manufacturer of long-standing that has built more than four million examples of 34 different models to date.

However, the plant is about to be reduced to just the Mercedes G-Class, threatening its future as a going concern.

The storied plant situated in in the eastern city of Graz in the Alpine foothills “is experiencing uncertainty”, Magna’s financial report for the second quarter ending 30 June stated bluntly. 

The reason for the uncertainty was “due to the bankruptcy of Fisker; the planned end of production of the Jaguar E-Pace, Jaguar I-Pace, BMW Z4, and Toyota Supra; and Ineos’s decision to not proceed with the Fusilier programme,” the report said.

Magna was particularly exposed to Fisker’s bankruptcy in June after playing a big part in the development and production of the Ocean electric SUV, for which it was partly paid in Fisker shares.

The company booked a $261 million (£205m) impairment hit in the first quarter because of the end of Fisker production and said it was cutting its 2026 sales outlook by $600m (£472m) because of it.

Also in June, Ineos cancelled its Fusilier programme, which was to develop a smaller electric and extended-range hybrid SUV below the Grenadier that was to be built at Graz.

Meanwhile, Graz will stop building the electric Jaguar I-Pace and the E-Pace in December amid JLR’s decision to axe five Jaguar models this year ahead of the launch of a new, more upmarket electric car next year.

No confirmation was given for the end date of the BMW Z4 and related Toyota Supra, but previous reports have said production will finish in 2026. 

Magna still has the contract to build the Mercedes G-Class, a model the plant has built continuously since its launch in 1979, originally as an army vehicle. However, global G-Class sales last year were 42,700, which is way below Graz’s capacity. Last year, the plant built 105,100 vehicles in total, itself well down from its recent peak in 2019 when it made 168,822 cars.

Even the G-Class is not as lucrative as it once was, with the company forced to reduce its sales outlook by $900m (£707m) in 2026 after Mercedes reduced the amount of content Magna supplies itself. 

Magna’s full-service business model is to develop, build and supply parts from other company divisions such as bodywork. That’s more lucrative than just assembly, which is why it’s taking a bigger hit on reduced G-Class content than the entire loss of assembly of the Fisker Ocean. 

As a consequence, Magna is restructuring its Graz business, CEO Swamy Kotagiri said on the second-quarter earnings call, without being specific.

The problem Magna faces is that the contract manufacturing business model itself is under threat, as the company notes in its second quarter report. “We depend on outsourcing by OEMs… Currently, OEMs in Europe and China have excess vehicle assembly capacity.”

The majority of its customers in recent years have been premium brands, such as Mercedes, JLR, BMW, Audi and Aston Martin (with the Rapide). But they are increasingly looking to reduce volume and increase prices, making overspill plants like Graz redundant. Manufacturers are also bringing parts manufacturing in-house amid the electric shift.

This year, Dutch contract manufacturer Nedcar halted production and shut its plant for good after the final Mini Convertible came off the line in February following BMW’s decision to bring production in-house. 

The former Daf plant last year stopped production of the Mini Countryman, a model that had previously been made at Graz (along with the short-lived Paceman). The Mini SUV is now made at BMW’s plant in Leipzig, Germany.

Graz started car production in 1906 as part of Puch. Business was patchy until the 1950s, when it started making motorbikes, mopeds and the Puch 500, a version of the Fiat 500. However, it was the launch of the Pinzgauer off-road army vehicle in 1971 that cemented its future. That led to a joint venture with Mercedes to build the G-Wagen, later called the G-Class,  

The off-road focus generated contracts to develop and build a range of all-wheel-drive vehicles, including the Mercedes E-Class 4Matic, the VW Transporter T3 4x4, the VW Golf County Mk2 and the Jeep Cherokee.

The company also made differentials for the Fiat Panda 4x4, which was badged Steyr Puch in honour of the development work done by the company. Magna International took a majority stake in Steyr Puch in the late 1990s.

Magna Steyr is now turning to China in the hope that it can play a role producing for brands that want to localise in Europe and avoid tariffs. Magna Steyr current produces Arcfox-branded cars in China for the BAIC Group through a joint venture. “We believe when they come over… I think we could bring a lot of value and we believe we’ll be at the table,” Kotagiri said on the second-quarter earnings call. 

Magna has the contacts to put itself in the running with the Chinese, but competition is fierce from European countries also looking to shore up their own dwindling automotive manufacturing business with new investment. The G-Class maker needs to engage emergency rock-crawl mode to escape from its current mire.