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(Bloomberg) -- Deutsche Bank AG warned that a challenging economic environment in Europe, the transition to electric vehicles and competition from China are posing a growing risk to its loans to the automotive sector.

Potential US tarriffs and persistent global excess capacities could add to woes in the industry, Germany’s largest bank said in its annual report published Thursday.

Europe’s carmakers are bracing for major cost cuts after years of excess capacity and muted demand, particularly for electric vehicles. Increasing global trade tensions on the back of sweeping policy changes in the US have further complicated their situation.

In Germany, where around a third of Deutsche Bank’s exposure is, the stress has also affected automotive suppliers. These manufacturers generally operate on tight margins and their orders from major automakers can change relatively rapidly in response to shifting conditions.

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At Deutsche Bank, the volume of troubled loans to the auto industry — those at higher risk of default or already impaired — rose 17% last year, to €1.67 billion, the report showed. Allowances for credit losses increased 35%.