German Labor Market in Transition: Six Percent of Jobs Cut at Auto Manufacturers

Beyond the manufacturers, medium-sized suppliers and smaller component plants are being hit. The range spans from classic powertrains to electric motors and on to software and electronics units. Many of these companies are responding to declining demand for combustion engines, a hesitant transition to electric mobility, and pressure from Chinese competitors.

Bavaria as the Center of Upheaval

The Federal Statistical Office is also registering the shift. Official statistics show that industrial employment overall is declining while the services sector grows. The auto industry, however, remains a key sector for exports and industrial value creation in Germany.

A major driver is structural change. The industry is investing heavily in electric drives, software, and autonomous driving, while jobs in traditional component manufacturing disappear. In addition, new production sites for electric vehicles are often planned more efficiently and require less staff than conventional plants.

Negotiations over site closures and social plans are currently underway. At several companies, works councils and unions are involved in talks over compensation payments, severance packages, and qualification programs. The question of plant closures — for example at individual VW sites — also remains on the agenda.

Mixed Signals from Federal Government Reforms

The chief economist of Hamburg Commercial Bank, Cyrus de la Rubia, nonetheless sees the federal government on a fundamentally sound course. „Die Bundesregierung ist mit ihren Reformen in weiten Teilen auf dem richtigen Weg. Die Infrastruktur wird erneuert, die steuerliche Belastung soll sinken“, sagte er. This, he says, creates an investment environment that could cushion structural change.

From the auditors' perspective, however, the job cuts remain a risk to the location's capacity for innovation. If experienced engineers migrate to other industries or abroad, the know-how for the transformation will be missing in the medium term. EY partner Jan Brorhilker had already pointed to this danger in earlier analyses.

Reskilling as the Answer to Change

Volkswagen, Mercedes-Benz, and BMW have launched internal reskilling programs in recent months. Employees are to be trained for roles in electric mobility, battery development, and software. However, the programs are getting off to a slow start and, in the view of works councils, are not sufficient to replace all affected positions.

Observers expect the trend to continue in the current year. Order books at manufacturers and large suppliers grew only slightly recently, according to EY, while staffing is being reduced at the same time. Productivity per employee is thus rising while the number of jobs in an industry long regarded as a secure industrial core of Germany declines.

For the coming months, industry experts expect further plant adjustments, especially at suppliers with a high share of combustion-engine components. In eastern Germany, where many small and medium-sized suppliers are based, pressure could become particularly intense if the order situation does not stabilize, according to EY.