The German Automotive Industry: A Year of Significant Job Losses and What Lies Ahead
One-year industry job loss in Germany amounts to 100,000 positions
Get ready for some hard-hitting insights into the German automotive industry, as we dive into the whirlwind of job losses that hit the sector over the past year.
The recent economic crisis has taken a severe toll on the German industry, with more than 100,000 jobs lost in just 12 months. The automotive industry bore the brunt of the punishment, shedding a staggering 45,400 jobs alone, according to an economic consulting firm EY.
At the start of the first quarter, the German industry was employing 5.46 million workers – a 1.8% or 101,000-worker drop compared to the same time last year. When compared to the pre-pandemic year of 2019, the industry has seen a decline of 217,000 workers, equating to a 3.8% decrease. In 2018, the industry boasted around 5.7 million industrial employees.
Industry companies are facing intense pressure, explains Jan Brorhilker, Managing Partner at EY. "Aggressive competitors, for example from China, are pushing down prices. Key sales markets are wavering, demand in Europe is stagnating at a low level, and there's a big question mark behind the entire US market. At the same time, companies are struggling with high costs – for example, for energy and personnel."
The Storm Continues
The beginning of the year showed a minimal decline in the industrial sector's turnover after a slump in 2024. However, there seems to be no end in sight for job cuts, as Brorhilker predicts at least another 70,000 industrial jobs to vanish by year's end. Particular attention should be paid to the mechanical engineering and automotive industries, where companies have already initiated cost-cutting measures. "We will still hear many bad news before it gets better," warns Brorhilker.
The automotive industry, plagued by a sales slump, fierce competition from China, and the transition to electric vehicles, lost nearly six percent of its jobs within a year. The industry now employs approximately 734,000 people. Moreover, significant job losses were reported in the metal and textile industries, with over 4% job reduction in each sector, while hardly any jobs were lost in the chemical and pharmaceutical industries (-0.3%).
The Long-Term Perspective
The debate about the future of Germany's industrial sector, often referred to as deindustrialization, has intensified. However, a closer look at the long-term trends reveals growth in the industry: By the end of 2024, industry employment had grown by 3.5% or 185,000 people compared to 2014, according to the Federal Statistical Office.
EY manager Brorhilker believes that "the industrial location of Germany has often been declared dead – and has proven remarkably resilient time and time again thanks to a very strong substance." However, he notes that conditions need to improve: "Lower costs, less bureaucracy, and stronger domestic demand are needed to make the economy less dependent on exports." The federal government's billion-euro investment package offers a potential solution.
Political Responsibility
Even the Association of the Automotive Industry (VDA) places the responsibility on politics. The need for competitiveness and location attractiveness must be the guiding principle of the new federal government, states VDA President Hildegard Müller. "The fact is: These factors determine where and to what extent investments are made – and thus also where corresponding future jobs will be created."
The factors contributing to the job losses in the German automotive industry include the global economic challenges, the shift toward electric vehicles, trade policies and tariffs, cost pressures, manufacturing efficiency, and general economic conditions. The road to recovery will require a concerted effort from industry players and policymakers to address these challenges and create a more favorable environment for growth and job creation.
- As the German automotive industry continues to struggle, there is a predicted loss of at least another 70,000 jobs by the end of the year, according to Jan Brorhilker, Managing Partner at EY.
- The transition to electric vehicles, fierce competition from China, and global economic challenges are some of the factors contributing to the job losses in the sector, impacting approximately 734,000 employees currently.
- Despite the ongoing job losses, Brorhilker emphasizes that long-term trends indicate growth in the German industry, showing a 3.5% increase in employment by the end of 2024 compared to 2014, according to the Federal Statistical Office.
- In his concern, Brorhilker suggests lower costs, less bureaucracy, and stronger domestic demand as necessary measures to make the economy less dependent on exports, all of which can potentially be addressed by the federal government's billion-euro investment package.
- The Association of the Automotive Industry (VDA) places the responsibility on politics as well, recommending that competitiveness and location attractiveness become the guiding principles of the new federal government to stimulate investments and future job creation.
