More than every second automotive company plans cutbacks

More than every second car company plans workforce reduction

Numerous German and Western European automobile companies forecast massive job cuts in the coming years. Reasons include cost pressure, competition, and investments of German companies in foreign production sites. China and India are the main beneficiaries.

According to a survey, numerous jobs are at risk in the German automobile industry. More than half of the questioned companies in the sector plan job cuts in Germany. According to a survey by the consulting firm Horváth, led by industry executives. The main reasons are high cost pressure and new competition, especially from China.

59% of the questioned companies plan to reduce their workforce in Germany over the next five years, with 14% planning significant reductions. On the other hand, only 15% plan to expand their workforce.

The situation was hardly better in other Western European countries, where 53% of the respondents planned job cuts. However, the companies continued to invest heavily in Germany and Western Europe. New jobs were being created elsewhere.

Building capacities outside of Western Europe

"Cars are increasingly being produced in the regions where they are ultimately sold," explained Frank Göller, Partner and Automotive Expert at Horváth. "This is not new, but it has intensified." These trends have not been changed by the poor experiences of the past few years with supply chain disruptions, especially in semiconductors. "This process is accelerating further. The result is that jobs are being shifted."

In the end, personnel is being built up almost everywhere in the world - except in Germany and Western Europe. 75% of the questioned companies plan to build capacities in India, 60% in China, and the same number in Eastern Europe. The signs of growth were also evident in other parts of Asia, as well as in North and South America.

"New factories are rarely built in Germany," Göller noted. "When new factories are built, they are usually outside of Germany. And that's where the employment growth takes place."

Restructuring towards electric drives relies on automation

Nevertheless, a large portion of the investments continues to flow to Germany. "If you look at the companies with headquarters in Germany, at least one-quarter of the total investments of all globally operating companies still flow here," says Göller. That is significantly more than in any other world region.

However, the money goes mainly into new products and technologies and the restructuring of existing sites towards electric drives. "In production, there is a significant investment in the automation of manufacturing plants and digitalization." The employment balance is correspondingly poor.

Cost pressure due to low production utilization

"We don't see Germany being reduced to a pure development location," Göller emphasized. "Many companies, even the large corporations, still identify themselves as a German and European location and with their factories here." However, many factories in Germany and Europe are already significantly underutilized today. Correspondingly high is the cost pressure, which many manufacturers are reacting to with cost-cutting programs and job cuts.

Volkswagen, like many other automobile companies, is facing job cuts due to cost pressure and competition. According to Horvath's survey, 59% of the questioned companies plan to reduce their workforce in Germany over the next five years. In response to these trends, companies are building capacities outside of Western Europe, with 75% planning to do so in India.

The shift towards electric cars is also leading to significant investments in Germany, but these are mainly focused on new products, technologies, and the restructuring of existing sites towards electric drives. However, this restructuring relies heavily on automation and digitalization, which can lead to a poor employment balance.

Due to low production utilization, many factories in Germany and Europe are significantly underutilized, resulting in a high cost pressure that many manufacturers are addressing with cost-cutting programs and job cuts. This dismantling process, as referred to by Goeller, is affecting even large corporations like Volkswagen, leading to a potential 'Burner-Out' of jobs in the traditional automobile industry.