Multiple German automakers—including Mercedes-Benz—are planning layoffs; up to 225,000 jobs may be lost cumulatively in the future. What are the underlying reasons? What impact might this have on the industry?

The shift toward electrification appears, on the surface, to be a matter of technological substitution—but digging deeper, it represents a fundamental disruption of the entire manufacturing logic. A traditional internal-combustion engine comprises hundreds of precision components; transmissions alone can sustain an engineer’s entire career. In contrast, electric vehicles rely on just three core systems—motor, power electronics, and battery—dramatically reducing assembly complexity. Based on this logic, the German Association of the Automotive Industry (VDA) and the Prognos Economic Research Institute projected in early 2024 that 190,000 jobs would be lost; that figure has since been updated to 225,000, reflecting a faster and more forceful transition than anticipated. Mercedes-Benz launched its 'Next Level Performance' initiative in April 2025, aiming to cut 30,000 jobs globally by 2027—15% of its total workforce. This marks the largest layoff in the company’s century-long history, surpassing even the scale of cuts during the 2008 financial crisis. Crucially, these are not ordinary assembly-line workers being let go: roughly 80% are engineers specialized in internal-combustion vehicles, personnel from traditional supply-chain departments, and mid-level managers—a targeted dismantling of the muscle tissue built up during the gasoline era. Then there is the market factor—the situation facing German automakers in China is far graver than it appears. In 2025, Germany’s automobile exports to China plummeted by roughly one-third. In Q1 2026, SAIC-Volkswagen’s ID.3 sold only 1,703 units, while the ID.4 X managed just 184 units—approaching the threshold of market marginalization. Over the past decade, Chinese domestic brands such as BYD, Avatr, and Li Auto have surged ahead so decisively that joint-venture competitors can no longer see their tail lights. Ola Källenius, CEO of Mercedes-Benz, told German media that profit declines stem partly from 'nei juan' ('involution') in the Chinese market—a term he directly imported into his German-language interviews. The third factor lies within Germany itself—its business environment. The VDA explicitly cited three causes in its official statement: industrial transformation, deteriorating domestic business conditions, and intensifying international competition. Following the Russia-Ukraine conflict, Germany’s energy costs have remained among the highest in Europe, and labor costs remain similarly elevated. For instance, Mercedes-Benz offered a voluntary severance package to a mid-level manager with thirty years’ service—worth over RMB 4 million (approx. USD 550,000). That figure speaks volumes: retaining such talent is extraordinarily expensive. The impact on parts suppliers is the most direct—and most underestimated. According to data from the European Association of Automotive Suppliers (CLEPA), suppliers announced 54,000 layoffs in 2024 alone; another 50,000 were added in 2025—totaling over 100,000 in two years, equivalent to 142 jobs vanishing every day. Bosch plans to eliminate 13,000 positions globally by 2030, with the majority based in Germany. ZF Friedrichshafen has announced cuts of approximately 7,600 roles. Continental’s automotive division intends to reduce 3,000 R&D positions by the end of 2026. Moreover, these layoffs trigger cascading effects: when suppliers slash headcount, supporting engineers, process specialists, and quality inspectors at OEMs vanish alongside them. When a component factory shuts down, three to five surrounding service providers also hemorrhage revenue. This is not simple arithmetic—it is localized contraction across an entire industrial ecosystem.

350,000 people are about to lose their jobs! The automotive supply chain faces an extreme 'battle royale'.

Stefan Bratzel, Director of the Center of Automotive Management (CAM), publicly stated that the coming years will witness a 'Darwinian selection,' under which some companies will exit the market or forfeit their independence. 'On one hand, the European market is stagnating. On the other, transitioning to electric vehicles entails enormous costs—and it’s now clear that achieving sales targets won’t be easy. Additionally, U.S. tariffs are hampering exports. Automakers are all striving to cut costs, and they increasingly view suppliers as cost centers,' said Stefan Bratzel. Braking on Electrification The suppliers’ predicament stems not solely from transformation costs but, more immediately, from a mismatch in timing. In recent years, OEMs demanded rapid capacity expansion from their supply chains to support electrification—yet end-market acceptance of battery-electric vehicles has failed to follow the originally projected adoption curve. In its January 2025 industry briefing, CLEPA reported that EU EV production in 2025 is expected to reach approximately 3.3 million units—well below the 4.8 million forecast made back in 2023. Meanwhile, overall EU auto output in 2025 remains about 20% lower than in 2019—roughly 3.1 million fewer vehicles. This demand shortfall quickly reverberates through OEMs and then flows upstream to suppliers. Take Stellantis, for example: Reuters revealed that in H2 2025, the automaker booked €22.2 billion in charges and impairments—including costs tied to scaling back its EV supply chain, write-downs of R&D investments, and cancellation of certain vehicle programs. Antonio Filosa, Stellantis’ CEO, admitted on a conference call that assumptions about the pace of electrification had been overly optimistic. He stressed the need for a major strategic reset—placing consumer preferences back at the core. When OEMs face mounting pressure on profits and cash flow, procurement departments tighten first—and cost-cutting mandates cascade rapidly upstream. A CLEPA survey released in November 2025 found that 70% of suppliers anticipate profit margins below 5%, the minimum threshold required to sustain long-term investment. Simultaneously, half plan to shrink production capacity in Western Europe over the next five years, and 69% already feel direct competitive pressure from Chinese imports. Cash-flow constraints are also directly undermining investment. In its May 2025 data briefing, CLEPA cited Oxford Economics’ forecast that annual investment will plateau by 2030 at €35.6 billion—below the earlier projection of €39.6 billion for that year. Slowing investment further impedes R&D advancement and production-line upgrades. In the battery segment, Europe’s efforts to build a domestic battery industry have faltered, delaying the anticipated local supply-chain ramp-up. Bloomberg analysis notes that of the 16 battery plants planned under European leadership, 11 have either been postponed or canceled. The EU Wants Rules; Companies Want Certainty As supply-chain layoff pressures spill over, the EU’s first response under discussion is to tie subsidies to localization requirements—raising the bar for 'Made in Europe.' CLEPA argues that the EU’s current automotive strategy is merely a starting point; next steps must deliver concrete measures—such as lowering electricity prices and easing regulatory burdens. According to Reuters, the European Commission has postponed its 'Made in Europe' policy rollout—from February 26 to March 4—with plans to mandate local content ratios in public funding projects and incorporate them into the proposed Industrial Accelerator Act.

Mood Darkens Among German Auto Suppliers as Investment and Hiring Fall, Survey Shows

Jun 16, 2026

A VDA survey indicates German auto suppliers anticipate deteriorating business conditions, with investments moving overseas and hiring at record lows amid EV transition challenges and rising energy and component costs.

reuters

2026-06-16

Mood Darkens Among German Auto Suppliers as Investment and Hiring Fall, Survey Shows

Mood Darkens Among German Auto Suppliers as Investment and Hiring Fall, Survey Shows

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