Job losses mount in German automotive sector as challenge from China intensifies

Automotive industry shed more than 40,000 jobs – 5.8 per cent of its workforce – in first half of year, statistical office says

Germany’s automotive industry shed 42,300 jobs in the year to the end of June, sending employment to its lowest level since 2005 as carmakers grappled with falling profits in China and mounting competition from Chinese brands in Europe, and industry groups warned that worse was yet to come.

With job losses spreading across German industries, the automotive sector was hit the hardest, recording a 5.8 per cent decline in employment, according to data published by the country’s Federal Statistical Office on Friday. Manufacturing as a whole lost 2.7 per cent of its workforce, or 144,100 jobs, over the same period.

The figures came as Volkswagen reported a roughly 30 per cent drop in first-half net profit and Mercedes-Benz cut its annual sales forecast, both citing weak demand in China as a factor. Volkswagen also flagged rising competition from Chinese rivals in Europe.

“We had a very successful business model, focused on dominance in the premium sector, on intercontinental exports, on technological leadership,” said Thomas Puls, senior economist at the German Economic Institute. “Obviously all these pillars are shaking.”

Puls attributed the job losses to overcapacity in Germany and the shift to electric vehicles (EVs). German plants now produced about 4.2 million passenger cars a year, down from roughly 6 million a decade ago, he said, leaving excess capacity of about 30 per cent. EVs generated lower margins for carmakers, while suppliers were squeezed by falling output and the shift away from combustion engines.

The impact from China had been mainly financial, Puls said. Germany had lost about 150,000 to 200,000 vehicle exports to China compared with 2019, mostly high-margin models from Porsche and Mercedes-Benz, with a far larger hit to earnings than volumes. Profits from Chinese joint ventures had also fallen.

As Chinese brands gain ground in Europe, German industry is increasingly framing China as one of the main threats to its future, a shift that now includes carmakers long opposed to trade barriers.