The uneven reshaping of Europe’s automotive industry

The European automotive industry is in a phase of substantial change that will transform its structure and employment distribution. This article examines how these changes are unfolding across the sector, presenting evidence on recent restructuring developments with insights on firms’ expectations. Intensifying global competition and the costs of technological and green transitions are prompting EU firms to reorganise production systems and supplier relationships, with implications that extend beyond individual companies to the wider European automotive ecosystem (Eurofound, 2025).

This analysis combines two complementary sources. The first is the European Restructuring Monitor (ERM), which tracks large employment announcements affecting at least 100 workers or 10% of employment in firms with more than 250 employees. The second source is the European Commission’s Business and Consumer Survey (BCS), which provides forward-looking indicators of firms’ employment expectations in the motor vehicles sector. While the ERM captures announced restructuring events, the BCS indicators reflect firms’ short-term expectations regarding employment developments.

Net employment change associated with restructuring announcements in the European automotive sector changed significantly after 2024. While job losses were limited in 2022 and remained moderate in 2023, the sector experienced a sharp employment contraction among the large companies starting in 2024. In that year, automotive manufacturers alone accounted for around 53,000 net job losses across the EU. A landmark case occurred on 20 December 2024; following months of negotiations and industrial action, Volkswagen announced an agreement involving over 35,000 job cuts in Germany by 2030, as part of a broader cost-reduction and competitiveness strategy. In summer 2026, media circulated suggestions that Volkswagen might be planning even larger collective redundancies – up to 100,000 employees globally (Reuters, 2026; BBC News, 2026; The Guardian, 2026).

This structural adjustment, which started in 2024, extended beyond vehicle manufacturers to the wider supply chain. Throughout this period, automotive suppliers in the EU have announced more job losses than original equipment manufacturers (OEMs). The sole exception was 2024, when OEM redundancies peaked due to Volkswagen’s long-term restructuring programme (scheduled through 2030). However, when accounting for the longer-than-usual timeline of the Volkswagen transition (to 2030), spreading them across those years shows that suppliers sustained the greater overall impact in job losses in 2024 too. Figure 1 provides a clear picture of employment contractions among OEMs, whose large-scale redundancies are well documented, as is usual for large companies. However, the impact on suppliers is likely much greater than shown; as most suppliers are SMEs, their smaller-scale job cuts are not fully captured by the ERM (Eurofound, 2025). Taken across the period 2022 to the first half of 2026, and considering this underreporting, suppliers account for an even larger part of total employment contraction in the European automotive sector.

These suppliers are not a homogeneous group but can be broadly divided into three categories. First, there are the firms specialised in internal combustion engine (ICE) components, whose exposure to the structural decline in demand for ICE-related components makes their production base technologically obsolete rather than temporarily uncompetitive. Second, there are generalist parts manufacturers closely tied to OEMs’ production cycles, and therefore highly exposed to demand fluctuations originating at the OEM level and transmitted downstream along the supply chain. This was illustrated by OEM restructuring decisions, including Audi’s plant closure in Brussels and Volkswagen’s large-scale workforce reductions in Germany. Lastly, there are the more labour-intensive producers of standardised components, primarily exposed to cost pressures and global competition, often resulting in the relocation of production to lower-cost locations.

While some suppliers are attempting to reorient themselves towards electric mobility and electronics, this transition remains uneven and does not offset the overall employment losses. New EV-related activities are more capital-intensive and require a different set of skills, generating fewer jobs and often requiring capabilities that incumbent firms do not possess. As a result, the current transformation is not only redistributing production across technologies and regions but also reshaping the structure of employment within the supply chain. The geographical distribution of restructuring further highlights the uneven nature of this adjustment process.

Job losses are highly concentrated in Germany, which emerges as the centre of the restructuring wave in the European automotive sector. In 2024, Germany accounted for more than three quarters of all net job losses announced in relation to large restructuring announcements. A similar pattern continues in 2025, with German cases representing roughly two thirds of total job reductions. In absolute terms, restructuring announcements led to more than 70,000 net job losses in Germany in 2024 and more than 40,000 additional positions in 2025. In 2026, the large redundancies under discussion at Volkswagen could affect four German plants.

Given Germany’s central role in the European automotive production network, the strong concentration of restructuring within its borders should not be interpreted as a purely national phenomenon. Rather, Germany acts as a hub within a highly integrated system of cross-border supply chains, meaning that restructuring pressures are propagating throughout the supplier networks of the neighbouring countries. This is particularly relevant for regions that are functionally integrated into German production systems, such as northern Italy, parts of central and eastern Europe, and automotive clusters in France and Spain, where local employment dynamics are closely tied to demand conditions in German manufacturing (European Commission, 2025).

However, while job reductions are concentrated in Germany, other regions follow a different trajectory, where job creation is closely linked to new investments in electric mobility and its supporting supply chains. Foreign investors, and Chinese manufacturers in particular, have emerged as a major source of investment in Europe's green automotive sector. In the first months of 2026, more than half of all large-scale job expansions were driven by Chinese investment or manufacturing firms connected to EV manufacturing or EV suppliers.

These companies are establishing a physical manufacturing presence to serve European markets directly. For instance, Ebro, a Spanish-Chinese manufacturer, is significantly increasing its industrial capacity in Barcelona through a new vehicle assembly line for the Ebro S400 and S700 models, driving hundreds of new hires in 2026. Similarly, Halms, a subsidiary of the Chinese supplier Zhejiang Huashuo Technology, is constructing a €200 million manufacturing base in Hungary to produce aluminium castings for major players such as Volvo and Tesla.

Chinese firms are also developing sophisticated R&D and production hubs for critical components. This is evidenced by Hunan Yuneng’s construction of its first European cathode-material plant in Spain, designed to strengthen the EV supply chain. Furthermore, the Hungarian subsidiary of the Chinese battery manufacturer Eve Energy is set to begin production at a new plant in Debrecen in 2027. While much of this expansion is concentrated in Spain and Eastern Europe, Germany has also attracted a limited number of large foreign business expansions, including the American manufacturer Tesla and Opes Solar Mobility, a solar module producer for the automotive industry whose group has operated in China since 2012.

While restructuring data provides a retrospective view of employment adjustments, business sentiment indicators offer insights into how firms perceive future conditions. The European Commission’s BCS series covers employment expectations in the motor vehicles sector since 2000 (see Figure 4). The indicator displays pronounced cyclical fluctuations over the past two decades, with repeated and often sharp deteriorations during periods of economic stress. At the same time, recoveries in employment expectations have tended to be gradual and incomplete, suggesting a pattern of persistent fragility rather than full cyclical rebound.

This development appears broadly consistent with the restructuring patterns observed in ERM data. While restructuring announcements capture announced employment adjustments, the BCS indicator reflects firms’ short-term expectations regarding labour demand. The recent weakening in sentiment therefore reinforces the picture emerging from restructuring announcements, pointing to continued caution among firms and a lack of sustained recovery in employment prospects within the European automotive sector.

Taken together, the evidence from restructuring announcements and business sentiment indicators points to more than a temporary downturn. The current restructuring cycle appears to reflect a broader process of industrial reallocation, in which employment losses are concentrated in incumbent production systems, supplier networks and mature automotive regions, while job creation is more selective and increasingly linked to EV-related and battery. This suggests that the next phase of adjustment is likely to remain uneven across firms and territories. For policymakers, the challenge is therefore not only to attract new investment, but also to ensure that labour market adjustment, reskilling and regional transition measures keep pace with the geography of industrial change.

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