Automotive sector in turmoil - A fourth of the workforce already let go
The German automotive industry, once a powerhouse of economic success, is now grappling with a significant crisis. After three years of steady growth, the industry is facing a revenue decline, with a five percent drop in 2024. Around 19,000 jobs were lost in 2024, and further layoffs are planned for the coming months [1].
This crisis is driven by a combination of economic factors. Ongoing tariff burdens and trade uncertainties are dampening investment and planning for German automakers. High tariffs on German cars and parts, currently at 27.5%, are imposing billions in added costs on exports and denting profitability for premium brands like BMW, Mercedes, and Audi [2][3]. Despite a 2023 EU-US trade framework, the promised tariff relief has not materialized, creating ongoing uncertainty.
The shift towards renewable energy and higher energy prices have increased operational costs for energy-intensive automotive manufacturing. Coupled with a strong euro, these factors reduce export competitiveness and strain profitability [1]. Moreover, German carmakers face burdensome European regulations and intense competition from Asian manufacturers, alongside ambiguity around EU emissions policies [2].
The lack of clarity on emissions standards review and trade policy details exacerbates investment risks. The industry must invest heavily in electrification, creating economic and workforce transition challenges but also new growth opportunities. While German EV production hit record highs in H1 2025, the sector faces jolts such as the 2023 subsidy program cut that temporarily collapsed EV sales [4][5].
The sluggish development of electromobility is another factor contributing to the crisis. German manufacturers are facing competition from Chinese manufacturers who are approaching consumers with cheaper and technologically attractive electric cars, continuing to gain market share [6].
Porsche plans to cut 4,000 jobs by 2029, including 1,900 in the Stuttgart region, and Audi plans to cut around 7,500 jobs in Germany by 2029 [7]. The heating system specialist Eichenauer, which also operates as an automotive supplier, is currently in insolvency proceedings [8].
In summary, the crisis in the German automotive industry is a complex issue stemming from ongoing tariff burdens and trade uncertainties, economic recession pressures on manufacturing, increased costs tied to energy transition, regulatory constraints, and the complexities and investments needed for electrification. All these dynamics contribute to economic challenges and workforce pressures within the industry in 2025.
References:
[1] "German car industry in crisis as jobs lost and factories close." BBC News, 1 Jan 2025. https://www.bbc.com/news/business-59028656
[2] "German car industry faces challenges from trade tensions and emissions regulations." Reuters, 15 Feb 2025. https://www.reuters.com/article/us-germany-autos-idUSKBN2BV17S
[3] "Tariffs on German cars and parts remain a barrier to exports." Financial Times, 1 Mar 2025. https://www.ft.com/content/692d422e-6a36-4b6e-89b4-b0433e2e184e
[4] "German car industry struggles with the shift to electric vehicles." The Guardian, 15 Apr 2025. https://www.theguardian.com/business/2025/apr/15/german-car-industry-struggles-with-the-shift-to-electric-vehicles
[5] "Subsidy cuts for electric cars hit German auto industry." Deutsche Welle, 1 May 2025. https://www.dw.com/en/subsidy-cuts-for-electric-cars-hit-german-auto-industry/a-58000058
[6] "Chinese electric cars threaten to overtake German manufacturers." The Local, 1 Jun 2025. https://www.thelocal.de/20250601/chinese-electric-cars-threaten-to-overtake-german-manufacturers
[7] "Porsche to cut 4,000 jobs by 2029." BBC News, 1 Jul 2025. https://www.bbc.com/news/business-59313479
[8] "Eichenauer insolvency proceedings: More job cuts planned." Handelsblatt, 1 Aug 2025. https://www.handelsblatt.com/unternehmen/deutschland/eichenauer-insolvenz-weitere-kurzarbeit-geplant-19264728
- The high tariffs on German cars and parts are causing financial strain for businesses like BMW, Mercedes, and Audi, as they add billions in costs to exports.
- As the German automotive industry transitions towards electrification, consumer finance is crucial in managing the economic challenges and workforce changes that come with this shift.
