Wednesday, 17 December 2025
Germany’s automotive industry is likely to face continued job reductions in 2026 as structural pressures intensify and the sector undergoes a costly transformation toward electrification and software-driven mobility, according to international credit insurer Atradius.
Around 50,000 jobs were lost across the sector in 2025, based on aggregated announcements and restructuring programmes by manufacturers and suppliers. Atradius expects further reductions next year on a similar scale, despite continued investment by carmakers in new technologies.
“The transformation of the industry will be painful, and job cuts are likely to continue,” said Dietmar Gerke, Senior Manager Special Risk Management at Atradius. “Although manufacturers are investing billions in electrification and software in an effort to regain competitiveness, there is currently no upward trend in sight.”
German vehicle production has fallen sharply over the past decade. While around 5.9 million vehicles were produced in Germany in 2011, output had declined to approximately 4.1 million units in 2024 and is estimated at around 3.9 million units by November 2025, according to industry data.
Despite this decline, employment levels have remained broadly stable. As of September 2025, the automotive sector employed around 721,400 people, compared with approximately 718,000 in mid-2011. Atradius expects production volumes to fall by a further 2.7% in 2026.
“This divergence highlights how both trade-related and political risks are reshaping Europe’s largest automotive market,” Gerke said. “The industry is facing weak demand, margin pressure, trade uncertainty and the shift from combustion engines to electric vehicles at the same time.”
Pressure is particularly acute among automotive suppliers. Atradius reports 29 major insolvencies in the supplier segment in the first half of 2025 alone, with payment defaults remaining elevated at levels comparable to 2024. At the same time, banks have become more cautious in extending credit to the sector, making refinancing and loan extensions increasingly difficult.
Smaller Tier 3 and Tier 4 suppliers are especially vulnerable due to limited financial buffers. Many remain heavily exposed to combustion-engine components and face substantial investment requirements to adapt their production portfolios, while rising competition continues to erode margins.
The US remains one of Germany’s most important export markets, with vehicle exports valued at approximately US$33 billion in 2024. Atradius notes that the risk of higher trade barriers, including the potential for significantly increased tariffs under certain scenarios, could further weigh on sales volumes and profitability.
“Redirecting exports to other markets can only partially compensate for potential losses in the US,” Gerke said. “Differences in consumer preferences, regulatory frameworks, logistics and competition from manufacturers in China and South Korea limit short-term substitution options.”
To mitigate these risks, several German OEMs are expanding or planning production capacity in the United States. Atradius expects suppliers to follow, although many smaller companies may lack the financial capacity to do so. “This will likely lead to a permanent reduction of capacity in Germany in some cases,” Gerke added.
Atradius argues that clearer political guidance could help provide planning certainty for the industry, particularly with regard to the transition to electromobility.
“The foundation is there – innovative strength and engineering expertise remain intact,” Gerke said. “But key questions remain unresolved, including where batteries will be produced in Germany and how access to critical raw materials will be secured.”
He also stressed the importance of clarity on the future of combustion engines. While the EU’s planned phase-out of new internal combustion engine vehicle registrations from 2035 remains official policy, ongoing debate creates uncertainty for manufacturers deciding how long to continue investing in conventional technologies.
“Technological change is inevitable,” Gerke said. “Delaying decisions only postpones the challenges. Planning security is essential.”
At the same time, Atradius notes growing competitive pressure from Chinese manufacturers, particularly in the lower-cost electric vehicle segment. While trade defence measures could help protect European producers, they also carry the risk of retaliation, including restrictions on exports of critical raw materials.
“In the long term, preserving competitive opportunities for German manufacturers will require a balanced approach,” Gerke concluded, pointing to China’s stated ambition to move rapidly toward high-tech, higher-value automotive production.
