Job Market Becomes "Unsettlingly Tense"
The German automotive industry is currently grappling with a deep crisis, as shown by the latest EY Industry Barometer. Sales have been shrinking for eight consecutive quarters, with the automotive sector being particularly affected. VW, one of Germany's leading car manufacturers, has seen a 1.6 percent fall in sales.
The slump in sales is particularly noticeable on important export markets, with exports to China decreasing by 14 percent and those to the USA dropping by 10 percent. This trend is contributing to the industry's difficulties, alongside the challenges of transitioning to electric mobility, high raw material prices, and intensifying global competition.
The path out of the crisis for VW and the entire automotive industry will be anything but easy. Job cuts have already been made, with tens of thousands of jobs lost in the sector. VW is not spared from these cuts, and one specific model has been discontinued, marking the end of the road for it.
The labor market is becoming increasingly challenging for young professionals in the automotive industry and mechanical engineering. High tax burdens, high labor costs, and slow approval procedures are preventing a sustainable strengthening of the German location, according to Brorhilker, Managing Partner at Ernst & Young.
However, the German government, led by Chancellor Friedrich Merz, is committed to supporting the industry. They aim to do this through innovation promotion, fostering entrepreneurial spirit, and engaging in a "future dialogue" involving major companies, suppliers, states, and unions. The focus is on creating tailored framework conditions to maintain Germany's position as a leading car manufacturing country.
Many employees at the Wolfsburg plant feel uncertain about the future due to the significant job cuts. The challenges facing the industry have caused large corporations, such as VW, to record losses. Despite these hardships, German car manufacturers and suppliers are reacting to the industry's difficulties with a consistent austerity course.
Jan Brorhilker, Managing Partner at Ernst & Young, states that the USA and China are causing major concern for the industry. The German government's support, coupled with the industry's resilience and adaptability, offers hope for a brighter future for the German automotive industry.
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