Hildegard Müller, president of the German Association of the Automotive Industry (VDA), has cautioned that Europe’s carmakers may need to carry out further workforce reductions and close production sites as they attempt to regain competitive footing.
In comments delivered in an interview with Bloomberg Television and in a separate statement, Müller pointed to persistent headwinds that have weakened the position of major manufacturers including Volkswagen AG and Stellantis NV. She specifically identified high energy costs, elevated labor expenses and bureaucratic hurdles as factors that have eroded competitiveness vis-à-vis rivals.
Against that backdrop, Müller said the region may see intensified restructuring. She stated: "The situation in the whole automotive industry is like the discussion in VW. Not every production location can be there also in the future, so there must be programs for restructuring." The VDA chief warned that further job cuts and plant closures remain possible as firms adjust to those pressures.
European production faces an additional competitive challenge from Chinese automakers that are adding manufacturing capacity in the region while electric vehicle production costs in Europe remain elevated. The article notes that Zhejiang Leapmotor Technology Co. and Chery Automobile Co. are among Chinese firms that have begun expanding production capacity in Europe.
Volkswagen, Europe’s largest automaker, is expected to hold discussions about doubling job cuts in Germany and shuttering factories on Thursday, a move consistent with the restructuring themes Müller described.
As one possible measure to protect employment across the sector, Müller suggested that manufacturers should permit foreign competitors access to existing factory capacity. "Sharing supply chains still brings people and countries together," she told Bloomberg Television, framing such sharing as a way to help preserve jobs.
The European Union is also developing a policy response. The bloc is drafting a proposal that would reward manufacturers producing cars locally through "Made in Europe" provisions. That proposal is part of the Industrial Accelerator Act and remains in the legislative process.
Müller summarized the urgency of the situation in a statement: "Options for changes have dwindled, but they’ve become even more urgent." Her remarks underline the pressure on the region’s automotive industrial base as firms weigh cost dynamics, policy changes and growing competition.
Summary
Müller warned of potential additional layoffs and factory closures as European automakers confront high energy and labor costs, bureaucratic constraints and competition from Chinese manufacturers expanding in Europe. Volkswagen is set to consider increased job cuts and plant closures, and the EU is crafting incentives to favor local production under the Industrial Accelerator Act.
Key points
- European automakers face restructuring pressure from higher energy and labor costs and regulatory burdens, affecting the autos and manufacturing sectors.
- Chinese carmakers are expanding production capacity in Europe while regional EV production costs remain elevated, increasing competitive pressure on local manufacturers.
- Policy responses are under development at the EU level through the Industrial Accelerator Act, which includes "Made in Europe" incentives that could affect regional supply chains and manufacturing location decisions.
Risks and uncertainties
- Potential for additional job losses and factory closures within the automotive and manufacturing sectors if restructuring continues.
- Ongoing elevated EV production costs in Europe may hinder competitiveness and investment in local electric vehicle manufacturing.
- Legislative outcomes for the EU's "Made in Europe" provisions remain uncertain while the proposal is still in the legislative process, creating policy risk for automakers' location and investment decisions.