Employment in the automotive industry: Prognos study shows profound change process through transformation

The automotive industry is undergoing a profound process of change. New market conditions due to stronger growth in other regions of the world, the transformation to electromobility, digitization and economic and political uncertainty characterize the current situation*. These developments have clear consequences for Germany as an industrial location and for employees in the automotive industry. The VDA commissioned the research institute Prognos to examine the effects on employment in a comprehensive study. The study, entitled "Employment prospects in the automotive industry," shows which changes in employment have already taken place in recent years and which foreseeable changes are still to come for the automotive industry and its employees. The development of 700 occupations in the automotive industry was evaluated. 

Due to the electrification of the drive train, overall lower employment is required for vehicle production than in the past. In addition, there are significant shifts within employment. This can be seen very clearly in the data. There have been disproportionate job losses in the industry's previous top jobs: Of the 10 largest occupational groups in the automotive industry, 7 are among those with the largest job losses since 2019. Jobs in mechanical engineering and industrial engineering as well as in metalworking in particular have lost relevance.

In contrast, there were increases in jobs in automotive engineering, which are mainly located at manufacturers, as well as in jobs in technical research and development, as well as in computer science, electrical engineering and software development. For example, employment in IT jobs in the automotive industry has increased by around a quarter since 2019 and by as much as 85% since 2013.

Retirement in the coming years will not solve the problem

The study shows that the transformation is far from complete, but is in full swing. This applies both to employment trends in general and to developments in individual occupational groups.

Looking at the individual professional groups, the different effects of demographic development are clear. As in the economy as a whole, around a quarter of employees in the automotive industry will retire in the next ten years. While this may help to support upcoming changes in some occupational groups, other professional fields are facing significant bottlenecks, particularly in electrical engineering, energy technology and IT.

The study (p. 17 ff.) shows four possible combinations of increasing or decreasing importance of professions and the respective supply of workers that will be available in the future. The key findings are:

1. Increasing relevance, decreasing supply: From the perspective of securing skilled workers, occupations where the importance increases (or remains constant) but the supply of workers decreases are problematic. These are occupations in the areas of mechanical engineering and industrial engineering, plastics and rubber production, plastics and rubber processing, IT network technology, IT coordination, IT administration and IT organization. The shortage of skilled workers is likely to become even more severe in the future. In some occupations with increasing relevance, there are already some bottlenecks. These include, above all, occupations in the field of mechatronics or IT. It is also clear that growth is lacking in other areas where an increase would have been expected. This applies, for example, to occupations in plastics and rubber production. The increasing relevance of this area has not yet been visible in employment in Germany. It can be assumed that this is related to the high energy prices in Germany; plastics processing is one of the energy-intensive sectors of the economy. 

2. Declining relevance, decreasing supply: In other professions, both the importance of the profession and the supply are receding, which means that part of the staff reductions may be handled by retirements. This particularly affects professions such as metal construction and welding technology or metal processing.

3. Increasing relevance, increasing supply: In some occupations whose importance is increasing (or remaining constant), an increase in the supply of workers is also expected. Due to the favorable age structure of the people employed in these occupational groups, only a few will reach retirement age by 2035, while at the same time new young workers will enter the labor market. This applies to occupations in IT, information and communication technology as well as mechatronics, energy and electrical occupations.

4. Declining relevance, increasing supply: In other professions, a declining importance of the professions and a simultaneous increase in supply will lead to an oversupply of workers. Apart from technical research and development, this particularly affects professions that are more indirectly related to production and instead involve the business management and administration of companies.

The result is a complex picture with varying developments depending on the profession being considered. The existing challenges are therefore complex: it is not just a question of jobs being lost in the automotive industry, but also of recruiting skilled workers for areas of employment that are becoming more relevant. This is done, for example, by offering retraining and further training courses within the companies themselves. These also help to dampen employment effects.

The study also shows that employment in human resources has increased by 36% since 2013. On the one hand, this indicates that companies are addressing issues such as securing and recruiting skilled workers or the compatibility of family and work, but it is also due to the fact that legal provisions and regulatory requirements have increased significantly in this area as well.

Current trend: Transformation could cost around 190,000 jobs by 2035

The study therefore shows that major adjustments are taking place within the workforce in the industry: the priorities are shifting. It is also clear that a lot of new things are emerging: the decline in employment of 75,000 employees since 2019 is offset by an increase of 29,000 in other areas.

The largest decline, with a loss of 8,900 workers (-16%), occurred in metalworking jobs, which are predominantly located in the supplier industry. The largest increase, with 10,700 employees or +14%, occurred in automotive engineering jobs, which are mainly located in the manufacturers.

Nevertheless, the employment balance is negative and will probably continue to develop negatively: If the trend that began between 2019 and 2023 continues, employment in the automotive industry in Germany in 2035 will be 186,000 people lower than in 2019, when only a few purely battery-electric vehicles were manufactured. The main reason for this is transformation effects due to the switch to alternative drive systems. 46,000 jobs – around a quarter of them – have already been lost between 2019 and 2023, and around 140,000 more are expected to be lost by 2035. However, there is a high degree of uncertainty as to the actual extent of this. On the one hand, the existing or already emerging shortage of skilled workers in some areas can dampen growth in areas that will become more relevant in the future, and on the other hand, the political framework can both reinforce or dampen the trend.

VDA President Hildegard Müller: "The transformation of our industry is a mammoth task. The companies in the German automotive industry and their employees are making every effort to ensure that it succeeds. There is no doubt about that. Between 2024 and 2028, German car manufacturers and automotive suppliers will invest around €280bn worldwide in research and development alone, and a further €130bn in converting their plants. The investments underline the German automotive industry’s will to make the transformation a success story. We want the change.

One thing is clear - our study shows this once again: The shift towards electromobility will lead to job losses. The lower employment is first and foremost not an expression of a crisis, but a part of the transformation. What is crucial, however, is that the political framework supports and accompanies this change. The political framework decides whether future investments take place in Germany, whether the new things that are coming up will be created here with new jobs or somewhere else. The framework can therefore strengthen or dampen the employment effects.

Whether it’s the Draghi Report, the BDI transformation study, or international rankings in which Germany is handed over down the list, it is becoming increasingly clear that there is no room for interpretation: Europe - and Germany in particular - is losing more and more of its international competitiveness when compared internationally. Electricity prices are up to three times higher for German companies than for international competitors, such as those from the USA or China. Germany is a country with the highest taxes, and bureaucratic burdens are constantly increasing. Surveys that the VDA regularly conducts among its members of the automotive medium-sized sector (manufacturer groups II and III) also show the location’s dwindling competitiveness. Most recently, it was shown that more and more companies (82%) are postponing, relocating, or completely canceling investments they had actually planned in Germany. More than one in three companies (37%) are planning to relocate investments abroad. 

The fact is: a competitive location with the right political framework is needed so that as much added value and employment as possible stays here and new jobs are created in Germany. Positive signals about the location are now crucial to show that not only the past was perfect here, but that new things can also emerge. The motto must be 'consistent action'. Competitive energy prices, less overwhelming bureaucracy, fast planning and approval procedures, a competitive tax and levy system, more free trade agreements – the list is long, the tasks are urgent."

In summary, the study shows which professional areas are losing relevance – and this is already clearly visible. It is also possible to state which professions will become more important in the future. But given the political framework, it remains uncertain whether this change can also take place in Germany. It also shows that even if the industry is in the midst of change and some of the transformation effects on employment have already been overcome, a large part of the challenges concerning location competitiveness are still to come.

* While the global passenger car market is only just below the pre-crisis level of 2019, the European and US sales markets are still a long way from this. In Europe (EU, EFTA, UK), the market volume in 2023 is around 2mn units lower than in 2019. In Germany, 15% fewer passenger cars were produced in 2023 than before the pandemic (2019).

While the market share of purely battery-electric vehicles in Germany and on the global market was around 2% in 2019, this rose to 18% in Germany and 13% on the global market by 2023. Production in Germany also changed: the share of purely battery-electric vehicles in domestic car production was 2% in 2019, and 23% in 2023.