European auto sector job losses could hit 726,000 by 2040, Fraunhofer study warns
Fraunhofer study warns European auto sector job losses could reach 726,000 by 2040 as electrification and offshore supply chains reshape employment and industry structure.
A new Fraunhofer Institute analysis commissioned by the employers’ association Gesamtmetall warns that European auto sector job losses could reach as many as 726,000 by 2040. The report, highlighted in international coverage, links the potential decline to structural shifts in powertrain production and widening reliance on non‑European suppliers for key technologies. Experts behind the study warn that, without policy or industrial intervention, the continent could face lasting dependence on third countries for strategic components.
Study scope and headline figures
The Fraunhofer analysis examined all segments of the value chains that produce components for vehicle drivetrains, estimating that roughly 1.6 million people currently work in that subsector across Europe. The study places the sector’s value added at approximately €250 billion and maps projected employment declines to 375,000 lost jobs by 2030 and 660,000 by 2035, reaching a worst‑case 726,000 by 2040. Those projections reflect scenarios tied to electrification, automation and shifts in supplier geography.
Methodology and assumptions behind the projections
Researchers modelled changes across suppliers, component manufacturers and assembly inputs rather than limiting the analysis to vehicle producers alone. The calculations factor in reduced parts content for electric drivetrains, greater vertical integration around batteries, and potential relocation of production to lower‑cost markets. The study’s authors caution that outcomes will vary by policy choice and investment flows, meaning the higher end of the job‑loss range is avoidable with decisive action.
Recent German industry developments
Germany — home to large OEMs and thousands of tier‑one and small suppliers — has already seen notable workforce adjustments. Official statistics showed about 50,000 fewer people employed in the German auto industry in 2025, a decline of roughly 6.3 percent compared with the prior year. Major manufacturers have announced cost‑cutting measures: some report global headcount reductions and plant consolidations, while discussions with works councils are under way at several firms to negotiate changes in staffing and operations.
Company measures and their regional ripple effects
Announcements from automakers indicate a mix of global restructuring and localized plant closures, with implications for supplier networks and regional economies. When a large factory closes or reduces output, smaller suppliers that depended on that work face immediate pressure and may shrink or disappear. The Fraunhofer report highlights how employment losses are not confined to assembly lines but spread across engineering, parts production and logistics, magnifying social and fiscal effects in manufacturing clusters.
Drivers: electrification, batteries and supply chain concentration
A principal driver identified by analysts is the shift to electric vehicles, which require fewer and different mechanical components than internal‑combustion cars. At the same time, battery manufacturing, semiconductor production and certain raw‑material processing remain heavily concentrated outside Europe. That concentration raises the spectre of strategic dependency and could redirect high‑value manufacturing and related jobs to countries that secure the upstream segments of these supply chains.
Policy options and industry proposals
The study has rekindled debate among industry associations, unions and policymakers about how to preserve industrial capacity and employment. Proposals discussed in policy circles include incentives for onshore battery and component manufacturing, targeted support for supplier modernization, stronger diversification of sourcing, and expanded retraining programs for affected workers. Employers and social partners are calling for coordinated measures to avoid a rapid erosion of domestic capabilities.
A range of outcomes remains possible depending on investment choices and regulatory responses across European capitals. The Fraunhofer findings serve as a warning and a call to shape the transition through industrial strategy rather than passively accepting structural decline. The next decade will be decisive for whether Europe retains critical parts of the automotive value chain or cedes them to overseas competitors.
