German Auto Industry to Lose 34,000 Jobs in 2026: Horváth Study

Germany’s automotive industry is expected to eliminate around 34,000 jobs in 2026 as manufacturers and suppliers intensify cost-cutting measures and reposition their businesses amid growing competition from Chinese companies, according to a study by consulting firm Horváth.

The estimate is based on an extrapolation of the study findings using total employment figures from the German Association of the Automotive Industry (VDA). Globally, employment at the companies surveyed is expected to decline by only around 0.2 percent, with the reduction in Germany and Central Europe attributed largely to relocation activities.

At the same time, India is emerging as a key growth location for the industry. About 84 percent of the companies surveyed expect employment to increase in India, followed by Africa at 67 percent and North America at 61 percent.

The findings come from Horváth’s seventh annual ‘CxO Priorities’ study, based on interviews with more than 1,000 board members and senior executives at large internationally active companies, including 90 automotive OEMs and suppliers. Most respondents were based in Germany, with interviews conducted during the second quarter of 2026.

AI investment triples

AI transformation has become the second-highest strategic priority for Germany’s automotive industry, behind cost and earnings improvement. Companies are investing around 1.4 percent of their revenue in AI development and deployment in 2026, more than three times the previous year’s level and significantly above the 0.5 percent average for other manufacturing sectors.

Horváth said the focus is also shifting from individual AI applications towards end-to-end processes involving interconnected AI agents. Automotive companies expect AI-driven productivity gains of 20 percent in IT and digitalisation and 19 percent in research and development over the next three years.

However, expectations vary significantly among executives, reflecting uncertainty over how quickly AI’s potential can be translated into operational gains.

Cost pressure remains high

Profitability remains a major concern for automotive companies. The industry expects an average EBIT margin of 4.7 percent in 2026, less than half the 10.1 percent average across all industries.

Cost and earnings improvement remains the sector’s top strategic priority. Companies plan cost savings equivalent to 3.8 percent of revenue in 2026, up from 2.8 percent in 2025. Material costs are expected to account for 35 percent of the planned savings, while general administrative expenses contribute another 22 percent.

The pressure is also influencing decisions on production locations. According to Horváth, labour costs, permitting processes, flexibility and bureaucracy are among the factors affecting companies’ location strategies.

Confidence in policymakers declines

The study also points to growing dissatisfaction among automotive executives with policymakers in Germany and the European Union.

Some 92 percent of respondents said the German federal government had failed to improve the framework conditions for the automotive industry. This compares with 84 percent of executives who had expected the new federal government to strengthen competitiveness in the previous year.

Confidence in the EU is also limited, with only 26 percent of respondents believing the bloc will successfully reduce bureaucracy.

BEV transition continues

Despite the industry's financial and competitive pressures, investment in Germany is set to continue. German automotive companies plan to allocate 34 percent of their investments over the next five years to their domestic market.

A portion of this investment will be directed towards preparing existing facilities for new vehicle models, including through automation and AI deployment.

Meanwhile, two-thirds of surveyed executives remain confident that battery electric vehicles will achieve a breakthrough in Germany and Europe within the next three years.

The findings indicate that German automotive companies are pursuing a multi-pronged repositioning strategy: reducing costs, shifting parts of their operations geographically, investing in AI and other technologies, and adapting their product strategies to the continuing transition towards electric mobility.