European automakers and suppliers are under pressure as traditional markets fade and new technology threatens. But auto workers are in demand as defense industries rally.
Europe an automakers and suppliers are under pressure as traditional markets fade and new technology threatens. But instead of workers finding themselves on the dole, they are in demand as defense industries take up the slack.
President Donald Trump’s tariffs aren’t helping the auto business either but his demand that Europeans finally face up to their NATO spending commitments is providing a serendipitous lifeline for engineering workers losing jobs at mainly German companies like “We estimate that the European defense industry may have to increase its workforce by about 500,000 by 2035. In contrast, rightsizing European automotive production may imply job reductions of a similar scale,” the Hamburg-based investment bank said in a report. The German Association of the Automotive Industry said approximately 186,000 jobs could be lost by 2035 due to this transition, with 46,000 positions already eliminated by 2024. The imposition of a probably temporary 25% tariff by the U.S. on car imports would further strain Germany’s car industry. This could cost Germany up to €200 billion over four years and reduce GDP by 1.5%, the German Economic Institute said.European members of NATO have agreed to step up spending on defence as Trump demanded they finally pay their fair share and end reliance on the U.S. Volkswagen recently said more than 35,000 jobs will go while capacity will be reduced by more than 700,000 vehicles. So far, premium manufacturers like BMW and Mercedes seem unaffected., said it’s not just the German industry under threat. The traditional auto business is close to a major wave of consolidation as players merge, cut capacity or simply collapse. “An amalgam of weak economic growth and uncertain framework conditions in core markets, as well as the major technological transformation challenges and intense competition from new players will massively change the face of the automotive industry in the coming years,” Bratzel said in a report. That means what had become easy profits from China are quickly disappearing as the locals reverse the process and invade traditional European markets, with their huge advantage in making electric vehicles. President Trump’s tariffs on China’s exports will mean European sales are even more important for the Chinese manufacturers. “In the coming years, a Darwinian selection process will be set in motion, in which some companies will exit or lose their independence,” Bratzel said. This coincides with defense industry expansion, according to Berenberg, which “dramatically” lacks scale. “This may create opportunities for a European automotive sector that is facing structural overcapacity challenges and in urgent need of restoring its productivity,” Berenberg Bank said. This overcapacity results from the lacklustre production outlook, expected to be flat between 2023 and 2029, still 20% below the 2017, pre-Covid peak. The advent of electric cars will be a challenge with the Chinese leading the transition in Europe. Most European suppliers have already started restructuring, cutting about 10% of their workforce.“We believe German manufacturers and suppliers should be relatively well exposed to this theme. Germany is likely to see the highest upside in defense budgets, which would overlap well with the current large automotive restructuring actions in the country; the automotive-related potential beneficiaries may be
Automakers Defense Rallies Tariffs Berenberg Bank Continental Bosch Rheinmetall Hensoldt Stefan Bratzel
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