At the beginning of 2025, Europe’s automotive industry is experiencing an unprecedented winter. The energy crisis and the ongoing Russia-Ukraine conflict have intensified operational cost pressures, while the pains of electrification are profoundly reshaping the industry landscape. In just three months, mass layoff announcements have surged across the European automotive supply chain, leaving over 50,000 employees facing unemployment. Is this wave of “structural layoffs” an inevitable cost of industrial upgrading, or is it a prelude to the decline of Europe’s automotive sector?

Factory Closures and Layoffs: A Historic Industry Restructuring

German automaker Audi has announced the closure of its Brussels factory in Belgium, resulting in approximately 3,000 job losses. This 70-year-old factory, once seen as the starting point of Audi’s electrification transition, has focused on producing electric vehicles since 2018. However, declining demand for premium electric SUVs, coupled with plummeting sales of its flagship Q8 e-tron and soaring logistics and production costs, ultimately forced its shutdown.

Volkswagen Group faces similar challenges. Confronted with shrinking profits, the company plans to close at least three domestic factories in Germany and lay off tens of thousands of employees. This will mark the first time in Volkswagen’s history that it has shut down factories in its home country. More notably, Volkswagen has terminated a 30-year employment protection agreement, removing its previous commitment to no layoffs before the end of 2029, paving the way for compulsory redundancies in 2025.

It’s not just automakers—suppliers are also experiencing upheaval. German transmission giant ZF plans to cut 12,000 jobs and shut down multiple internal combustion engine component factories. Luxury car brand Porsche has announced 3,000 layoffs, primarily affecting its internal combustion engine R&D team, while Mercedes-Benz will slash 18,000 jobs and close fuel engine plants in Germany and Hungary.

Since 2023, layoffs across the European automotive supply chain have exceeded 70,000—far surpassing levels seen during the 2008 financial crisis. Unlike past cyclical layoffs, this wave has permanently erased many job positions, such as internal combustion engine engineers, transmission assembly workers, and fuel pump technicians, whose roles have no place in the electric era.

Electrification Transition: Profitability Challenges and Market Struggles

Behind the mass layoffs of European automakers lies a structural reversal in market demand. By mid-2024, European internal combustion vehicle sales had declined by 23% year-on-year, forcing Volkswagen Group to cut its internal combustion engine platform R&D budget by 50%. Meanwhile, although EV penetration has reached 35%, profitability remains a severe issue. Luxury electric models such as the Mercedes-Benz EQ series and the BMW iX are struggling with losses, while battery costs—accounting for 40% of the total vehicle price—continue to squeeze European carmakers.

More concerning is that Europe’s EV market is hitting a bottleneck. High EV prices, insufficient charging infrastructure, and consumer concerns over range limitations have slowed adoption below expectations. Western automakers are struggling in the premium segment, while in the mid-to-low-end market, they face fierce competition from Chinese EV manufacturers.

Europe’s automotive industry is undergoing a profound transformation. On the surface, corporate layoffs and factory closures may seem like signs of industry decline, but in the long run, this may be a process of “creative destruction.” Just as horse-drawn carriage makers were replaced by automobiles in the early 20th century, the stakeholders of the internal combustion engine era are making way for new technologies and market trends.

However, this transition is not without risks. Can European carmakers rebuild their competitiveness in the electric era? Will high costs and profitability challenges weaken their global standing? If this round of restructuring fails, Europe’s automotive industry could lose its former dominance—and potentially be overtaken by foreign competitors.