Factory closures overshadow EU’s mobility transition

After a difficult 2024, which saw nearly 55,000 job losses announced across the automotive supply industry, this year shows little sign of recovery. In the first three months of 2025, a further 10,000 job losses have already been announced,
proving that the ongoing wave is not over. The beginning of 2025 has done little to halt the hiring slowdown. Only 500 new jobs were announced, continuing a steady decline in job creation that has now lasted for five consecutive periods.

Since 2020, nearly two-thirds of announced job cuts in the automotive supply sector have been linked to internal restructuring, in efforts to reduce costs and address growing competitive pressures. Yet a growing proportion is due to more drastic events: 22.5% of job losses have resulted from company closures or bankruptcies, highlighting the toll of increasingly difficult regulatory and business environments in Europe.

This trend has intensified in early 2025, with 57% of reported job losses attributed to bankruptcies or site closures. At least eight factories or companies have shut down operations across Europe since January; the case of Northvolt standing out among them.

The outlook for the automotive supply industry remains concerning, with 62% of respondents to the latest CLEPA-McKinsey Pulse Check reporting overcapacity and growing fixed costs – conditions that could lead to further downsizing and further job reduction in the near future. One in four companies cite insufficient fixed cost coverage in most of their production facilities at current demand levels. This points to continued pressure on margins and an increased risk of structural adjustment across the sector.

Profitability remains a major concern in 2025, with over 75% of automotive suppliers expecting profit margins below the critical 5% threshold considered as the minimum need to sustain long-term investments. Alarmingly, 42% anticipate operating with little to no margin at all, the highest number recorded since the pandemic shock in 2020. The outlook is shaped by a trio of mounting challenges: declining competitiveness, strained relationships with OEMs, and a slowdown in demand.

CAPEX (investments in building, machinery, R&D) forecasts for the 2025–2030 period have dropped by €22.3 billion since last year’s forecast, reflecting a significant deterioration in investment expectations. According to Oxford
Economics, annual investment is now expected to flatten at €35.6 billion by 2030, well below the €39.6 billion that was projected last year.

While Europe still leads compared to other regions in terms of CAPEX relative to sales, the trend is moving in the wrong direction. Since peaking at over 13% in 2021, the CAPEX-to-sales ratio has steadily declined and now stagnates at 10.4%. This slowdown comes as the scale and urgency of investment required to remain competitive in the green and digital transitions heighten. With margins under pressure, many suppliers simply lack the financial capacity to undertake the capital-intensive projects that transformation demands.