Facing the skills crisis in the European automotive sector

By Matthew Beecham , AutoTechInsight Research Manager, S&P Global Mobility

The European automotive supply industry is currently grappling with a severe labor shortage, exacerbated by record attrition levels that have plagued it over the past few years. This alarming situation has led to job losses that surpass even the darkest days of the pandemic.

Despite optimistic forecasts for new job creation, the reality reveals a staggering net loss of nearly 56,000 positions since 2020, with the worst yet to come, according to CLEPA - European Association of Automotive Suppliers .

“These losses are driven by declining demand, rising production costs, and delayed investments in new technologies,” states CLEPA.

This paradox illustrates that Europe's labor shortage is not merely a numbers game; it is deeply intertwined with the quality of available jobs. The World Economic Forum 's latest warning in ‘The Future of Jobs Report’ (published January 2025) emphasizes this hard truth, indicating that as 54% of employers brace for worsening shortages, the urgent need for reskilling and upskilling has never been more pronounced.

Research from the European Trade Union Institute (ETUI) supports this notion, revealing that labor shortages are largely driven by poor job quality, with the hardest-to-recruit industries offering wages that are, on average, 9% lower than those in sectors less affected by these shortages.

Amid this backdrop, the automotive industry faces a critical shortage of skilled positions, threatening production efficiency. As technological advancements accelerate—particularly in electric drivetrains and autonomous systems—the demand for highly skilled workers has intensified, further exacerbating the existing skills gap.

The relentless pace of technological change complicates matters, as the integration of advanced technologies, such as AI, automation, and electrification, requires specialized skills that educational institutions have struggled to provide.

Technological advancements and skills gap

Nicole Roik , head of technology for Security Global Manufacturing Industries at IBM Technology, highlights this shift: “The move toward software-defined vehicles comes with new challenges for automotive OEMs and suppliers — they will be an increasing direct liability and interaction with the end user and a step change in the skills required to manage the manufacturing and maintenance of these new vehicle designs. This comes at a time when retirements and skills shortages are hitting the industry, making better use of AI and data essential to maintain continuity.”

Francis Chow , vice president and general manager, In-Vehicle Operating System and Edge, Red Hat underscores this disconnect: “In 2024, the automotive industry faced several challenges. Many companies invested heavily in establishing a software-first capability and efficient software factory process but have struggled to determine how to effectively achieve all of this while simultaneously managing the electric vehicle and autonomous driving race to market share. Strong competition, along with lower growth, is forcing companies to cut costs, limiting investment in new technologies.

The industry also faces labor and technical challenges, including a shortage of skilled software engineers and cybersecurity risks associated with continuous software updates to vehicles in deployment, all of which does impact how aggressively OEMs can move on all fronts.”

Economic uncertainties, such as global trade tensions, exacerbate the labor shortage. Companies often hesitate to make long-term investments in hiring and training amid such instability. Roik also warns that “labor shortages and supply chain disruptions may continue to impact costs and production, potentially leading to price increases and delays in deliveries.”

Strategies for attracting and retaining talent

The implications of these labor shortages are profound. Production delays may arise as manufacturers struggle to meet consumer demand, risking market share to more agile competitors. Rising costs associated with attracting and retaining talent, including increased wages and benefits, can erode profitability and lead to higher prices for consumers.

Mark Morelli , president of Vontier , notes, “We are navigating a rapidly evolving and increasingly connected mobility ecosystem. Our customers consistently express their need for support in solving their most pressing challenges, which include labor scarcity and skills shortages/knowledge gaps.”

Moreover, the scarcity of skilled talent can stifle innovation. Companies may find it difficult to invest in research and development, particularly in critical growth areas, such as EVs and autonomous technologies. Hiring less experienced workers to fill gaps can lead to quality control issues, increasing the risk of defects and recalls that damage a brand’s reputation.

To tackle these pressing challenges, automotive businesses must adopt proactive strategies. Strengthening partnerships with educational institutions to align curricula with industry requirements is essential. By collaborating with technical schools and universities, companies can guarantee that graduates are armed with the cutting-edge skills required for today’s automotive landscape. Investing in comprehensive training and development programs is going to be equally vital.