Job Cuts in the Automotive Supply Chain: Could Stronger Cost Engineering Have Reduced the Impact?

More than 70,000 jobs have disappeared across Europe’s automotive supply chain since 2019. In Germany alone, over 10,000 layoffs have hit parts suppliers, and there is little sign of relief on the horizon. Job reductions announced by major suppliers like Bosch, Ford, Valeo, ZF and Forvia underline the scale of the restructuring. In some cases, up to 14,000 positions are being cut as companies respond to profitability pressures.

Across the sector, pressure is mounting. Suppliers face new demands from OEMs, rising costs, and an uneven transition to electric vehicles. There’s little room for inefficiency and even less time to adjust. The questions arise: Are there more strategic ways to respond to financial pressure than cutting jobs? And if companies had earlier access to cost transparency and better scenario planning tools, would they have had more room to maneuver?

Layoffs may not always be avoidable. But when companies lack the ability to break down costs quickly, test alternatives, or model future risks, their choices are often more reactive than strategic. So what’s driving this wave of cuts, and how can it be approached differently?

Why Job Cuts Are Surging in the Automotive Supply Chain

The automotive sector is undergoing structural change, and suppliers are under pressure from multiple directions. These are the key factors driving the current wave of job losses:

1. Inflation and Cost Pressure

Energy, labor, and raw material costs continue to rise. According to a KPMG report, supply chain disruptions have significantly contributed to inflationary pressures, affecting both demand and supply. These rising costs are squeezing supplier margins, making it increasingly difficult to maintain profitability without resorting to cost-cutting measures.

2. EV Growth Not Filling the Gap

Despite widespread headlines, EV sales are slowing in Europe. In Germany, for example, registrations dropped by 27 % in 2024. This decline means the EV boom has not been sufficient to absorb the jobs lost on the combustion side. While the EV transition remains essential to long-term sustainability goals, it comes with disruption. The International Monetary Fund warns that the shift will have “far-reaching” effects on investment, production, and employment, thereby illustrating how complex and challenging this moment is for suppliers.

3. OEMs Pushing for Lower Prices

Original Equipment Manufacturers (OEMs) are asking suppliers to absorb these rising costs while still reducing prices. With margins under pressure, many suppliers respond by cutting headcount. For example, automotive logistics providers are experiencing increasing cost pressures as OEMs push for savings to sustain EV investment and stay competitive.

4. Lower Demand for Combustion Engine Components

As the industry pivots to electric vehicles (EVs), demand for traditional combustion engine parts is falling. Global sales of internal combustion engine vehicles peaked in 2017 and have steadily declined since, according to data from Our World in Data. This trend reflects a broader shift in both consumer behavior and manufacturing priorities. Many Tier-2 and Tier-3 suppliers have long specialized in components that are now becoming obsolete at scale.

The Missing Link: Cost Optimization in Crisis Prevention

Cost engineering is about analyzing, managing, and improving product costs throughout the lifecycle. However, in many supplier organizations, the function is either missing or underdeveloped. Instead of using structured data and consistent calculations, teams often rely on disconnected spreadsheets and outdated tools. This leads to:

• Different costing practices across teams
• A lack of clarity on true cost drivers
• Slow response times when evaluating cost-saving options

When profits shrink and visibility is low, job cuts often become the default response.

Structured product cost management provides an alternative. By improving visibility and enabling faster, data-driven decisions, it gives companies the tools to navigate volatility without defaulting to reactive cost-cutting measures.

The Role of Product Costing Software in Building Financial Resilience

So far, we’ve established that today’s supply chain environment demands speed, precision, and alignment across teams. Yet many organizations still struggle to react to cost pressure before it leads to difficult trade-offs - often because critical data is fragmented or too slow to surface.

This is where a structured cost engineering approach, supported by product costing software, can shift the equation. Should-cost analysis and purpose-built tools help teams uncover savings opportunities earlier in the process, giving them time to act before costs escalate.

With a product costing solution like Tset, suppliers can:

• Run automated, bottom-up cost calculations for structured cost breakdowns that support internal decisions and supplier negotiations
• Compare supplier quotes with market-based cost data to identify overpriced offers
• Adjust product designs early to align with cost targets using design-to-cost methods
• Simulate sourcing or manufacturing scenarios quickly, across regions, materials, or variants
• Enable seamless collaboration between cost engineering, procurement, finance, and other departments

When these capabilities are in place, cost engineering becomes a proactive driver of business decisions.