Summary

What are the skills and employment trends in the European automotive industry? New Cedefop analysis brings insights into one of the most innovative and research oriented manufacturing industries of Europe, coping with Covid-19 pandemic and rising challenge of green and digital transformations.

The rise of European automotive industry

The automotive industry encompasses the design and production of passenger cars and commercial vehicles, the production of vehicle bodies (coachwork) and trailers, and the manufacturing of electrical and mechanical parts and accessories for cars and commercial vehicles.[1] It accounts for almost 7 per cent of the EU’s GDP and – representing 20 per cent of Europe’s industrial research funding – is a leader in product innovation.[2]

The sector is a major employer. It directly employs around 2.8 million people (2018) and, when all extensive supply chains are considered, as many as 12 million.[3] The supply chain includes metalworking, mechanical engineering, textiles industry, rubber and plastics industry and the rapidly growing manufacturing of electronic components and software development. Producers of car tyres (NACE C 22.11) are often considered part of the automotive industry, too.[4]

Besides manufacturing, an additional 2.5 million people work in trade and repair of motor vehicles sector (NACE G 45)[5]. Jointly, the sale of fuel (NACE G 46.12), insurance services (NACE K 65.12) and other service sectors account for 2.7 million workers. For every job in the automotive sector there is one service sector job (see Figure 1).

Figure 1:         Automotive industry:  direct and indirect employment

Source:     Eurostat National Accounts and Structural business statistics. Own calculations.

The automotive industry recovered quickly from the economic crisis from 2009 onwards and until 2018 it added more than 700,000 new jobs. With cars becoming more technologically complex and sophisticated, the car parts and accessories industry are growing fastest. 50% of jobs in automotive are now in the car parts and accessories industry, and this industry since 2009 contributed 67% of net job creation (see Figure 2).

 

Figure 2:         Employment structure and change in the automotive industry, 2009 to 2018

Source:     Eurostat National Accounts and Structural business statistics. Own calculations.

Motor vehicles manufacturing is the most skills and innovation intensive part of the automotive industry. Car manufacturers are also “integrators”, because put together products coming from many other industries. This part of automotive industry has the highest research intensity and the highest need for interdisciplinary skill sets. These do not only concern skills linked to research and advanced manufacturing, but also those connected to logistics, sale, marketing and law.

Car manufacturing is concentrated in just few EU countries. Germany is leading with over 50% of employment; just 7 other EU Member States (mostly former EU-15 countries) account for almost 40% of jobs (see Figure 3).

Figure 3:         Car manufacturing: EU employment shares (2018)

Source:     Eurostat Structural business statistics. Own calculations.

For the other parts of the “core” automotive industry (coachwork, trailers, parts, accessories, tyres), the image is different. It is obvious that integrators located in western Europe benefited from the EU single market. They have successfully outsourced a substantial part of their supplier network to Member States in the east, which are attractive because of their skilled workforces, the availability of technical/VET skills and lower labour costs (see Figure 4).

Figure 4:         Car parts manufacturing:  EU employment shares (2018)

Source:     Eurostat Structural business statistics. Own calculations.

The ‘marriage’ of advanced western technology, innovation power, and market knowledge with the skills and productivity of eastern workforce led to many automotive success stories in the former communist bloc. Slovakia and Czechia now lead the EU and the world in production of cars per capita[6] and eastern EU countries also have the highest shares of workers employed in the automotive industry (see Figure 5).

Figure 5:         The Automotive industry contribution to employment in EU Member States

Source:     Cedefop Skills Forecast database. Own calculations. Note: Size of a “bubble” indicates total automotive employment in the country.

Automotive jobs and skills

The “success story” of the new Member States in the automotive industry has led to significant job creation. Between 2010 and 2020, 3 out of 4 new automotive jobs have been created in countries once part of the former communist bloc. However, job creation mainly concerned assembly lines jobs and much less positions with higher value added and higher skills intensity.

In contrast, in the former EU-15[7], professional jobs (such as designers, engineers, ICT or business professionals) represented 84% of net job growth of the automotive industry in the last decade. While job growth increasingly concerns the R&D jobs in the new Member States too, still 7 out of 10 new jobs were for manual workers such as assemblers, machine operators or labourers (see Figure 6).

Figure 6:         Employment growth in the automotive industry (2010-2020)

Source:     Cedefop Skills Forecast database. Own calculations.

Changing operations and processes are impacting the demand for jobs and skills in the automotive industry. Technical (production, design and engineering) occupations at different skill levels dominate employment, while office and support workers represent just 1 in every 7 jobs (see figure 7).

Figure 7:         Occupations in the automotive industry (2020 employment share)

Source:     Cedefop Skills Forecast database. Own calculations.

At the same time, technological advancements and progressing automation is reshaping employment. Medium skilled technical trade jobs (metalworkers, electro-engineering workers) are becoming less dominant while employment in highly skilled technical jobs (researchers, engineers, ICT professionals) is on the rise. Automation appears to have less impact on assembling and machine operations. Here it is likely that until now, outsourcing of these activities to new Member States was a more attractive solution than fully automating processes.

Cedefop Skills OVATE, an online platform presenting information based on millions of online job advertisements gathered from all EU Members states, was used to analyse of skills demand in the automotive industry[8].  Employers in automotive request a wide range of transversal and technical skills (figure 8).

Figure 8:         Most requested skills in the automotive industry (2019-2020)

Source:     Cedefop Skills OVATE. Own calculations. Note: The percentages indicate share of job ads in the sector that request a particular skill.

Transversal and high-end technical (ICT; design; engineering) skills appear to be required in many jobs. It is important to be aware that the image may be skewed toward these skills because low-to-medium skilled jobs are possibly not advertised via online channels to the same extent as high level jobs, and job ads for high-skilled jobs such as managers, designers, ICT professionals or engineers tend to be longer, with more skills requested on average[9]. Despite this, it is clear high-skilled jobs in the industry are becoming more important and with this also the demand for high-end, specialised skills, as Cedefop’s latest skills demand forecast[10] shows (see Figure 9).

Figure 9:         Future employment growth in the automotive industry (2020-2030)

Source:     Cedefop Skills Forecast database. Own calculations.

Automotive: The next decade

The automotive industry is a leader in robotization. In 2018, the sector purchased more than 125 thousand robots, or 30% of all industrial robot installations[11]. The electrical/electronics industry came second with 105 thousand units; and the metal and machinery industry with around 40 thousand units ranked third[12]. According to the Cedefop-Eurofound European Company[13] survey around of half of EU automotive companies use robots; more than twice the average of the manufacturing industry as a whole[14].

The growing demand for cars has driven recent robotization in the automotive industry[15]. Increased demand and with skills and job shortages led to rising personnel costs and incentivised automotive companies to automate. Although the single market provided possibilities for outsourcing, this option is becoming less viable and the robotization trend in the industry is likely to pick up steam in coming years. The combined effects of Covid-19 and a shrinking talent pool in the Eastern EU Member States will leave manufacturers with no other choice to tackle skills challenges and to comply with stricter occupational health and safety standards to protect their workers.

The immediate impact of the pandemic and social distancing measures in the automotive industry was sizable. Factory shutdowns in the EU led to an estimated decrease in production equalling almost one quarter of 2019 volume[16]. Although the second half of the year saw a partial recovery, there were still 3 million less vehicle registrations in 2020 than in 2019[17].

And more adverse development may lie ahead. Aside from factories and retail network closures, rising unemployment, loss of income and uncertain job prospects lead potential customers to postpone or cancel their plans to purchase cars. The same is happening in the business sector where enterprises need to save and cut costs and, in some cases, rely less on cars because they have moved to a more virtual way of doing business and/or organising work.

The automotive sector itself hopes for a strong recovery. Covid-19 may lead to changing preferences in transport, as public transport is seen as riskier than use of a private car.  Such a revival could help the automotive industry address the enormous challenges it faces. Considered a major strain on the   environment, the pressure to reduce emissions even more and to reduce the environmental impact of car manufacturing itself, is mounting.

The industry is making substantial investments in both areas and is shifting towards producing electric cars. In addition, technological innovation means cars are becoming “computers on wheels”. Electronics and software may represent up to 35% of a car’s value in next 5 years[18] and possibly 50% in 2030[19]. Aside from the substantial impact on skill needs and job demand (see Figure 10), the large investments needed to make the transition towards cleaner production and more environmentally friendly cars may also further reduce the already shrinking operating margins.

Figure 10:       The increasing tech and ICT intensity of car production: technology, skills and jobs

Source: Roland Berger, Cedefop Skills Forecast and Cedefop Skills OVATE. Own calculations.

Self-driving cars are a third area of major investment. Here, however, hopes for a speedy market breakthrough are somewhat fading because of limitations in current generation of Artificial Intelligence.[20]

The transformation of the European automotive industry towards more high-tech production and greener cars is in full swing but the process is challenging. The Covid-19 pandemic adds another layer of complexity, complicating core work processes and logistics operations and business models.

Typical for heavily machine-driven sectors producing highly complex products in large volumes, enterprises in the automotive industry are usually sizable establishments. 86% of the automotive workforce (more than 2 million workers) are employed in establishments with 250 employees or more. There are less than 1,300 automotive companies of that size in the entire EU (see Figure 11).

Figure 11:       Employment by company size

Source:     Eurostat Structural business statistics. Own calculations.

For such a (in terms of employment) concentrated industry which heavily relies on agile manufacturing, extensive supplier networks and seamless logistics, the impact of the Covid-19 shutdown is considerable. Even a couple of Covid-19 cases may shut down an entire factory with hundreds or thousands of workers and completely disrupt the value chain.

Skills for the future

Social distancing is challenging to implement in assembly lines, where even highly automated procedures, such as robotically attaching windscreens, still require the intervention of half a dozen workers.[21] Therefore the potential risk to production line workers is well above average and so is the share of their tasks that can be further automated (see Figure 12).

Figure 12:       Automation and Covid-19 risk: Exposure of automotive workers

Source: “Automation risk in the EU labour market”[22] and “EU jobs at highest risk of Covid-19 social distancing”[23]. Own calculations. Note: Size of a “bubble indicates number of jobs in the automotive industry.

As a result the pandemic is expected to accelerate automation because it can help avoid or reduce  costs and future uncertainties associated with social distancing measures.

For individuals, the automation risk rises with age and is higher for those with low level education[24]. The most exposed production line occupations in the industry are therefore assemblers, machine operators, metalworkers, electro-engineering workers and manufacturing labourers. More than 1 in 4 people working in these occupations are 50 years or older and a similar share of people is low skilled[25]. These workers typically also have less access to training that would help them adapt to workplace changes or to find alternative employment in case of lay-off.[26] This is a true challenge for stakeholders and VET policy makers. How to ensure that accelerating automation will not create winners and losers, but rather winners and, at least, good adapters?  

Automotive enterprises invest a lot in training, but down the value chain of the industry finding sufficient resources for skill development is challenging. Once again, an east-west EU divide is visible: car manufacturers in the west are more robotised than their suppliers and are better able to cope with social distancing measures. They also tend to have more resources to cope with the investments necessary to mitigate Covid-19 risks, to help their workers to cope with change and to provide retraining.

To ensure operations function smoothly during the Covid-19 pandemic, training is essential and cuts across many areas. There is a need to train people on health and safety procedures to ensure protection of staff as well as to expand worker’s skills portfolio so they are able to perform in multiple roles and if re-arrangement of staff is needed in case of sickness and self-isolation.

Digital skills training is needed to expand remote working opportunities; developing skills for flexible handling of value chain disruptions or risk assessment skills to identify possible weaknesses in processes.

It is necessary to further support the adaptability of managers, workers and whole organizations to flexible refocus activities to areas where the industry can use its knowledge and skills to come up with demanded products[27]; training to master the use of newly introduced technologies and last (but not least); training for workers whose skills may become obsolete with radically changing processes or technologies (see Figure 13).

Figure 13:       Skills for the future automotive industry

 

[1]               The following divisions are part of the automotive manufacturing sector: 

C 29.1- motor vehicle manufacturing

C 29.2 - manufacture of motor vehicle bodies, trailers and semi-trailers

C 29.3 - motor vehicle parts and accessories manufacturing

[4]               European Sector Skills Council: Automotive industry. Available at: https://ec.europa.eu/social/BlobServlet?docId=18795&langId=en

[5]               Eurostat Structural business statistics. Available at: https://ec.europa.eu/eurostat/web/structural-business-statistics/data/database

[7] UK data were excluded from analysis

[9] The Online job vacancy market in the EU.

Available at: https://www.cedefop.europa.eu/en/publications-and-resources/publications/5572

[11] International Federation of Robotics: World Robotics 2019. Executive summary. Available at: https://ifr.org/downloads/press2018/Executive%20Summary%20WR%202019%20Industrial%20Robots.pdf 

[12] Lbid.

[14] ECS 2019 microdata. Own calculations.

[15] Since 2009, car production in the EU grew by 3M and reached 16.5M in 2018. European Automobile Manufacturers Association. Available at: https://www.acea.be/statistics/article/eu-passenger-car-production

[16] Interactive map: Production impact of COVID-19 on the European auto industry. Available at: https://www.acea.be/news/article/interactive-map-covid-19-impact-on-eu-automobile-production-up-until-septem

[17] EU car sales: COVID recovery expected to start in 2021, auto industry says. Available at: https://www.acea.be/press-releases/article/eu-car-sales-covid-recovery-expected-to-start-in-2021-auto-industry-says

[18] “The car will become a computer on wheels”. Available at: https://www.rolandberger.com/en/Publications/The-car-will-become-a-computer-on-wheels.html

[21] The Economist: The world’s car giants need to move fast and break things. Available at: https://www.economist.com/briefing/2020/04/25/the-worlds-car-giants-need-to-move-fast-and-break-things

[25] Skills Panorama. Own calculations.