Germany’s Car Labor Costs Make America Look Like A Bargain Factory

The study also found that cars can cost up to $7,800 more to build in Germany than in China

                                        https://www.carscoops.com/author/chris-chilton-cc/                                    

As President Trump’s import tariffs begin to take effect, foreign automakers, including those from Germany, are considering building more vehicles within America’s borders. In Audi’s case, that would mean establishing U.S. production for the first time.

However, as it turns out, avoiding tariffs isn’t the only incentive to shift manufacturing from Germany to the U.S.; escaping the high domestic labor costs that are straining Germany’s car industry is another major factor.

Related: Trump’s Tariffs Set To Cut Global Production By 1.5M Vehicles

A new study by consultancy Oliver Wyman has, for the first time, revealed the vast gap in labor costs between Germany and other countries. It also helps explain why domestic car production has fallen by more than a quarter over the past decade, and why that decline is likely to continue.

Researchers comparing 250 car plants across the globe learned that Germany is the most expensive country on the planet in which to produce new cars, each vehicle landing its maker with an average $3,300 labor bill that covers wages, pension contributions and other benefits. Shifting production to the US would cut that bill in half and then some.

But even building cars in America looks expensive compared with producing them in China, where the labor cost per vehicle comes in at only $585. In some cases, making a car in Germany costs as much as $7,800 more than it would in China, according to the same report.

“The question arises as to how we can even continue to enable vehicle manufacturing in Germany in the future,” Fabian Brandt, Germany head of Oliver Wyman, told the country’s Handelsblatt newspaper. “If volumes continue to decline, many medium-sized suppliers will either leave us or go out of business altogether.”

But if tariffs ever ceased to become an issue and cutting labor costs was a top priority, there are even better choices for a new plant than China. The study uncovered multiple countries where the labor costs make even China’s look expensive, including Mexico, where the labor cost per vehicle is $305, and Romania, where it’s just $273.

The country that really delivers bang for your car-building buck, however, is Morocco, where the labor cost per vehicle is an incredible $106, less than one thirtieth of the made-in-Germany figure. We don’t know what kind of pitiful salary Moroccan workers at Renault‘s plant are on, but it would probably cause the UAW’s Shawn Fain to have a stroke on the spot.

AVG LABOR COST PER CAR

Data Oliver Wyman