It is no news that Serbia depends on Europe when it comes to markets. Given transport routes, geographic proximity, and the fact that Serbia is part of the same continent, doing business with EU countries is inevitable. However, in the automotive industry – where several European countries were long leading players – the situation has changed significantly, and negative trends are now spilling over to domestic companies. Due to a serious slowdown in activity and fewer orders on the European automotive market, factories in Serbia are facing substantial production cuts, directly creating surplus labor.

Although major companies such as Continental, Bosch, Lear, PKC/Motherson, Grammer, and others still have a strong presence, restructuring is visible in parts of the supplier chain. The clearest recent closure case is LEONI and its branch in Malošište, which shut down after the last cable outputs in December 2025. As announced at the time, around 1,900 jobs were gradually eliminated. At other locations in Serbia – Prokuplje, Niš, and Kraljevo – the company is also facing rising costs. Still, those three factories continue operating on their projects. DRÄXLMAIER (Drexlmaier) also announced the closure of its Zrenjanin plant after 17 years of operations, due to the lack of further orders, with a phase-out planned during 2026.

In a number of cases, plants in Serbia are positioned in lower value-added segments of the automotive chain (e.g., wire harnesses, certain components, and assembly-intensive processes). One of the key issues, in addition to declining demand, is that such activities are often the most vulnerable in times of crisis. Moreover, production of these components can be relocated to locations with lower total costs and more favorable conditions, especially once subsidy periods expire and operations are assessed without initial state support.

In this context, the Independent Metalworkers’ Union of Serbia recently stated that during 2025, as many as 12,640 workers were sent on paid leave with compensation of 60 percent of wages, for periods longer than the legally prescribed 45 working days. According to the union, this practice resulted in more than 6,000 layoffs in 2025, and the negative trend has unfortunately continued into 2026. The situation in southern Serbia is particularly worrying. In addition to the examples above, the union highlighted Yura in Leskovac, which has already announced further production cuts, along with plans to offer employees mutual termination agreements. The company has also requested to place around 300 workers on paid leave throughout 2026. By way of reminder, Yura Corporation has operated in Serbia since 2010 and primarily manufactures wire harnesses for the automotive industry, including cooperation with Kia Motors and Hyundai Motors. Although these are Asian car brands, the supply chain is largely European, since parts produced in Serbia end up in vehicles intended for the EU market or in plants producing for Europe, such as those in Slovakia and the Czech Republic. Unlike countries where final assembly, higher automation, and greater value-added are concentrated-making such plants more resilient to market disruptions-labor-intensive plants, including some in Serbia, enter crisis mode more quickly.

An additional sign of broader pressure in Europe’s auto sector was the restructuring announced by Continental itself. In early 2025, the company announced an additional 3.000 job cuts in automotive R&D by the end of 2026, on top of previously announced restructuring. Less than half of those new cuts will be in Germany, indicating that the measure is not tied only to the German market.

The Independent Metalworkers’ Union of Serbia warns that this case will not be isolated, as similar measures are being announced in other automotive companies in Serbia. Although these measures are formally implemented in line with Serbian legislation, the core problem is that most employees in these factories have less than 10 years of service. As a result, their severance pay in the event of job loss is generally below RSD 200,000, which is not enough to secure basic livelihood protection. The union stressed that an urgent, concrete, and responsible response is needed from state institutions, social partners, and the government in order to immediately halt further job losses and prevent deeper social degradation of workers in this sector, the statement said.

As for the causes in Europe, Chinese competition is indeed an important factor, but this mostly concerns the electric vehicle segment (hence the EU anti-subsidy measures/tariffs). It is not the only driver, however. Other pressures include high production costs, a slow and expensive transition to electric vehicles, margin compression, trade tensions, decarbonization-related requirements, and changing consumer preferences and habits.