Automakers weigh production shifts amid rising European labor and energy costs

Automotive manufacturers are facing significant pressure to reduce costs, leading to potential shifts in production locations across Europe.

Dacia, a brand under the Renault Group, is facing challenges at its Mioveni plant in Romania. Due to high energy prices and rising labor costs, the company expects a double-digit decrease in production for 2026. Investment in the facility has also seen a sharp decline, with 2025 investments reportedly down by more than 64% compared to the previous year. This shift threatens the long-term competitiveness of the Romanian site, as Renault explores more cost-effective alternatives in locations such as Turkey, Morocco, and Spain.

Similarly, Mercedes-Benz is utilizing cost comparisons to negotiate with workers in Germany. During recent meetings, management presented data showing that production in countries like Romania, Hungary, and Poland can be up to 82% cheaper than in Germany. The manufacturer is seeking longer working hours without pay increases, using the potential for relocating production to lower-cost regions as a strategic lever in labor negotiations.