German luxury carmaker Porsche will eliminate another 5,000 jobs by 2035, bringing its planned workforce reduction to around 9,400 positions as Germany’s once-dominant automotive industry struggles with soaring costs, collapsing competitiveness and government policies that have deprived manufacturers of affordable energy.

The Volkswagen subsidiary reached an agreement with labor representatives on Monday to eliminate the positions without compulsory redundancies, primarily through natural attrition, partial retirement and voluntary severance programs. Under the deal, however, the remaining employees will accept slower wage growth, smaller bonuses, stricter remote-work limits and changes to break arrangements and production cycles.

Porsche had previously announced 3,900 job cuts, while another 500 positions are being lost through the closure of subsidiaries. The combined cuts represent roughly one fifth of its workforce but will fall disproportionately on its high-cost German operations, where nearly 40% of positions will be eliminated.

Porsche has blamed weak demand, competition from Chinese manufacturers, US tariffs and costly electric-vehicle missteps, but the company’s troubles are unfolding against a broader industrial decline aggravated by decisions made in Berlin and Brussels.

Germany abandoned the Russian pipeline gas on which its energy-intensive manufacturing sector had been built while simultaneously shutting down its remaining nuclear power plants and pursuing an expensive transition to intermittent renewable energy. Even Chancellor Friedrich Merz acknowledged earlier this month that the country is experiencing an “ongoing energy crisis due to the lack of Russian gas.”

The consequences have spread across Germany’s entire industrial base. The economy contracted in both 2023 and 2024, marking its first back-to-back annual decline in more than two decades, while corporate insolvencies rose by more than 22% in each year. BASF, Bosch, Volkswagen and numerous other manufacturers have shut factories or announced major reductions since 2022.

Berlin and Brussels have simultaneously required manufacturers to invest heavily in electric-vehicle production, but demand has failed to keep pace with political targets. Germany further disrupted the market by abruptly withdrawing EV purchase subsidies in late 2023.

Porsche became one of the most prominent casualties of that approach, abandoning a planned all-electric platform after years of investment. The reversal contributed to €3.9 billion in extraordinary expenses in 2025, while its operating profit plunged nearly 93%, from €5.6 billion to just €413 million. The company has also been hit by collapsing sales in China, which have fallen to less than half their 2021 peak.

The cuts come as parent company Volkswagen considers doubling its previously announced workforce reduction from 50,000 to as many as 100,000 positions. Germany’s automotive industry has already shed around 125,000 jobs since 2019, with Mercedes-Benz, BMW and major suppliers also reducing costs and staff.