RED Mechanism for Automobiles Extended Until December 2026: What Companies Must Do

Key data

Motor vehicle manufacturing companies have until December 31, 2026 to take advantage of the sectoral RED Mechanism. The Council of Ministers approved on June 29, 2026 the second extension of this instrument, published in the BOE through the Order PJC/654/2026. This is the final legally possible extension: from 2027 onwards, the sector must face its restructuring without this protective umbrella.

The mechanism was initially activated by the Council of Ministers Agreement of December 23, 2024, under the article 47 bis of the Workers' Statute (Royal Legislative Decree 2/2015, of October 23). The second extension extends its validity for an additional six months, thus completing the maximum cycle allowed by the regulation.

What does this regulation establish?

Order PJC/654/2026 approves the second and final extension of the RED Mechanism for Employment Flexibility and Stabilization in its sectoral modality for motor vehicle manufacturing. The available measures are two:

• Working hour reduction for affected workers.
• Contract suspension of employment.

To access the mechanism, companies must meet the requirements detailed below according to the group they belong to:

In exchange for accessing the mechanism, companies assume two mandatory commitments:

• Prohibition on individual and collective dismissals for the two years following the end of the mechanism (that is, until the end of 2028).
• Presentation of a worker retraining plan specifically focused on the transition to electric mobility.

Economic and operational impact

The most immediate impact is the possibility of reducing labor costs in the short term through working hour reduction or contract suspension, with unemployment benefit coverage for affected workers. This allows companies to adjust their productive capacity without incurring dismissal costs.

However, the deferred cost is significant: the prohibition on dismissals for two years after December 2026 means that companies accessing the mechanism cannot execute individual or collective dismissals until at least the end of 2028. Any structural restructuring decision is therefore blocked during that period.

The other operational cost is the obligation to develop and present a retraining plan focused on electric mobility. This plan is not a minor formality: it involves identifying workforce skill gaps, designing training pathways, and committing to their execution. Companies that do not present it cannot access the mechanism.

From a strategic perspective, this is the last opportunity to use this instrument. From 2027 onwards, the sector must manage its workforce surpluses with ordinary tools: conventional ERTEs, EREs, or company agreements, all with higher costs and less protection.

Who does it affect?

• Companies classified in the CNAE codes from Annex I (direct motor vehicle manufacturing) that prove loss of affiliation greater than 25% and have maintained more than 30% of workforce in ERTE between April 2022 and January 2025.
• Companies classified in the CNAE codes from Annex II (value chain of the automotive sector): component suppliers, parts manufacturers, specialized logistics companies, and other links in the production chain.
• Workers of the aforementioned companies, who may be subject to working hour reduction or contract suspension during the mechanism's validity.
• Departments of HR, financial management, and general management of affected companies, which must evaluate the convenience of accessing the mechanism and manage associated commitments.

Practical example

A transmission component manufacturing company classified in Annex II, with 180 workers, that has seen its workload reduced due to falling orders from combustion vehicle manufacturers, can access the mechanism during the second half of 2026.

If it decides to apply a 40% working hour reduction to 60 workers for six months, it avoids the costs of collective dismissal and maintains human capital for when demand reactivates. In exchange, it must:

• Present a retraining plan focused on electric mobility (for example, training in battery systems or power electronics).
• Accept that it cannot dismiss those workers individually or collectively until at least the end of 2028.

If the company does not access the mechanism before December 31, 2026, it will permanently lose this option and must manage any future workforce adjustments through ordinary ERTEs or EREs, with higher costs and without sectoral coverage.

What should companies do now?

1. Verify if the company is included in Annex I or Annex II of Order PJC/654/2026. The CNAE classification determines the access group and applicable requirements.
2. Prove the access thresholds if belonging to Annex I: loss of affiliation greater than 25% and more than 30% of workforce in ERTE between April 2022 and January 2025. Gather supporting documentation before requesting accession.
3. Evaluate the cost-benefit of accessing the mechanism against the prohibition on dismissals for two years (until the end of 2028). This decision must be made with the management team and labor advisory.
4. Develop the retraining plan focused on the transition to electric mobility. This plan is a mandatory requirement, not optional. Identify the competencies to develop and training pathways.
5. Act before December 31, 2026. This is the final legally possible extension. There is no room for a third extension: from 2027 onwards, the instrument disappears.
6. Plan the post-2026 strategy from now on. If the company anticipates needing workforce adjustments in 2027 or 2028, it must assess whether accessing the mechanism is compatible with that roadmap, given that the dismissal prohibition would extend until the end of 2028.

Official source

Consult complete regulation at official source

Notice: This article is for informational purposes only and does not constitute legal advice. For specific decisions, consult a qualified professional. Source: https://www.boe.es/diario_boe/txt.php?id=BOE-A-2026-14115