they would be better on extensive conscription
Germany's used manpower (fielded + training + casualties) is 5.9M, i.e. 9% of the population. So Extensive Conscription (65M * 5% = 3.3M) is out of question anyway. Once they went for Service By Requirement (6.5M) and used most of that they should technically have had ~600K left. At this point going for Total Mobilization is actually
a very good idea because it doesn't directly drain available manpower; it just reduces the cap on available manpower. But because almost all of it is already in use, the free manpower would likely only change by a few thousand. The real hit to available manpower from TM only comes with the next increase in the conscription law. However the jump in manpower from Service By Requirement to All Adults serve is so big that getting just an additional 7% instead of 10 there is totally fine.
So the AI either considered 600K free manpower as to little (debatable) or they switched to TM
much much earlier (bad).