The German economy is in crisis mode. Especially in the automotive industry where mass layoffs threaten, so the question arises: Who will make the cars of the future?
There is no doubt that the German economy is not doing well at the beginning of 2025. The automotive industry was particularly hard hit. Thus, the largest German car manufacturer, Volkswagen, even decided to start closing its factories in Germany – for the first time in the company’s history.
However, just before the holidays, an agreement was reached with the unions. The compromise, hailed as a “Christmas miracle,” calls for cutting more than 35,000 jobs and cutting production by nearly a quarter, but without immediate layoffs or plant closures. It means workers will be offered early retirement and severance pay until 2030. However, production capacity will be reduced by more than 700,000 vehicles per year.
But the crisis is also shaking other car concerns and auto parts manufacturers, and they are preparing for mass layoffs.
Among market analysts, there are several basic interpretations of the causes of this crisis. Štefan Bracel from the Center for Automotive Management (CAM) talks about “a combination of difficulties, the German polycrisis”.
This includes the fact that “new skills in the transformation of the industry have yet to be acquired: the transition to electro-mobility, to software-defined vehicles, to autonomous driving.” In addition, as he told DW, there is also a “new competitive environment. And it’s not just Tesla and the Chinese.”
A spokeswoman for the Automotive Industry Association (VDA) said in a statement to DW that the policy was responsible: “The end of subsidizing e-vehicles in December 2023 and insufficient charging infrastructure are reducing current sales and making the situation worse.”
Ferdinand Dudenhofer from the renowned Car-Institute shares a similar opinion and criticizes “the type of politician who wants electric cars one time and promotes internal combustion engines the other, confusing people.”
They slept in the management boards
It has been clear for years that the future of individual transport is not in the development of internal combustion engines. It doesn’t matter whether they are powered by fossil or synthetic fuels: the trend is clearly towards e-mobility.
Automotive expert Frank Schwope, a lecturer in automotive management at the College of Secondary Entrepreneurship, believes that “Individual manufacturers have made serious mistakes in management.” The directors, he says, “had their heads in the sand” while they hoped that everything would go well. .
But it is not going well, concludes Štefan Bracel. Germany is significantly behind in international competition. The reasons include “high labor costs, high health care costs and many vacation days. As long as you were better and more innovative than others, it could still work.”
A lot has gone wrong
This expert points out the key issues. When it comes to classic cars, the operation of which requires fossil fuels, German manufacturers are the world leaders: valves and carburetors – the Germans understand this very well. But what about the electronic components? Ferdinand Dudenhofer points out that German car factories “understand today’s car very well, but the main role for the car of the future is played by technology companies”.
Štefan Bracel agrees with that. For industry veterans, the situation is awkward: “The erosion of old paradigms and knowledge is truly tragic.”
Dirk Doze from the Institute for the World Economy in Kiel (IfW) believes that this is the core of the problem. Although “German engineers still belong to the world’s elite, there is not enough flexibility, especially in management, to win over new groups of customers, such as technology-enthusiastic young people in Asia”.
It’s not just China
The future of automobile transport is in electric drives, and China is far ahead of Germany in this. IfW economist Doze notes: “China’s e-vehicle market is the largest in the world and the most dynamically developing. This indicates that China will increase its lead further.”
Bad outlook for VW, BMW, Mercedes and Porsche. The sheer size of the Chinese market brings enormous market power. Even worse for German manufacturers: China is not alone, Bracel says. “In the medium term, more significant players will emerge in India – along the lines of China.” Initially, many actors from China and Korea will go to India – perhaps in the form of joint ventures.”
Frank Schwope sees some hope in battery development, which is still in its infancy. He told DW: “Batteries for electromobility are far from perfect. Big jumps are possible here. Also, at the end of the decade, a transition to solid batteries is expected, which could change the rules of the game.”
The VDA spokeswoman warns of the consequences of the current trend: “If it continues, by 2035 the number of employees in the automotive industry in Germany will be 186,000 fewer than in 2019. 46,000 jobs have already been lost from 2019 to 2023, and around 140,000 more jobs are expected to be lost by 2035.”
That’s why he calls for quick policy action: “We need less bureaucracy, more trade agreements, a more competitive tax system and simpler and faster approval processes.”
Hard times
Even if politics creates the necessary conditions and Germany becomes competitive again, the recovery will not be quick. Bracel warns: “The next two or three years will be a big challenge, because many structural problems must be solved at once.” Nevertheless, he concludes optimistically: “Now politics has also recognized the German political crisis.”
IfW expert Dirk Doze also points out that it will be worse rather than better: “This will be a very difficult year for the German auto industry. But also a year in which the foundations for the future must be laid.”
Automotive expert Ferdinand Dudenhofer suggests that Germany should look for new opportunities in the East, but also observes America with caution: “That’s why it’s important to go where the new wave is developing. It is partly China, and it may also be America. We’ll see if under Donald Trump there will be a return to the 1980s with internal combustion engines.”
The final word belongs to Professor Frank Schwope, who sees at least a glimmer of hope for German car manufacturers. His outlook for the new year is “A mixture of skepticism and hope! I believe that electromobility in Europe will significantly gain momentum by 2025, 2026 at the latest!”
Source:
German wave
Photo: Arhiva Autoblog.rs / Volkswagen
Source: autoblog.rs
