A VW Golf GTI is pictured in a parking lot near the brand tower at the Volkswagen plant in Wolfsburg, Germany. The image is attributed to Julian Stratenschulte from Picture Alliance.
Germany’s automotive sector, known for its reliable and innovative internal combustion engine (ICE) vehicles, is facing challenges in maintaining its significance in the era of electrification. Major domestic automakers such as Volkswagen, Mercedes-Benz Group, and BMW have recently issued profit warnings, attributing economic weakness and reduced demand in China, the world’s largest automotive market, as contributing factors.
These challenges, which are not exclusive to Germany as Europe’s largest economy, add to concerns about historic job cuts and potential plant closures in the country for Volkswagen. Furthermore, Germany’s abrupt termination of its electric car subsidy program late last year and its recent inability to prevent European Union member states from endorsing tariffs on Chinese electric vehicles demonstrate additional pressures.
Such decisions have raised questions about Germany’s diminishing influence on regional policy, a notion that would have seemed implausible a few years ago. These factors contribute to concerns that the ‘made in Germany’ reputation, once synonymous with high quality, may be fading as the shift away from ICE vehicles intensifies.
Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, suggested that while the German quality label remains recognized, it is insufficient in a rapidly changing automotive world. He emphasized the importance of a mix of product, quality, and price, noting that current consumer focus is on new concepts.
The question remains whether German car manufacturers can adapt their product offerings, reorganize, and enhance productivity swiftly enough to retain their decades-long status and relevance. According to Luman, the industry’s transition to electrification necessitates an increased emphasis on tech-rich supplies for EVs, especially batteries, which are yet to be fully developed in Berlin.
A spokesperson for Germany’s coalition government was unavailable for immediate comment. Chancellor Olaf Scholz’s government has expressed consideration for supporting Volkswagen through cost-cutting measures without resorting to domestic plant closures. Economy Minister Robert Habeck has described Volkswagen as crucial to the nation.
Not everyone shares a bleak outlook for Germany’s automotive industry. Sigrid de Vries, director general of the European Automobile Manufacturers’ Association (ACEA), expressed confidence in Germany’s ability to adapt to electrification. ACEA represents key European automakers like Volkswagen, Mercedes-Benz Group, and BMW.
De Vries, speaking at the Paris Motor Show, emphasized Europe’s rich tradition in automaking and the competencies required in producing advanced, high-volume products. She expressed confidence in the capacity to innovate and master new technologies, suggesting that German automakers are catching up rapidly and should not be underestimated in terms of brand loyalty.
This week’s Paris Motor Show has offered hope for a turning point in Europe’s automotive sector, with several manufacturers launching affordable EVs in an effort to boost demand and regain market share from Chinese brands. BMW showcased two budget electric Mini models at the event, including the John Cooper Works Electric and the John Cooper Works Aceman.
Julia Poliscanova, senior director for vehicles and e-mobility supply chains at the campaign group Transport & Environment, outlined two distinct issues affecting Germany’s auto sector. She noted that challenges for global German manufacturers extend beyond European regulations and electrification, citing increased competition from China and changing consumer preferences. Poliscanova argued that slowing down on electrification is not the solution.
