Germany Has a (Car) Problem. And With Them All of Europe.

Summary

The German car industry faces its biggest challenge since the invention of the internal combustion engine, with a 20% decline in production and a loss to electric car competitors. The industry's slow start in electric mobility and past focus on diesel engines put it at risk, as global trends shift towards electric vehicles. The impact of this downturn could be felt across Europe, affecting not only Germany's economy but also countries within its supply chain.

Takeaways

• 🚗 The German car industry is facing its greatest challenge since the invention of the internal combustion engine, with a significant decline in production compared to 2019.
• 📉 German automakers like Volkswagen, Audi, BMW, and Mercedes-Benz are losing ground to foreign electric car manufacturers, particularly in the Chinese market.
• 🔋 German carmakers have been slow to adapt to the electric vehicle (EV) market, initially focusing on diesel engines and missing the early stages of the electric race.
• 💡 The US and other countries, including China, have been investing heavily in electric mobility, with China leading in lithium-ion battery production, a critical component for EVs.
• 🌏 The Paris Agreement and global climate policies have spurred the development of electric mobility, with Germany lagging behind in this transition.
• 🛑 The 'Dieselgate' scandal significantly impacted the German car industry, resulting in billions of dollars in compensation and a loss of reputation and sales.
• 🏭 Competitors have been building the necessary infrastructure for electromobility, including large battery factories, while German companies have been slower to respond.
• 💼 The German government has launched an electric mobility program to expand charging networks and subsidize EV purchases, but the industry is still playing catch-up.
• 🏢 The automotive industry is a major driver of the German economy, accounting for nearly 5% of GDP and a significant portion of employment and exports.
• 🌐 The potential decline of the German car industry could have far-reaching effects on the European economy, particularly in countries with a strong automotive presence.
• 🚀 Despite the challenges, German automakers have committed to investing €250 billion in research and development by 2027 to innovate and compete in the new automotive landscape.

Q & A

What did Gabor Steingart predict about the German car industry in Focus magazine in July 2023?

Gabor Steingart predicted that the German car industry, and by extension Germany as a whole, is on the verge of collapse due to the greatest challenge since the invention of the internal combustion engine.

What significant observation did Handelsblatt confirm about the German automotive industry in July 2023?

Handelsblatt confirmed that Germany's flagship automotive brands produced more than half a million fewer cars in the first half of 2023 compared to the same period in 2019, indicating a nearly 20% decline.

Why is the German automotive industry losing ground to competitors in the electric vehicle market?

The German automotive industry is losing ground because it has been slow to adapt to the electric vehicle market, with competitors like Tesla and Chinese manufacturers making significant inroads and investments in electric vehicle technology and infrastructure.

What impact did the 'Dieselgate' scandal have on the German car industry?

The 'Dieselgate' scandal, where German car manufacturers were found to have used software to falsify emissions measurements, led to a loss of trust, a significant financial penalty, and a tarnished image for the industry.

How did the US administration under President Barack Obama influence the electric car industry?

The US administration under President Barack Obama had a significant influence by providing $2.4 billion in subsidies to manufacturers, mainly Tesla, and $1.5 billion to companies developing more efficient lithium-ion batteries, thereby promoting the electric car industry.

What role did the Paris Agreement play in the development of electric mobility?

The Paris Agreement, ratified by 195 countries, pledged to pursue policies limiting the global average temperature increase to less than 2°C, which included the development of electric mobility as part of the fight against carbon emissions.

Why did German carmakers initially refuse to embrace the electric car trend?

German carmakers initially refused to embrace the electric car trend because they were focused on perfecting diesel engines, which they believed would better adapt to tightening emission limits, and they were slow to recognize the potential of electric vehicles.

What is the significance of the battery manufacturing industry for electric vehicles?

Battery manufacturing is crucial for electric vehicles as batteries are the most important component without which the vehicles cannot operate. The dominance of Asian companies in this sector has given them an advantage in the electric vehicle market.

What steps has the German government taken to promote electric mobility?

The German government has allocated large sums of money to expand the network of charging points for electric cars and to subsidize customers who want to buy electric vehicles, aiming to support the growth of this sector.

How has the Volkswagen Group's investment in battery factories been perceived as a response to the electric vehicle market?

Volkswagen Group's investment in six large battery factories has been seen as a significant step to catch up with the competition in the electric vehicle market, but it is also viewed with skepticism due to the decade-long delay compared to competitors.

What are the broader economic implications of the German car industry's struggles for Europe?

The struggles of the German car industry could have far-reaching implications for Europe, as the industry is a key economic driver not only in Germany but also in countries like the Czech Republic, Slovakia, Hungary, Poland, and Spain, where German car brands have a significant presence.