Germany’s largest industrial sector is sliding ever deeper into crisis. Behind us lies another week of depressing news from the car companies: In Wolfsburg on Wednesday, Volkswagen employee representatives threatened a labor dispute “the likes of which the Republic has never experienced”. The works council is defending itself against planned cost reductions and the threat of closures of VW factories in Germany for the first time. In Stuttgart on Thursday, Mercedes announced a billion-dollar savings program. On Friday, the world’s largest auto supplier Bosch announced that it would cut another 5,500 jobs. The situation is serious, more serious than it has been for many decades. It has long been talked about how much the two megatrends in automobile manufacturing will change the industry: the switch from combustion engines to battery-electric drives and the ever-increasing importance of software and digital technology in cars. Now the change is reaching the car manufacturers’ headquarters and their factories with full force. The previous business basis is rapidly eroding. Electrification and digitalization have put German car manufacturers, who have long been spoiled for success, on the defensive. German cars are expensive, and the manufacturers were able to enforce higher prices on customers for a long time because they had better technology, good quality and a lot of brand prestige to offer. But the existing business basis is rapidly eroding. Nowhere is this more clear than in China, the world’s largest car market. For many years, German manufacturers lived very well off the seemingly ever-growing hunger of Chinese customers for their cars. The hefty profits from China made companies at home sedate and sluggish. VW could only afford the high costs of its German factories because the profits flowed from China. Now the market has tipped over, electric cars and hybrid-electric vehicles are increasingly displacing the traditional combustion engine models from German manufacturers in China. Europe and thus also the car nation Germany are no longer technology leaders, former ECB President Mario Draghi concludes in his recently presented report on European competitiveness: In almost all respects, Chinese car manufacturers are a model generation ahead of the Europeans, writes Draghi. On the way to the industrial museum German car manufacturers have no choice, they have to assert themselves in this new car world and fight for their place again. The pole position from the old days is already gone in China. If things continue as they are, the Chinese will also conquer the European market. It is an illusion to assume that European customers will make different purchasing decisions than Chinese customers in the long term if cars from China are better and cheaper than the products of German companies. Cars with combustion engines are unlikely to disappear from the roads in Europe as quickly as in China. Sales of electric cars have fallen sharply in Germany this year. The change is likely to take longer than expected just a few years ago. This is an advantage for European manufacturers, who can temporarily continue to make money with combustion engine models in their home market.More on the topicBut that doesn’t change the fact that the age of the combustion engine in cars will come to an end. There are technical alternatives to battery-electric drives, but German car managers and politicians will not secure the future of car factories by trying to give the combustion engine a second life with synthetic fuels and by relying on eternal hopefuls such as the hydrogen fuel cell. The decisive form of drive in the competition will be the battery-electric car. Even if they are currently selling poorly in Germany: Without competitive electric cars, German manufacturers will sooner or later be on the way to becoming an industrial museum.
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