Once a symbol of industrial strength, Germany’s automotive industry is now struggling, becoming a drag on the nation’s economy. This shift comes at a time when global markets are increasingly turning towards electric vehicles (EVs) and away from traditional combustion engines, a transition in which German carmakers have notably fallen behind competitors like Tesla and Chinese manufacturers.
Germany, home to iconic brands like Volkswagen, Mercedes-Benz, and BMW, has seen its economic prospects darken, largely due to the faltering performance of its car industry. In fact, the country has been a top exporter of vehicles for decades, with car exports accounting for nearly 16% of its total.
The car industry is in Germany in free fall. The deindustrialisation looks unstoppable.
Volkswagen produced 22% fewer cars in Europe in the first five months of 2023 than in the same period in 2019.
BMW, Audi, VW and Mercedes are running out of orders- car industry on shrinkage pic.twitter.com/NaH34Okk1r
— Mathis Mateo, MD ✝️☦️☯️☀️🌟🌙🕉🌹💎🚀👽 (@mateo_tao) July 22, 2023
Yet the last few years have marked a significant downturn, with production and demand for new cars shrinking, especially as the shift to electric vehicles (EVs) accelerates.
One of the primary reasons for this decline is Germany’s slow adaptation to the electric revolution. While countries like China have surged ahead in EV production, German manufacturers have been hesitant to fully commit, resulting in a loss of market share. Although Germany boasts over 800,000 jobs tied to the auto industry, the nation’s sluggish transition to e-mobility has put these jobs at risk, leading to production cuts and layoffs.
Good Morning from #Germany where the industry has been stuck for years. Overall industrial production is at the same level as in 2007. Of Germany's 6 major industrial sectors, only electrical industry managed to rise above its pre-corona level in 2019. Germany's flagship… pic.twitter.com/ojbRlsaUeo
— Holger Zschaepitz (@Schuldensuehner) August 26, 2023
Despite efforts by the German government to inject nearly 1 billion euros into the industry to spur the shift to electric cars, the results have been underwhelming. The end of government subsidies for EV purchases has exacerbated the situation, leading to stockpiles of unsold electric vehicles across the country. By 2024, around 100,000 electric cars were reported to be sitting in storage due to sluggish sales, indicating a serious mismatch between production and consumer demand.
The global landscape further complicates Germany’s situation. With car sales peaking in 2018, international demand has dropped significantly, and competition from China, where nearly 40% of the market now comprises electric cars, has intensified.
German carmakers have been forced to turn to China for growth, with major brands like BMW and Mercedes-Benz investing in fast-charging infrastructure there to keep pace. However, this dependence on the Chinese market raises concerns about long-term stability, especially as China increasingly dominates the EV sector.
The broader economic picture in Germany is bleak. The country, once an economic powerhouse in Europe, has struggled with stagnation since 2018. The decline in car manufacturing—historically a pillar of its economy—has compounded this issue, further weakening Germany’s industrial output.
