Lhe German economy is not doing well at all at the start of 2025. The most important sector, the automobile industry, has been hit hard. Germany’s largest automaker, Volkswagen, even plans to close factories in Germany, something that has never happened before in the company’s decades of existence.
An agreement was certainly reached with the unions just before the end of year holidays. This compromise, hailed as a “Christmas miracle”, provides for the elimination of more than 35,000 jobs and a reduction in production by almost a quarter, but without immediate layoffs or even closure of factories. But massive layoffs are still on the agenda at other automotive companies and many supply companies.
The diagnosis is indisputable, it is only on the question of the reasons that market observers and competitors still differ. So car expert Stefan Bratzel of the Automotive Management Center (Cam) speaks of a “combination of difficulties, a German polycrisis”.
This implies that “new skills must first be acquired in the transformation of the sector: towards e-mobility, towards autonomous driving”. And on top of that, he said in an interview with DW, “a new competitive environment. And it’s not just about Tesla and the Chinese”.
The political class indexed
A spokesperson for the automobile industry association (VDA) also questioned thee policy on DW: “In addition, the end of the promotion of electric cars in December 2023 and the insufficient charging infrastructure are holding back current sales figures”. Ferdinand Dudenhöffer of the famous Car-Institut agrees in an interview with Deutsche Welle and criticized the type of “politician who once wants electric cars and then preaches for combustion cars and confuses people”.
It has seemed certain for years that the future of individual transport does not lie in the construction or development of combustion engines. It doesn’t matter whether they run on fossil fuels or synthetic fuels: the trend is clearly towards e-mobility.
Germany has clearly fallen back in international competition, notes Stefan Bratzel. Among the reasons there are “the high costs of work, including high medical costs and many days off. As long as you were better, more innovative than others, it was still okay”.
The German car manufacturer must adapt
The Cam expert thus puts his finger on the wound. For the traditional car, which requires fossil fuels, German car manufacturers are the best in the world. The Germans know how to make valves and carburetors, but what about electronic components? Ferdinand Dudenhöffer confirms that German car manufacturers understand “the car of today is fine, but for the car of tomorrow, Tech companies play a leading role”.
The future of automobile transportation lies in electric motors, and China is clearly leading in this area. This is also what Dirk Dohse, economist at the Kiel Institute of World Economy (IfW): “The Chinese market for electric cars is the largest market in the world and the most dynamically developing. This rather argues in favor of China’s continued advance”. The outlook is therefore not good for VW, BMW, Mercedes and Porsche.
Frank Schwope, the university professor, identifies at least a small glimmer of hope on the horizon for German automakers. His outlook on the new year is a “a mixture of skepticism and hope! I am already assuming that electromobility in Europe will significantly accelerate in 2025, at the latest in 2026”.
