Can you imagine the automotive world without brands like Mercedes,
BMW, Volkswagen, Audi and Porsche? Not really. After all, the Germans did invent the engine-running car more than a 130 years ago, and have been considered for many decades to be the makers of the best cars in the world. But if the German car industry does not overcome the current decline curve, this remote and undesirable possibility of demise might turn into reality.
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The initial indication of an alarming existential threat on the horizon was Daimler and Volkswagen groups’ announcements of their intention to lay off thousands of their workers in the next few years.
Among the most prominent reasons for this are VW “Dieselgate”, Brexit, and the tariff war between the US, China and the EU, especially after the Trump administration trade barriers threats. These events had an unprecedented impact on the German auto industry, which is the catalyst of the German economy. They also reflected Germany’s heavy reliance on exports to American, British and Chinese markets.
The auto industry, which employs around 850,000 Germans, is in fact the most important sector of the German economy since the dawn of the last century. In 2018, for example, the auto industry and its components accounted for around 16 percent of total German exports, at a value of 1.3 billion euro, according to the Germany Trade and Invest agency (
GTAI).
Hence, the looming decline is being dealt with very seriously by the federal authorities in Germany, along with industry pioneers, regarding it an issue of national security issue.
Put politics aside, the main source of worry facing the German car industry in the coming years is the extent of its ability to catch up with technological progress in the field of electric cars and smart car tech, to keep pace with other competitors such as the US, China, Korea, and Japan.
These countries have the huge advantage of having domestic tech companies like Google and Apple in the US; Alibaba and Baidu Nvidia in China; and LG and Samsung in South Korea. These companies have been integrating the world of the Internet with AI to further develop automotive technologies, an advantage Germany, and Europe as a whole, do not really have. What Germany does have however are automotive component giants like Bosch and ZF, which are not lagging behind. In fact, these companies are very much invested in future automotive technology.
The German auto industry acknowledges the necessity of working hard to confront the new competitors that seek to dominate the global market in the coming years. Most German automakers have allocated large funds to invest in the development of electric cars and future tech; BMW, for example, made the allocation of 200 million euro for the establishment of a research and development center for electric car energy systems, while Daimler allocated 20 billion euro for broader plans that include developing battery cells and other high tech. for its part, Volkswagen has allocated twice the amount to similar plans, and is making notable investment and acquisition moves around the world in tech startups that help furthering its electrification vision.
The German government is also is doing its part by developing the needed national infrastructure, including
5G networks and high speed internet, among others, in addition to accelerating development in the fields of information technology and artificial intelligence, and electric car charging networks.
Germans are not used to lagging behind or playing catch up, but they are renowned for being a resilient people with an extraordinary ability to rise from the ashes, so it is safe to expect that German car giants will survive and thrive against all odds.
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