A Volkswagen Golf GTI is parked in the parking lot of the brand tower at the Volkswagen factory in Wolfsburg, Germany.
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The German automotive industry has long been known for producing reliable and innovative internal combustion engine (ICE) vehicles, but it is struggling to maintain its relevance in the era of electrification.
Major domestic manufacturers such as VolkswagenMercedes-Benz Group and BMW have issued profit warnings in recent weeks, citing a weak economy and sluggish demand in China, the world’s largest auto market.
These headwinds, while not unique to Europe’s largest economy, are in addition to worries about historic layoffs at Volkswagen AG and potential German factory closures. end suddenly Germany’s electric car subsidy program late last year and Berlin’s recent failure to prevent other EU member states from voting in favor of EU tariffs on Chinese electric vehicles (EVs).
The latter seems to suggest that Germany less influence Regional policy—an idea that might have been unthinkable just a few years ago.
The litany of problems has raised concerns that the high-quality “Made in Germany” moniker could lose its luster as internal combustion engine cars disappear.
Rico Luman, senior sector economist for transportation and logistics at Dutch bank ING, told CNBC via email: “I believe that the German quality label is still valid overall, but it is not enough because the automotive industry is changing rapidly.”
Federal Minister for Economic Affairs and Climate Protection Robert Habeck visits the electrical assembly line at the Volkswagen plant in Emden.
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“It’s always a mixture of product, quality and price. Quality is also related to the past, and we are now completely revamping the model range. So, in any case, customers are paying attention to new concepts,” Luhmann said.
“The question is whether the German carmaker can adapt its product portfolio, change its organization and increase productivity quickly enough to maintain the position and relevance it has held for decades.”
The industry’s transition to electrification means it will become increasingly important for German carmakers to expand their technology-rich supply of electric vehicles, particularly batteries, Luhmann said, noting that Berlin has yet to develop the technology.
A spokesman for the German coalition government did not immediately respond to CNBC’s request for comment.
Under the leadership of German Chancellor Olaf Scholz, the German government explain The company is considering how to support Volkswagen through a period of cost-cutting without closing domestic factories. Reuters Economy Minister Robert Habeck calls Volkswagen “centrally important” to the country report September 19th.
brand loyalty
Not everyone is that concerned about the future of the German auto industry.
Sigrid de Vries, director general of car lobby group European Automobile Manufacturers Association (ACEA), said she found it “really hard to believe” that the German car industry was struggling to adapt to electrification.
ACEA represents 15 major European car manufacturers, including Volkswagen, Mercedes-Benz Group and BMW.
“Of course, as I said, I’m more focused on ‘Made in Europe’ than ‘Made in France’ or ‘Made in Germany,’ but I think there’s such a huge tradition in car manufacturing that that’s a capability in itself,” de Vries told CNBC at the Paris Auto Show.
“It’s a complex (and) it’s a very advanced product that needs to be produced in large quantities, so you need to get a lot of things right. I don’t think we should underestimate that ability, but also to innovate and master new technologies.”
ACEA’s de Vries said that while some might think German automakers have some work to do to get up to speed, “I think they will catch up pretty quickly as long as they continue to use the term.”
“They have technology and products that are (very) good and I think interesting, and don’t underestimate the reputation and reputation of brand loyalty,” she added.
Illustration of the BMW booth at the Auto Summit at Porte de Versailles Exhibition Center in Paris, France on October 15, 2024.
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Some hope this week’s Paris auto show will be a turning point for Europe’s auto industry.
Many car manufacturers have taken advantage of the opportunity The launch of low-cost electric vehicles is an attempt to stimulate demand and regain some of the market share currently held by Chinese brands.
BMW propose Two cheap electric Mini models were on display at the show, including the John Cooper Works Electric and the John Cooper Works Aceman.
Slowing down electrification ‘is not the answer’
Julia Poliscanova, senior director of vehicles and electric vehicle supply chains at the Transport and Environment Campaign group, said there are two different issues to consider when assessing the health of the German auto industry.
“One is good for German manufacturing and the other is good for German manufacturers who are global and making money everywhere, but they are not always the same thing,” Poliskanova told CNBC at the Paris Auto Show.
“I think German industry and some carmakers like Volkswagen do have serious problems globally. I just don’t believe it’s all due to European regulations and electrification. It’s much more serious than that.”
Poliskanova said some of the challenges facing European car giants include increased competition from China, a “patriotic” trend among Chinese consumers choosing to buy domestically produced cars over those made in Europe, and the failure of overall car sales to recover after Covid-19 -Level level before 19.
“So, yes, mass-market German manufacturers will indeed be affected, but slowing down electrification or the technology that everyone wants to buy is not the answer,” she added.
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