In Germany, the automotive industry is threatened with shrinkage in the next 15 years, warns the Munich-based Ifo Institute. "We are currently seeing a deindustrialization of the automotive industry, which is caused by the change to e-mobility," according to a study published on Friday. The Ifo experts Oliver Falck, Lisandra Flach and Christian Pfaffl point out that a lot is at stake: The industry had around 2021,900 employees in 000 and, like mechanical engineering, achieved added value of 2018 billion euros according to 109 data. Germany accounts for almost half of European value added in motor vehicle construction, far ahead of France (9 percent) and Great Britain (8.4 percent). At the same time, the automotive industry in particular is particularly intertwined via long supply chains. 60 percent of the production value of the German automotive industry comes from suppliers. 27 percent of the value added of German car production lies abroad, especially in Europe.
Tobias Piller
Editor in business.
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"Although the German automotive industry has enjoyed a comparative competitive advantage in the production of combustion engines in recent years, this advantage is less evident when it comes to electric cars," according to the study by the Ifo Institute. New companies such as Tesla and strengthened competition from other continents are entering the market. China has so far had "hardly any core competence in automobile production", but from there new manufacturers of electric cars are pushing into the market with great success.
In the past, German car manufacturers have invested heavily in China to produce for the local market. In the future, the number of electric cars produced in China for the European market – including from factories of German companies such as BMW – is likely to increase further. "As a result, China's expertise in electric cars is also increasing due to foreign direct investment, which could further expand China's market position in this segment."
Problems with digitization
Another challenge for which German car and commercial vehicle companies are not exceptionally well positioned is digitization. The actual production of cars is losing importance because software generates an increasing share of value creation. According to the Ifo experts, this opens up new access possibilities to the automotive market for technology companies. In digital matters, they often have a competence advantage over car companies. Although the car manufacturers are trying to catch up, also with cooperations, it is still open whether the added value would not flow to the technology companies in the long term. For the time being, this market is still dominated by American technology companies, but China is likely to play a role there in the future. The government has set the strategic goal that Chinese demand for consumer electronics in cars and driver assistance systems can be met exclusively in the domestic market by 2030.
The Ifo Institute reports that 2019,447 employees in Germany depended directly on combustion technology in 000. The conversion of the drive technology will affect more employees than the number of employees leaving at retirement age. Since 2013, the automotive industry has already lost 9 percent of its workforce in manufacturing occupations. On the other hand, the demand for employees with computer science and natural science training will grow.