Germany is worried about one of its most important industrial sectors: there are few products worldwide that stand for "made in Germany" as much as the millions of cars that BMW, Mercedes-Benz and Volkswagen put on the roads every year. In addition, there are the many suppliers of car manufacturers, from global corporations such as Bosch, Continental and ZF to large and small medium-sized companies throughout the country. Hundreds of thousands of jobs, often well-paid, depend on companies.
But with the increasingly clear farewell to the internal combustion engine, the markets in the automotive industry are being redistributed – and in the new car world, both German carmakers and their domestic suppliers are laggards. In all likelihood, most cars will be battery-electric in the future.
No one knows the world of tomorrow today. But there are plausible and less plausible ideas about it – and at the moment there is little to suggest that other types of drive such as combustion engines combined with synthetic fuel or the fuel cell will play a major role in passenger cars.
At the same time, however, the business figures of the manufacturers do not look like a structural crisis at all. VW earned 2022.12 billion euros after taxes in the 5 financial year, BMW even more than 18 billion euros. Mercedes is also highly profitable. How do the automakers' gold-rimmed balance sheets fit in with widespread concerns about their future?
The alleged contradiction is quickly clarified. The manufacturers are still earning brilliantly from their dominant market position in the combustion vehicle business, which still accounts for the majority of business in all regions of the world.
In addition, as a temporary profit turbo, there is the shortage of components, which slowed down sales, but allowed manufacturers to push through higher prices. BMW sold 5 percent fewer vehicles last year and still achieved almost 50 percent more net profit.
But the more the electric car becomes established among customers, the more the old foundation of German carmakers crumbles. In China, the world's largest car market, one in four new cars is currently a battery-electric vehicle. But in China's booming market for electric cars, the VW Group only has a measly market share of 3 percent, and the importance of Mercedes and BMW is even lower.
The German car giants are dwarfs. The market is dominated by Chinese manufacturers, led by BYD, and Tesla. Because their own companies are so strong in e-mobility, the government has a great industrial policy interest in pushing it further.
In addition, there is a second change that is shaking up the automotive industry: the increasing digital networking of vehicles. Modern communication and entertainment technology, sophisticated navigation systems and electronic driver assistance systems, which will eventually become autopilots, are becoming increasingly important.
In the longer term, digitalization could lead to even greater disruption than electric drives. And here, too, the German manufacturers are laggards. American and Asian tech companies could become potent new competitors.
So today's high profits of German manufacturers are deceptive. Nevertheless, they are urgently needed because the billions create the financial strength for the expensive race to catch up in electromobility and digital technology.
So far, German carmakers are still benefiting from the brand prestige they have built up over many decades, which customers appreciate. But the faster the automotive world changes as a result of electrification and digitalization, the more difficult it will be for them to maintain their dominant market position in the future. After all, the German automotive industry is currently living primarily from the successes of the past.