The industrial decline of a German car parking facility is underway.
2024 wasn't a great year for the German automotive sector, particularly its domestic branch. However, is 2025 destined to be a nightmare with factory closures, company collapses, and mass layoffs? Auto analyst Helmut Becker shares his insights in an interview with ntv.de.
ntv.de: 2024 wasn't a good year for the German auto industry, at least when considering its domestic performance...
Helmut Becker: You're spot on. It's been a sales crisis with electric cars in the homeland, followed by a sales crisis in far-off China. Meanwhile, the only profit maker is the internal combustion engine, which the EU, with Germany's help and without any industry opposition, aims to phase out by 2035. Folks, this is downright absurd.
But the troubles aren't over yet: Will 2025 also be a nightmarish year for German car manufacturers and suppliers?
In essence and at the moment: Yes, it will get harder. Since the 2018 tightened EU CO2 regulations, car production in Germany has decreased by about a quarter. It's not coming back, that's for sure. Without a change in political circumstances, this trend will continue. Much depends on if the upcoming administration has the courage to halt this decline.
Are mass plant shutdowns imminent?
Ford is leading the charge with its Saarlouis plant, and Volkswagen will have to follow suit. Volkswagen's CFO Arno Antlitz sees this as "inevitable" because the plants are bleeding out. Unfortunately, this won't happen without job losses, even if Volkswagen's works council chair Daniela Cavallo has made keeping her position contingent on it.
Will there be major company bankruptcies?
There will certainly be bankruptcies, but not among the large global automotive industry players. The smaller and medium-sized suppliers will bear the brunt, especially those whose business models are heavily dependent on electric cars. There are reports of order losses and sales decreases of 40 percent or more - no company can survive that in the long run. The outcome: Without an immediate political intervention, deindustrialization of the German automotive sector will continue unabated in 2025, although it may be unnoticed by the general public, except for the affected individuals.
What needs to happen for us to hope for a turnaround?
Politics has a role to play: The misguided ban on internal combustion engines and the irrational, overzealous CO2 regulations must be challenged. I'm all for environmental protection, but not in this manner: Shut down clean nuclear power and promote dirty coal and natural gas power for electric vehicles. Car consumers deserve assurance that they can continue to drive their new internal combustion engine vehicles at a reasonable cost in the future, and that their car's resale value won't plummet, as witnessed with electric vehicles in 2024.
Beyond Germany: Where will the automotive action be in 2025?
Without a doubt, not in Germany or Europe. It's likely to be in Trump's America and still in China, but at a slower pace there. The rest of the world is still buying affordable combustion engines and pickups, but they're no longer coming from Germany; instead, they're coming from Japan, South Korea, and increasingly from China. For instance, in 2023, the German automotive industry sold only 9,600 cars in India's most populous country, and 90,000 cars in all of Africa. That's no consolation, but other world regions might make up for an export shortfall to China or the United States... In Russia, Chinese brands like Chery, Geely, and Great Wall Motor have dominated the market with their combustion engines, following Western brands' withdrawal from Moscow due to sanctions.
So, the bottom line is: Without China, nothing works...
Furthermore, the German car manufacturers' dependence on China is growing. To avoid being completely overshadowed in China, they will have to intensify their engagement there. This means: more value creation in China, less in Germany.
Will Chinese automakers launch a significant attack in Europe with cheap electric cars in 2025?
I'm glad you asked, as this gives me the opportunity to debunk a popular myth about the threat of German market leaders being displaced by cheap electric cars from China. It's all hype. To date, all Chinese intruders have failed in the German market. The reason is simple: German car buyers generally don't like electric cars, and they especially don't like them from China with quirky names like Xpeng, Nio, or Maxus. Even the once-popular city car Smart, which sold 144,500 units globally in its best years, plummeted to just 15,000 new registrations in Germany after being acquired by the Chinese manufacturer Geely and fully electrified.
Will trade disputes between the EU and China escalate further?
If so, it would be utterly foolish. The Chinese threat does not exist. Given this, the EU should repeal the tariffs graciously and return to normal trade relations. However, the EU's action did have one positive effect for me: it served as a warning shot across China's bow.
Rumors circulate that he's not a big fan of the Germans, despite his German heritage from Bavaria. Thus, he's probably set to follow through on his plans and dramatically hike import taxes on the around 400,000 high-end vehicles imported from Germany annually. The end goal? Import entire German car factories instead. Basically, Germany loses out on factories, jobs, and prosperity, while the USA sees a comeback.
In light of the ongoing challenges, the German automotive sector may need to invest more in electric mobility to stay competitive in the global market. Despite the difficulties, some manufacturers like Tesla have already made significant strides in electric car production and sales, and Germany could follow suit to reduce its dependence on China.
Given the increased global focus on electric mobility, German car manufacturers should consider partnering with companies that specialize in electric vehicle technology to improve their own offerings and reduce reliance on fossil fuels. For instance, cooperation with battery suppliers or tech companies could provide a competitive edge in the race for future mobility solutions.
