Auto industry: After burglaries: Is the Autoland Germany in the end?

The German auto industry recently had to cope with profit breakdowns. Volkswagen, Mercedes-Benz, BMW, Porsche and Audi hit it hard. The negative reports were nothing new. Rather, they lined up in announcements by the car manufacturers and suppliers such as Bosch, ZF or Continental, saving and wanting to reduce.

In one of the most important key industries in Germany, tremendous pressure is placed. There are problems, the challenges are huge. Is the Autoland Germany in the end? Or is there another way out of the crisis?

“The German automobile manufacturers are still far from a real crisis,” says Frank Schwope, car expert and lecturer at the Berlin University of Applied Sciences. Deep red numbers are not in sight.

Despite burglaries, billions in profits are still

For example, Mercedes-Benz still had a group result of around 2.7 billion euros in the first half of the year. Although the profit was still around 6.1 billion euros in the same period last year. The Volkswagen Group, which also includes the core brand also Porsche and Audi, still recorded billions in profits. Likewise BMW.

Schwope sees it this way: in the Corona years the German manufacturers were spoiled extremely and had made extremely high profits. “Some of these were profits for which the board members couldn’t do much,” says Schwope. Chips for cars were in short supply, the manufacturers would have sold fewer cars, but the significantly more expensive ones with correspondingly higher profit panels.

Expert: “Sleeping trend towards electromobility”

Of course, the car manufacturers would not have done everything right. “The German manufacturers have overslept the trend towards electromobility,” says Schwope. In the Chinese market in particular, they hardly have the taste of young people or modern car buyers. Even when driving autonomous, the Germans are currently not competitive.

The Constantin Gall, car expert at the examination and consulting company EY, looks similar. The burdens are currently piling up for the German auto industry. “In China, the most important sales market of German car companies, the German car companies are currently losing market shares,” said Gall. In addition, there would be billion dollar pollution that would result from the US import tariffs.

The current burglaries are only due to the difficult external circumstances, but would have jumped too short. Some of the problems are also homemade. “The super cycle from 2021 to 2023 with dream margins thanks to covid, lack of chip and supply chain interruptions has apparently given some market participants a deceptive feeling of security, so that cost management was neglected,” said Gall.

“The German auto industry urgently needs slimming”

There were billions of billions in research and development without the results always convincing. “The German auto industry urgently needs slimming and acceleration of the development processes,” says Gall.

“The problems of individual companies are stored differently, but the situation for industry and the employees overall is already precarious,” says IG Metall boss Christiane Benner. The challenges are approaching. The sales figures for corona pandemic would currently not be reached in the EU. “As a result, works are not busy, and we conduct hard clashes that employees do not wear the loads unilaterally,” said Benner.

IG Metall: “We have to go through”

The trade unionist also sees homemade problems for which “management should take responsibility”. Shareholders should also cut back on the amount of the dividends. “We have to go through there,” says Benner. However, the situation is hard for some suppliers. “Cost pressure and high investment costs for transformation in the event of a lack of income bring many to the brink of the existence shortage,” said Benner.

Car expert Schwope also shares the assessment of the suppliers. It looks much darker with them. In recent years, these have been terrifyingly weak profit spans. “If someone is in the crisis, they are the suppliers,” says Schwope.

How does industry come back to old strength?

To come back, the German manufacturers would have to become stronger again on the Chinese market. “And maybe looking for new domestic partners there,” says Schwope.

Since the car manufacturers only had a very limited or no influence on the inconsistent regulatory conditions, it is all the more decisive that they optimize their internal structures, increase their ability to act and speed, and make cost savings, says Ey expert Gall. German corporations are now significantly better positioned in e-mobility than it was a few years ago, so they would have a good chance of being at the forefront on this market.

Attaching numbers in e-mobility also observes IG Metall boss Benner. “Something is happening,” she says. The companies would now have to prove staying power and continue to invest in future products. This will pay off, although the dry spell for one or the other is getting a little long, says Benner.

Industry calls for reforms

Meanwhile, the industry itself is calling for reforms for the competitiveness of the business location. For example, the suppliers with their products are internationally competitive, but the location of Germany, on the other hand, was not, the managing director of the association of the automotive industry, Jürgen Mindel. Competitiveness and location attractiveness would have to become a top political priority in Berlin and Brussels.

The consultant Harald Christ does not look so negatively into the future. The German automotive industry could be very good, namely to start a new innovation offensive from a difficult starting situation. The German manufacturers had learned some things about cars of the future. And: “The German automotive industry has been written off more than once.”