German cars were once considered untouchable. Mercedes-Benz, with its star on the bonnet, was synonymous with prestige, precision and engineering perfection. But today, as the industry struggles with global competition, high costs and misguided strategic decisions, the German automotive titans seem to be sliding down the path that Nokia once trod – from market king to mere footnote in the history books. The car brands from Germany are in clear free fall. Can anything save them?
Imagine sitting on the throne of an automotive empire, confident that you are untouchable, while a tidal wave is already building beneath you. German automotive industry, that crown jewel of European industry, is right at that point – and history is breathing down its neck with warnings it can no longer ignore. German car brands are going the way of Nokia. In an era where trends spin faster than the turbines of the latest Porsche, underestimating the competition is like driving blindfolded on a German autobahn with no speed limit. So let's take a look at how German automotive legends have already been burned – and why Mercedes-Benz could be the next to pay the price of ignorance.
When arrogance meets reality
Let's remember 2015, when Matthias Müller, the then head of Volkswagen, looked down on Tesla with a smile and declared: “Tesla sells about 80,000 cars a year and loses half a billion dollars, while we sell 11 million vehicles and earn 13 billion.” Oh, how bitter that statement sounds today! Not only did Volkswagen wander into the swamp of the Dieselgate scandal that year, where they lost billions of euros and their reputation by cheating on emissions tests, but Tesla in the meantime became the guiding star of the electric revolution. Today, Tesla’s market value is higher than all the German automotive giants combined, and Volkswagen is still chasing its tail and trying to catch up.
But this is not an isolated case of German blindness. Let us recall Bob Lutz, the former vice president of General Motors, who in 2017 called Tesla a “cult of fanatics with no financial future” and announced its bankruptcy. Years later, Lutz humbly admitted that he was wrong, but the damage was done – Tesla has since overtaken all traditional manufacturers and set new rules of the game. Germans, who a decade ago claimed that electric cars “will never be mainstream”, are now watching Tesla, BYD and other Chinese players overtake them left and right.
History teaches, but who listens to it?
The history of the automobile is like a comedy of errors, where arrogance always plays a leading role. In the 1970s, the American giants – the car brands – GM, Ford and Chrysler – branded Japanese cars as “cheap junk”. Lee Iacocca, the legendary boss of Chrysler, looked down on Toyota and Honda at the time, convinced that they “couldn’t compete with American power”. The result? The Japanese took over the world market with reliability and efficiency, and Detroit had to ask for government bailouts to survive. Similarly, in the 1950s, Henry Ford II underestimated European cars, thinking that Americans only wanted huge V8 engines. Then came the Volkswagen Beetle and became an icon of a generation, and Ford was left speechless.
And now? The German car industry, led by Mercedes-Benz, is at a crossroads. Chinese manufacturers such as BYD are not only producing cheaper electric cars, but are also technologically ahead of the European giants. While the Germans are still dreaming of their diesel and petrol heyday, the world is already driving on electricity. If they don't wake up quickly, they risk becoming the Nokia of the automobile - once kings, now just nostalgia.
Mercedes-Benz: Cleaning or funeral?
Mercedes-Benz, the brand synonymous with luxury and German precision, is now announcing a “clean-up” – a reorganization that is supposed to return them to the paths of their former glory. But the question remains: is this really an opportunity for a revival or just a desperate attempt to patch up an already leaky ship? The company faces shrinking margins, increasing competition and internal challenges that can no longer be swept away.
Mercedes-Benz: Half a million for farewell
Mercedes-Benz, once the undisputed king of luxury sedans, is implementing one of the largest voluntary layoff programs in the automotive industry. According to a report by the German newspaper Handelsblatt Around 4,000 employees have already left the company, each with a six-figure severance package. A long-time team leader who has worked for the brand for 55 years can get up to half a million euros to say goodbye. Turbo bonuses for quick departures? Sounds like a desperate attempt to get rid of "excess weight" while the ship is sinking.
The program is part of a cost-cutting plan led by CEO Ola Källenius. The goal? To save five billion euros by 2027, one billion of which will come from reducing labor costs. Severance payments have been offered to as many as 40,000 non-production employees – from administrative staff to engineers and IT specialists. In Germany, these workers are protected from dismissal until 2034, so Mercedes is waving money around to persuade them to “voluntarily” leave. But it’s not just about cleaning up the offices. The company is also investing in retraining employees for jobs of the future. Ironic, right? They fire you, but they promise to teach you something new – if you stay at all.
Moving to Hungary: Is Cheaper Better?
While factories in Germany, such as the one in Sindelfingen, are cutting production – from 330,000 vehicles in 2018 to just 205,000 last year – Mercedes is expanding its plant in Kecskemet, Hungary, where costs are 70 percent lower. This is not just a business decision, it is an admission that the German high-cost model no longer works. The luxury S-Class and EQS models that once defined the brand now come from factories where the workforce is cheaper but still sufficiently skilled. Is this a sign of flexibility or a quiet retreat from the homeland?
Industry in free fall
Mercedes-Benz is not an isolated case. The German automotive industry has lost more than 55,000 jobs in the past two years. Bosch plans to cut 22,000 jobs by 2030, Volkswagen will cut 35,000 in Germany, and ZF 14,000. This is no longer just a wave of layoffs – it is a tsunami. The main reasons? Fierce competition in China, the most important market, where German brands are losing the battle to domestic manufacturers such as BYD. Add to that the tariffs imposed by US President Donald Trump and a misguided strategy for switching to electric vehicles. Mercedes has already abandoned the dream of an all-electric fleet and is now investing in modernizing its internal combustion engines while preparing a new generation of electric models. It sounds like chasing its own tail.
Corporate Culture: Adverse Selection as a Silent Killer – Car Brands – Can't Change This
The primary problem of the German car industry is not just external factors, but a corporate culture that has fallen victim to negative selection in recent years. Management positions are often filled based on loyalty rather than ability, which has led to a lack of innovation and adaptability. Let's remember Nokia. The Finnish giant ruled the mobile phone market until it rested on its laurels. It failed to adapt to smartphones because its corporate culture – rigid, introverted and convinced of its own infallibility – made change impossible. Mercedes-Benz, Volkswagen and other German giants are caught in a similar trap. The German precision that once amazed the world is now a fetter. “You can't change a company's culture if it's woven into its DNA,” a former Nokia executive once said. Adverse selection has created management teams that are too slow to cope with a rapidly changing market, where the Chinese are offering cheaper, technologically advanced electric cars and Tesla continues to set the standard.
What does the future hold?
The German car industry is at a crossroads. Mercedes-Benz is trying to find a balance between austerity and innovation, but the question is whether it is already too late. Moving production to cheaper locations and making layoffs may be necessary measures, but they do not solve the fundamental problem: a lack of vision and a rigid culture, further burdened by negative selection. While China and Tesla race into the future, the German giants are still tinkering with their old recipes. If they do not learn the lesson of Nokia – adapt or perish – they may be a pale shadow of their former glory in a decade.
