Once a symbol of innovation, prestige and technical excellence, the German automotive industry seems to be going through some of its toughest times. Volkswagen (VW), the country's largest carmaker, is facing challenges that could threaten jobs and even shutter factories in Germany. These problems are the result of a combination of factors, including the rapid growth of Chinese competition, a lack of innovation in electric vehicles, and the country's ever-increasing labor costs.
At a recent meeting with workers' representatives, the atmosphere was tense. The workers have come out against company management, which plans to scrap a thirty-year-old job security agreement. Germany faces a real threat of losing a large number of jobs, which would have a major impact on local communities. The president of the works council, Daniela Cavallo, emphasized that job cuts could have disastrous consequences for entire regions where Volkswagen is the main employer.
China's competitiveness and missed opportunities
A problem for German car giants, like VW, is not only in bad business decisions, but also in global market changes. Chinese car brands that once served as production platforms for Western manufacturers are now competing with them themselves. Electric vehicles, in which Volkswagen has invested a lot of hope in recent years, are extremely competitive in price on the Chinese market. This competitiveness is now also spilling over into the European market, which has made Volkswagen's already difficult situation even more difficult.
As a result, VW faces strong competition in Europe, which is reflected in falling sales and declining market share. According to Carsten Brzeski, Chief Economist of ING Bank, Volkswagen, like other German manufacturers, did not respond quickly enough to the trends of electrification and digitalization that transformed the automotive industry.
The German automotive industry and the future
For many years, Germany was considered an unshakable industrial superpower, mainly thanks to the automotive sector. But years of economic stagnation, lack of investment in digitization and infrastructure, and ever-increasing international competition have weakened its position. Some economists warn that this is a warning sign for the entire German economy, which urgently needs to adopt structural reforms if it wants to remain competitive on the world market.
Volkswagen may have one to two years to turn the curve downward, according to the CFO. This will require radical changes in business, from cost reduction to greater investments in new technologies. But the question remains whether Volkswagen will be able to find its way back to the top in the increasingly competitive automotive sector.
