Are days of the German car over?

The car industry is rarely out of the news, often under gloomy headlines related to tariffs, falling sales, low uptake of electric vehicles (EVs) and workers' strikes.

- PIETRO MICHELI

While the crisis in the sector affects all global brands, German companies have been especially badly hit. Volkswagen has been reducing its production capacity, Mercedes-Benz has issued a profit warning and announced a cost-cutting programme and BMW's value has dropped substantially over the past year.

There are several reasons for German carmakers' troubles. These include changes in regulations, the emergence of new competitors, high energy prices, Covid disruption in both the market and the supply chain and the bottleneck created by the shortage of microchips.

Also, while China was a booming market for many European and North American manufacturers, over recent years it has become a formidable competitor with its domestic brands capturing market share both locally and globally.

Meanwhile, German brands' market share in China has dropped from 25 per cent to 15 per cent in just five years. All this hurts not only the German economy, but also its national pride, given the role that the automotive industry has played in shaping the country's sense of identity.

These troubles come against a backdrop of changing consumer preferences. I have researched and worked with several legacy car manufacturers and believe that they have underestimated recent important shifts in users' needs and behaviour.