Industrial production in Germany fell by one percent month-on-month in October, the German Federal Statistical Office said. The industry in Europe's largest economy is currently approximately ten percent below the level of 2021 and has not even surpassed the pre-Covid level.
This is also the reason why the German economy as a whole cannot break out of the stagnation it has been facing for the last few years. And according to the European Commission, the German economy will shrink by a tenth of a percent this year. Only in the next year and the year after that, Germany should finally experience economic growth, which, however, will not be dizzying. In 2025, German GDP will rise by 0.7 percent and in 2026 by 1.3 percent.
In this context, the German economy is facing the most pressing problems in the automotive industry, which has been one of its main engines for many decades. After all, even in 2015 or 2016, Germany exported more than four million vehicles to the world annually. The Covid pandemic has almost halved these numbers, but Germany is far from returning to pre-2020 volumes.
Just over three million cars were exported from Germany last year. This is roughly a quarter less than in 2017, and such an export volume corresponds approximately to the end of the last century. It must be said, however, that the problems of the German automobile industry began even before the covid pandemic, as already in 2018 and 2019 there was a decrease in the number of exported cars.
At the time, it was more or less behind the Volkswagen scandal surrounding the falsification of data on greenhouse gas emissions, as well as the tightening of emission standards in the European Union. But within a few years, a much bigger problem loomed on the horizon: declining exports of German vehicles to Asian markets, especially to China.
Volkswagen announced that its sales in China for the first nine months of this year decreased by 12 percent year-on-year, sales in Western Europe by one percent. Volkswagen's pre-tax profit fell 60 percent year-on-year in the third quarter, and the automaker announced plans to cut production at several of its factories.
How could something like this happen? Is the Green Deal to blame, as it is increasingly heard in the public sphere? Based on the above data, it seems rather that the German automotive industry is losing competitiveness, especially compared to Chinese automakers. For quite a long time, Chinese cars have had a reputation for low-quality, even dangerous products, but that is probably changing quickly. Especially in connection with the rise of electromobility.
The problem, which now mostly affects German car manufacturers, will most likely affect other European vehicle manufacturers sooner or later. In short, the European car market is not enough to keep up with the world. And that world is not only China, but also the United States, or the American car manufacturer Tesla. It delivered 1.8 million cars to global markets last year, which is about five times more than in 2019.
How to get out of this situation? German, and thus European, car companies have no choice but to catch up technologically behind their main competitors as quickly as possible. That is, if they want to survive. Otherwise, Germany and Europe will be forced to go through a large-scale restructuring of the economy, they have not experienced since at least the oil shocks of the 1970s.
