According to a report on the website of the Frankfurter Allgemeine Zeitung on May 30, Germany is worried about one of its most important industries: few products represent “Made in Germany” globally like the millions of cars produced by BMW, Mercedes-Benz and Volkswagen every year.
But with an increasingly visible goodbye to the internal combustion engine, the market is being reallocated in the car industry – and both German carmakers and their local suppliers are laggards in the new car sector. The car of the future will most likely be battery-powered.
Their dominant market position in the internal combustion engine car business continues to deliver bumper profits for German carmakers. But the more consumers embrace electric cars, the more shaky the old foundations of German carmakers are.
One in four new cars in China, the world’s largest car market, is now a battery-powered electric vehicle. But in China’s booming electric car market, the Volkswagen Group has only a 3 percent market share, and Mercedes and BMW are even less significant. Germany’s car giants have become dwarfs. The market is dominated by Chinese manufacturers.
There is a second change that is shaking up the car industry: cars are becoming more digitally networked. Modern communications and entertainment technologies, accurate navigation systems and electronic driving AIDS that will eventually become autonomous drivers are becoming increasingly important.
In the long run, digitisation may bring even bigger changes than electric drive. Here, too, German manufacturers are laggards. American and Asian technology companies could become powerful new competitors.
So the high profits that German manufacturers are making are deceptive.
So far, German carmakers have benefited from decades of brand cachet. But the faster electrification and digitisation transform the automotive landscape, the harder it will be for German carmakers to maintain their market dominance in the future.