The automotive industry, once the driving force behind Germany’s status as Europe’s economic leader, is now in crisis.
Declining demand for electric vehicles, rising energy and labor costs, competition from China, and potential tariffs from Donald Trump are all weighing heavily on the sector.
These challenges are undermining Chancellor Olaf Scholz’s position ahead of the February 23 election, where his party is trailing in third place. However, even a victory for the conservatives, led by Friedrich Merz, is unlikely to bring a quick solution.
Germany’s auto industry has lost ground in China, with its market share shrinking due to local competitors. High energy and labor costs are forcing companies to scale back production in Germany, with Volkswagen even considering closing three factories.
Politicians are divided on the industry’s future. Merz has pledged to reduce dependence on China and reconsider the planned 2035 ban on combustion engines. However, automakers, having already invested billions in electrification, fear market instability.
Further blows could come from U.S. tariffs on steel and aluminum, as well as Trump’s push for oil and gas, which threatens investments in electric vehicles.
Germany now faces a crucial question: Can its renowned engineering prowess restore the auto industry’s dominance, or is the country in for a long road to recovery?
