Given that France is also starting to suffer badly, one thing to watch is more and more people demanding a cut to EU budget contributions from these countries. Its like 40 billion EUR worth of net transfers. Could make for explosive politics.
German industrial output falls to 2005 levels as auto sector craters
51–60 of 130 posts
Re: German industrial output falls to 2005 levels as auto sector craters
#52Germany desperately needs a wake-up call in the form of recession.
German car industry has been non-competitive for multiple years now. Instead of letting it fail, the government kept on flushing money down the toilet and prolonging the inevitable.
For a business, there's no incentive anymore to choose Germany over other EU countries. Cheap energy is gone. Germany is literally collapsing under its own weight: endless bureaucratic structures that just keep on growing.
Re: German industrial output falls to 2005 levels as auto sector craters
#53Why is output falling? Are there other countries taking the market share? Or is there more to it?
Like many traditional car makers they are struggling with the EV question. Presumably they want to switch to EVs, but in a company built on building ICE vehicles that comes with a lot of resistance from inside the company. All things considered they aren't doing too bad, both Volkswagen and BMW are in the global top 7 EV brands by sales. But BYD is far ahead of everyone else, selling nearly an order of magnitude more…
Keep in mind that the ICE market is still huge. Even in China 50% of new cars are still ICEs, 30% are Plugin Hybrids and only 20% are BEVs. On the EV market, especially in China, there is a brutal price war going on, with falling profits even for giants like BYD, so trying to milk the ICE market for a little more could give German car makers some air while trying to catch up (which they do if you look at the new Mercedes and BMW models).
Porsche (having the same CEO as Volkswagen) went all-in with EVs too early with offering their bread-and-butter model "Macan" as an EV exclusively, and they had to find out that it's not what their customers what at the moment, so they are currently trying to backpaddle.
Re: German industrial output falls to 2005 levels as auto sector craters
#54Why is output falling? Are there other countries taking the market share? Or is there more to it?
Reasons I can think of (as a German) from the top of my head: - Crumbling infrastructure - Decades of missing investments in education and the public sector - no digitization - Unwillingness to move away from ICE vehicles - Slow internet access and slow build out of fiber network - Killing future industries (solar, battery ...) by cutting funding/subsidies early - low wages in European comparison
What makes German cars uncompetitive in the world market are actually high production costs. Which is due to high energy, labour cost and social tax. Combined with a lack of innovation. This is impossible to fix with a state subsidy.
Re: German industrial output falls to 2005 levels as auto sector craters
#55Why is output falling? Are there other countries taking the market share? Or is there more to it?
Reasons I can think of (as a German) from the top of my head: - Crumbling infrastructure - Decades of missing investments in education and the public sector - no digitization - Unwillingness to move away from ICE vehicles - Slow internet access and slow build out of fiber network - Killing future industries (solar, battery ...) by cutting funding/subsidies early - low wages in European comparison
Whenever you hear a German entrepreneur talk about the biggest obstacles they have and are facing, it's never crumbling infrastructure or slow internet. The number one complaint is always excessive bureaucracy and crippling regulations.
> Slow internet access and slow build out of fiber network
We don't have dial-up anymore. High-speed access is not a problem for commercial and industrial sites, and rarely a problem for remote work in residential areas. Despite what some commentators like to imply, you don't need 1 Gbit/s for productive work. 100 Mbit/s is usually fast enough, and if your browsing experience is still slow, it's most likely caused by round-trip delay, not bandwidth.
> low wages in European comparison
That would actually help commercial output and competitive position, not lower it.
Re: German industrial output falls to 2005 levels as auto sector craters
#56Why is output falling? Are there other countries taking the market share? Or is there more to it?
Export markets for European cars are cratering. The Chinese and Koreans are taking over with really decent, affordable EVs. And while the likes of VW are producing good EVs, it's at the cost of their ICE vehicles and those losses aren't offset by their EV sales.
In general the ICE car market is not just car manufacturers but many thousands of companies all over the place that make parts and components. Quite a few of those are becoming redundant and quite a few more are facing stiff competition from abroad. Anything to do with components for petrol or diesel engines is going to face year on year declines.
What's currently happening in the market is price parity before incentives, before considering benefits from lower maintenance, and before considering benefits from lower energy cost. An EV is simply becoming the cheaper vehicle to buy. And with all that included, EVs are far cheaper overall. That's not a trend that's ever going to revert. It's only going to get worse and it's going to have some obvious effects.
A lot of this applies to US car manufacturers as well BTW. The current tariffs are distorting the market dynamics. But that's unlikely to last very long. GM and Ford will need to keep up internationally if they want to stay relevant in foreign markets.
Germany is merely ripping off the band-aid right now (or having it ripped off for them). Short term disruptive but it needs to happen at some point.
Re: German industrial output falls to 2005 levels as auto sector craters
#57Germany desperately needs a wake-up call in the form of recession. German car industry has been non-competitive for multiple years now. Instead of letting it fail, the government kept on flushing money down the toilet and prolonging the inevitable. For a business, there's no incentive anymore to choose Germany over other EU countries. Cheap energy is gone. Germany is literally collapsing under its own weight: endless…
[deleted]
Re: German industrial output falls to 2005 levels as auto sector craters
#58Why is output falling? Are there other countries taking the market share? Or is there more to it?
Many reasons. 1) Ever since the Cold War ended, German companies have been shifting production to cheaper places in Europe, so less and less "German" cars are actually built in Germany and show up as German industrial production. 2) Germany used to sell a lot to China, but Chinese companies are upping their game and shifting to EVs, and Germany is losing Chinese market share as a result. 3) Those same Chinese compani…
A fourth reason that is overlooked is that rubber component prices (if you don't import from Asia) have almost doubled in the Eurozone since 2019. I haven't worked in a company whose products use many rubber components in their supply chain since late 2024 but a single seal, gasket or vibration absorber with a single coating of a wear or friction modifying polymer could have had quoted prices rise from 11,000€ per batch to the neighbourhood of 18,000-20,000€. Smaller price rises have also hit non-imported thermoplastics, fiberglass and plastic textiles, presumably because of structural component lead time and cash flow issues in petrochemicals as a whole.
The German industrial sector might be shy at importing most of their parts from Asian developing countries and China in order to keep friendly relations with their domestic supply chain, keep friendly relations with their domestic political system, reduce IP cloning and keep some semblance of national pride, all of which combine to impact their prices. Also, there may be legal or tax requirements about domestic or EU component origin percentages, but I wouldn't know, since my business was in medical appliances.
Re: German industrial output falls to 2005 levels as auto sector craters
#59Most of it caused by "Mama Merkel": * She inherited a booming economy with very good reforms and plenty of budget surplus * Let infrastructure to rot * Energy production cratered and shifted to Russian gas dependency (high profile politicians related) showering Putin with billions every year * Then tricking Puting to a peace agreement to quietly "rearm" Ukraine to prepare for war ( https://en.wikipedia.org/wiki/Minsk…
Also, she did not initiate a single structural reform in her 16 years of being chancellor. The public sector has become a huge burden for our country. It is just too expensive and just like AI is currently propping up the US economy, the growing public sector is what keeps Germany's economy afloat.
Re: German industrial output falls to 2005 levels as auto sector craters
#60> as German Chancellor Friedrich Merz is set to meet the bosses of the country’s carmakers on Thursday in Berlin to discuss the woes of the struggling sector. Consumers will definitely profit from that, there's no way they will tax Chinese imports even more, no way i tell's ya!
They will ask the EU to remove environmental protections like the end of new gas / diesel cars by 2035.
Germany (and the EU generally) import 98% of their oil-derived products..
Before sanctions the leading import source was Russia.
EVs could have helped a lot more as China has demonstrated but people like the brum-brum noise and all the right-wing parties with mysterious ties to Russia and other fossil fuel producers didn't think they'd work for some reason.