Name: Why Germany needs a new industrial strategy | The Dip Podcast
Uploaded: 2026-03-17T16:55:54.000Z
Duration: 14 min 9 s
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The question is, will German car manufacturers keep losing market share until they are out of the market entirely or will it stabilize?

You do see some movement in the past year, some efforts to start to turn the ship, but

In particular, Germany has a huge demographic problem.

We actually need far more skilled workers than Germany can provide.

Germany's biggest potential in the labor market is female employment.

The problem is not so much the cost side as the innovation side.

Germany was once known as an industrial power powerhouse in Europe, but

key sectors, including auto manufacturing, have been struggling for years.

The latest figures show a drop in profits.

So for more we turn to our DW business colleague, Steven Beardsley.

Well, I mean, there's a couple things going on in 2025 that are worth noticing.

One is that Chinese sales have fallen dramatically.

You also saw strategy shifts, including big ones.

Porsche, for example, basically 5 billion euros write off after it changed its strategy from pure electrification, going back from that step, saying we're going to have combustion engine models as well.

That of course costs its parent company, Volkswagen.

We've known about these issues facing the carmakers for a while.

So why can't they seem to really get it together?

I mean, I think again, you have some special effects in 2025 that weren't expected.

That also makes it difficult to ship to China for examp and to supply certain markets.

That also created a lot of consternation and uncertainty for these companies and that ate into their bottom lines.

The bigger issue really is China though, and that's something that they can't really control.

The economy in China is down and you had a number of carmakers, Mercedes and Porsche, really stand out that really wanted to sell luxury to China.

Again, you do see some movement in the past year, some efforts to start to turn the ship, but

Okay, so that was why they couldn't turn it around.

But casting our eye to this year, can they turn it around?

How crucial is 2026 to these German car brand brands?

2026 will tell us a number of things about how these companies are positioning themselves and how new offerings will appeal.

There are some things to like when we look at the European market, which of course German automakers want to really Defend as they see more competition coming from China home turf.

We've had new releases from Mercedes, from BMW and Volkswagen, I should say they're making those steps.

They're going to produce more vehicles, more models that we're going to see outcome, we're going to see come out just for China because that's what we see as a diversion of the Chinese and the European markets.

They're working with Chinese, with Chinese partners there, collaborating to make something that's more exciting for that market.

So of course, the carmakers are just one part of this story.

It's an issue which affects the entire German industrial sector and therefore the economy as a whole.

So Marcel Fradscher, president of the German Institute for Economic Research in Berlin, can join us now to tell us a little bit more.

Marcel, it looks like German industrial production has slumped significantly.

Is this just a blip or is this a sign of broader decline?

This has been an ongoing process at least since 2019.

So for the past six, seven years, particularly the automotive sector, but also other sectors.

Though we have to be aware, Germany has a fairly large industrial sector and not all sectors are affected equally, but

the automotive sector is particularly strongly affected.

Against this background, do you see the crisis, for example, that's happening in Iran right now, the effect on energy prices as something which could significantly weigh on Germany's economy as it tries to get out of this slump.

Because one of the big issues that industry complains about is the high cost of energy in Germany.

Yes, it will have a big impact on the German economy, partly because Germany is highly dependent on energy imports of gas and oil, not necessarily from the Middle east, but

And as market prices all over the world are rising, it's hitting Germany hard, harder than others.

Also because we have a fairly large energy intensive industry in Germany.

And so one mechanism is precisely higher energy cost, a faster increase.

Then let's put say in China or the United States.

And that puts German industries at an additional disadvantage.

And we've seen, for example, with the carmakers in Germany the effect that all of this is having.

Certainly it's the most prominent example to people who don't look into the details of the German economy.

We heard from Steve earlier that VW's profit has shrunk significantly.

So what does it tell you that Europe's biggest carmaker is operating on margins thinner than a supermarket chain?

But first of all, the, the profits by Volkswagen have halved.

You could say a company in crisis that still makes 9 billion profits a year is not so bad, right?

I mean they're still making profits and they still have plenty of liquidity.

The point here is that Volkswagen doesn't have, has really problem of innovation, so it's losing market shares.

The profit margins on the regular cars with combustion engine are going down.

Volkswagen is trying to cut costs and has been doing so already.

So the problem is not so much the cost side as the innovation side.

And we all know Chinese, American, South Korean companies are moving ahead on electric cars and battery technologies and German car manufacturers are left behind.

So the challenge is not short term, the challenge is long term.

And as I said on the profits and liquidity position, it's still fully in the hands of German automotive makers to turn the tide and become competitive again.

The carmaker decline, that's been a story in Germany for quite a while and we know the ingredients here, right?

It's increased Chinese competition, high energy prices.

These are increasing the cost of making German cars.

The high energy prices that is there, there are many factors here.

So is there any remedy in your view or do we just have to accept that the German car industry is in its decline era?

Well, you know, from an economic point of view, companies, industries often go away.

The German automotive sector has had spectacularly good times between let's say the late 90s and 2018, 2019, increasing sales, capturing market share elsewhere in the world.

The key point is the automotive sector worldwide is growing as Chinese consumers, in particular Indian and other consumers are becoming, becoming richer and want to buy car.

So over the long term, that's still a growth sector.

And the question is, will German car manufacturers keep losing market share until they're out of the market entirely, or will it stabilize?

Or will they turn the tide and actually manage to regain their competitive advantage?

And as I said, German automotive companies have been too slow in adopting new technologies, both electric cars, battery technologies as well as autonomous driving.

That will be the next challenge and that will be probably a much bigger challenge to the automotive sector than the E mobility.

When you put it that way, it almost makes the problem sound worse that there's a pie that's growing and even still the German slice of it is shrinking.

It makes me think of the people who have these jobs which were once considered quite safe jobs here in Germany because more than half of German business associations are expected to cut jobs in 2026.

How bad could the unemployment picture get here?

Especially when we're Talking about industry and autos and the like.

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Why Germany needs a new industrial strategy | The Dip Podcast

potential

struggle

strategy

term