Automobile industry – Expert speaks frankly: German policy is responsible for the crisis
The International Motor Show (IAA Mobility) opened in Munich with stunning displays of future cars, along with striking lights and music. However, behind this glamorous scene, the German automotive industry is facing a worsening crisis. The sector is trapped between fierce competition from China, high tariffs from the United States, and political decisions within Europe that many consider to be exacerbating the situation.
Bavaria's Prime Minister Markus Söder and German Chancellor Friedrich Merz criticized the proposed ban on internal combustion engines by 2035, arguing that it threatens jobs and undermines technological innovation. However, trade economist Dr. Martin Braml, author of the book 'The End of Free Trade', believes that the real problem is internal. He said in an interview with Euronews: 'Germany has put obstacles in front of itself.'
Bramel points to rising labor costs, heavy bureaucracy, and strict laws such as supply chain regulations that have weakened the competitiveness of German companies. He emphasizes that Germany needs to encourage competition, reduce administrative burdens, and allow innovation to flourish instead of imposing more laws. He also sees the ban on combustion engines as an unwise decision, as half of German car exports still rely on traditional engines. He believes that climate policies should be managed through pricing mechanisms rather than binding political decisions.
At the same time, German car manufacturers are facing international pressures. The United States has imposed a 15% tariff on imported cars, up from just 2.5%. This makes it more advantageous for companies to move production to America, where they can serve both the European and American markets together. Meanwhile, China is invading the global car market with new brands in the electric vehicle sector, although Bramel points out that German consumers are still hesitant to buy Chinese cars.
The German automotive industry has already paid a heavy price. A report by EY revealed that 51,500 jobs were lost in one year - a decrease of 6.7%, the largest in all German industries. The shift to electric vehicles also contributes to job losses, as they are less complex to manufacture and require fewer workers. Although Germany maintains a strong trade surplus in electric vehicles, the decline in production requirements makes it a "structural challenge," according to Bramel.
Trade disputes complicate the situation further. When European Commission President Ursula von der Leyen reached a customs agreement with former US President Donald Trump, the agreement was seen as heavily in favor of the United States. Bramel says that the European Union failed to show strength and allowed itself to be cornered. However, he adds that with the Russian war in Ukraine and the need for Western unity, the concession was inevitable even if it was unfair.
Currently, the German automotive industry stands at a crossroads. Strong international competition, high fees, and restrictive domestic policies are all factors putting significant pressure on a sector long considered the backbone of the largest economy in Europe. The question remains whether Germany can change course by reducing bureaucracy, rethinking regulations, and creating the right conditions for innovation and competitiveness in a rapidly changing global market.