- Germany is on the brink of recession after growth slowed to zero in the last quarter.
- The economy is being dragged Down by a seismic slump in car manufacturing.
- The Tesla effect – and the shift to electric vehicles – is leaving Germany in dire straits.
Germany’s economy is on the verge of recession as its once-illustrious car making industry falters. It’s no stretch to say that Tesla has disrupted the very backbone of Europe’s largest economy.
A German engineer put it best when he called Tesla an ‘existential threat’ to the entire German automotive industry and urged the country’s CEOs to ‘do better’:
Your ambitions for electric vehicles are falling short of consumer expectations. Those expectations have been set from your strongest competitor today and in the future, Tesla.
Chief among the problems is a rapid decline in auto manufacturing and exports.
Germany’s car industry facing its Detroit moment
Reuters compared the facing facing Germany with s Detroit , where a rapid decline in the auto industry decimated the entire city.
This is no exaggeration .
Germany’s auto industry has slumped to a 62 – year low, putting almost 1 million jobs at risk. A tenth of those jobs are expected to disappear in the next decade. Cuts will take place at carmakers themselves (BMW, Volkswagen, Daimler) and suppliers in the region (Michelin, Bosch, Continental).
In some areas of the country, auto-workers make up % of the workforce. The effect of these cuts on spending, consumption and GDP is hard to even quantify.
Volkmar Denner, CEO of Bosch after announcing thousands of jobs cuts at the auto supplier, noted:
It could well be that we have passed the peak of automotive production.
Most of the challenges facing Germany’s automative industry can be traced to the rising demand for electric cars.
When Tesla launched the Model 3 in Europe last year, it instantly outsold rival sedans at BMW and Mercedes . It was the third best-selling car, period, in December . Elon Musk is now readying a Tesla gigafactory in Germany itself to capitalize on demand.
US car sales peaked in and have been decreasing ever since, while EV sales are increasing year by year – German engineer.
Problem is, electric cars don’t require the same workforce to build. As Reuters writes, ‘electric cars provide less assembly work than combustion engine vehicles.’
Stefan Bratzel, German Center of Automotive Management explained:
The transition [to electric] could well mark the end of the golden age for cars as a mass employer.
Analysts have speculated about this Tesla disruption for years, but with Germany now on the brink of recession, the reality is finally hitting home. If Germany’s car companies don’t act now, the country may enter a crippling downturn.
This article was edited by Samburaj Das (Read More )
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