For decades, the phrase “Made in Germany” has been synonymous with cutting-edge automotive technology and design. However, German automakers are now falling behind in the global race to produce more electric vehicles. To describe how quickly they need to catch up, some executives are using the new catchphrase “China speed.” This term reflects the rapid transformation of the Chinese car industry into a battery-powered juggernaut. At the recent I.A.A. Mobility auto show in Munich, newcomers from China stole the show, with BYD, an all-electric Chinese carmaker, unveiling sleek new vehicles that garnered applause from the crowd. Matthias Schmidt, an independent analyst of the electric car market, states that the Europeans are petrified of how the Chinese will perform in Europe.
The German auto industry, the largest in Europe, is facing a precarious time, as it has become a drag on the country’s economy. The production in the auto industry shrank in June, weighing on overall industrial production. The German economy is stagnating due to the high cost of energy and raw materials, along with other factors like inflation. This has led prominent German companies to delay expansion plans or build in regions with enticing incentives, such as China and North America. Germany’s economic output is projected to shrink this year, making it the only advanced economy among eight studied by the International Monetary Fund to do so.
To revive production and stimulate the economy, the German government has approved corporate tax cuts and proposed cutting down on bureaucracy for businesses. In contrast, HiPhi, a luxury car company from China, is producing tech-heavy electric vehicles with unique features like gliding doors and customizable lights. The company’s chief technology officer, Mark Stanton, attributes their ability to produce cars quickly to a different approach to the auto business, where they eliminate the fear of failure.
One of the major concerns for companies in Germany is the persistently high price of energy. Germany heavily relied on natural gas from Russia, but after the flow of gas was halted due to political reasons, prices skyrocketed. This has forced many companies to scale back production. The high price of energy has also affected confidence in the government’s energy policy, causing German industrial firms to reconsider investments. Volkswagen, for example, has decided to build its battery factories in other countries where energy prices are lower.
German automakers’ failure to meet the demand for battery-powered vehicles in China has allowed domestic automakers to quickly fill the vacuum and gain dominance in the Chinese market. German automakers are now looking to improve their position in China and meet the growing demand for electric vehicles. Chinese automakers, on the other hand, have set their sights on Europe, where gas-fueled cars will be banned in 12 years. At the auto show in Munich, while traditional German automakers presented their plans for expanding production of electric vehicles, manufacturers from China unveiled new models for the European market. This marks a turning point in the industry, as Europe becomes an interesting market for Chinese electric vehicles, increasing competition.
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