The German automotive industry is facing a profound structural transformation that goes far beyond technological innovation. A range of internal weaknesses is colliding with rapidly changing global market dynamics. The pressure to transform is high – yet in many areas there is still a lack of speed, determination and a clear vision for the future. The following developments and approaches provide an overview of the current state of the industry and possible pathways towards an economically sustainable future.

// Market shifts and changing customer needs
The traditional engineering-driven approach – long the hallmark of German automotive manufacturers and suppliers – is steadily losing relevance. Younger generations today place less value on technical performance and instead expect digital connectivity, convenience and lifestyle-oriented user experiences. This shift is being driven above all by Asian markets, especially China. Highly connected mobility solutions are emerging there, aimed not only at the vehicle itself but also at its intelligent integration into infrastructure and everyday life. European manufacturers have so far failed to provide successful answers to these new usage models.

At the same time, the geopolitical sales landscape is changing dramatically: as access to key export markets such as North America and China diminishes, German OEMs – some of which generate more than 80% of their business through exports – are coming under increasing pressure. The mobility transition, which is being vigorously advanced in many places outside Europe, is depriving German industry of its familiar growth markets.

// Barriers to innovation and strategic misalignment
A key problem is the lack of innovation momentum. OEMs and suppliers in Germany are often hesitant when it comes to consistently developing and establishing new products and business models in the market. Instead of a market-oriented approach, politically driven targets often dominate – for example with regard to climate neutrality goals by 2035. This orientation frequently prevents flexible and pragmatic positioning in line with actual user demand.

At the same time, structural misalignments exist within companies themselves. Employees are not always deployed where they can contribute most effectively to value creation. At leadership level, there is often a lack of experience in dealing with crisis situations – many decision-makers were shaped during an era of sustained growth and struggle to navigate uncertainty and profound change.

// Societal framework conditions
There are also societal factors that make transformation even more difficult: high sickness rates, a skills shortage driven by demographic change and an overall low willingness to embrace change within society are slowing down decision-making and transformation processes. This inertia stands in stark contrast to the agility of international competitors.

// Structural consequences and necessary measures
In order to remain competitive in the long term, far-reaching structural adjustments are unavoidable. This includes, in particular, the targeted reduction of overcapacity. In many areas, a reduction of around 30% of the workforce is considered necessary – not because there is a general lack of labour, but because resources are structurally misallocated. Site closures are also being discussed in the context of declining utilisation and persistently high fixed costs.

At the same time, far-reaching labour law and trade union reforms are needed in order to implement restructuring measures operationally in the first place. Many companies face the challenge of adapting their cost structures within a very short time to a sharply reduced level of market demand – a task that is difficult to achieve under the current labour law framework.

// Realignment of business models and customer experience
The way cars are sold and experienced must be fundamentally rethought. Buying a car as a purely rational process has had its day – what matters now is an emotional, holistic brand experience. Other sectors, such as the consumer goods industry, are already showing the way: customer loyalty is created through enthusiasm, not through product specifications alone.

In addition, complementary business models must be integrated into the product “car”. Mobility and insurance services offered directly from within the vehicle could open up new sources of revenue. OEMs must learn to think beyond the vehicle itself – a paradigm shift that is still only happening hesitantly.

// Bottlenecks and structural market distortions
The gap between shrinking global market volumes and the largely stable production capacities of OEMs and suppliers is exacerbating the economic situation. Postponed start and end points of vehicle programmes (SOP/EOP) are disrupting the supply chain. Plants are operating below capacity while high fixed costs remain – one of the central features of the current crisis.

At the same time, many companies are not succeeding in reducing their fixed costs quickly enough. Automation alone is not the solution, as it often creates additional capital lock-up without delivering the short-term flexibility that is urgently needed.

// The road ahead: strategic, decisive, independent
The current situation is highly complex. Technological change, societal shifts, political targets and international competition are all challenging the industry at the same time. Yet the need for action must not be made dependent on short-term politics. Companies need to make long-term decisions – independently of regulatory uncertainty.

The handling of personnel is particularly critical in this context: retraining and targeted qualification measures are essential where industrial jobs are being lost. A lack of employment prospects would have serious consequences not only economically but also socially – especially with regard to wage development and regional stability.