The Chronicle of Errors in a Key Industry: Why the German Automotive Sector Lost Its Edge
The German automotive industry — once the backbone of the German economy — is currently facing one of its most severe crises in decades. Multiple interconnected structural, economic, and technological factors have converged to form a “perfect storm.”
Today, the crisis in the German automotive industry seems like a sudden collapse — in reality, it is the result of a series of strategic missteps, missed opportunities, and external shocks that have accumulated over more than a decade. A closer look reveals a clear pattern.
1. Early 2010s: Complacency in the Combustion Engine Business
At the start of the 2010s, Germany was the world leader in combustion engines. Manufacturers were generating record profits — and precisely this success bred dangerous complacency.
Mistakes:
- Past success led to the belief that combustion engines would remain technologically dominant in the long term.
- Early signals from the U.S. and China that electric mobility was gaining momentum were dismissed as temporary trends.
- Investments in alternative drivetrains remained minimal; internal innovations were slowed because they threatened the lucrative combustion-engine business.
Consequence:
Germany focused on optimizing the existing system instead of pursuing transformation.
2. 2015–2018: The Diesel Scandal as a Turning Point — but the Wrong Conclusions
The diesel scandal caused massive loss of trust. Instead of using this crisis as a starting point for real technological change, manufacturers focused on damage control and lobbying.
Mistakes:
- The emphasis was on legal defense rather than a strategic restart.
- The industry clung to diesel as a transitional technology, even though it was clear that policymakers would move away from it.
- Development capacities for electric vehicles continued to grow only slowly.
Consequence:
German manufacturers lost valuable years while Chinese and American competitors invested heavily in batteries, software, and platforms.
3. From 2018 Onward: Underestimating China’s EV Offensive
While the Chinese market — now the world’s most important auto market — increasingly shifted toward electric mobility, German manufacturers stuck with plug-in hybrids and highly optimized combustion engines.
Mistakes:
- China was viewed primarily as a sales market, not as a highly innovative competitive arena.
- The importance of state-supported Chinese EV manufacturers was underestimated.
- German OEMs misjudged the speed at which Chinese companies could reduce costs, integrate software, and shorten product cycles.
Consequence:
When European markets later opened up, Chinese electric cars suddenly appeared with unbeatable prices and strong features — a shock that had been foreseeable.
4. 2020–2022: Pandemic and Supply Chains — The Global Warning Signal
The pandemic exposed how dependent the German auto industry is on global supply chains, especially for semiconductors and battery components.
Mistakes:
- Dependence on Asian suppliers for batteries and electronics was already known but not addressed.
- Decisions to build European battery production came too late.
- Inventory was minimized for efficiency (“just-in-time”), increasing vulnerability.
Consequence:
Production stoppages, months-long supply bottlenecks, record losses — and a massive loss of customer trust.
5. From 2023 Onward: Political Framework Changes Faster Than Companies
The shift toward electric mobility accelerated sharply due to European policies. At the same time, many national funding programs ended.
Mistakes:
- German OEMs relied too heavily on political stability and did not anticipate sudden subsidy cuts.
- Electric models that were not yet market-ready were introduced at high prices, often with limited range and weak software quality.
- Charging infrastructure expanded too slowly, further reducing consumer acceptance.
Consequence:
Sales numbers collapsed. The industry faced overcapacity and was forced to adjust or close factories.
6. 2024–2025: Structural Break — Suppliers and Manufacturers Under Pressure
Now the full force of accumulated structural problems is becoming visible.
Mistakes:
- Many suppliers specializing in combustion-engine components received support for transition far too late.
- Rising energy and labor costs intensified the situation — a structural issue that had been ignored for years.
- Digital transformation in vehicle development lagged behind international standards.
Consequence:
A decline in employment by tens of thousands of jobs.
Insolvencies and takeovers of small and medium-sized suppliers.
Manufacturers struggling with weak demand and tough global competition.
Conclusion: A Crisis Born of Missed Early Warnings — and the Failure to Build an Effective Error-Management System
The current crisis in the German automotive sector is not the result of a single mistake but the accumulation of long-term shortcomings. What stands out clearly: Many of the problems were identifiable early — yet they were neither systematically recorded nor consistently analyzed.
An integrated error-management system at both industry and company level could have counteracted this decisively. Rather than responding reactively to crises, such a system would have initiated the necessary structural transformation much earlier.
What Was Missing — and How an Error-Management System Could Have Prevented the Crisis
1. Early-Warning Indicators for Technological Trends
A modern error-management system would have identified signals such as the rapid development of Chinese EVs, rising battery efficiencies, or the software leadership of other markets as risks early on.
This would have led to proactive investment in EV platforms, semiconductor independence, and software capabilities — instead of delayed catch-up programs.
2. Systematic Analysis of Recurring Structural Weaknesses
Issues such as supply-chain dependency, lack of diversification, or excessive focus on combustion-engine optimization were ignored for years.
An error-management system would have regularly evaluated these weak points, linked them to concrete measures, and embedded them in strategic monitoring.
3. Risk Assessment of Political Dependencies
The industry relied too long on stable political frameworks.
Robust risk management would have highlighted potential subsidy cuts, stricter emissions regulations, or trade conflicts — and prepared contingency strategies.
4. Learning Loops from Past Crises
Neither the diesel scandal nor the pandemic nor supply-chain disruptions led to a sustainable learning process.
A structured “lessons learned” approach would have prevented many of the same strategic mistakes from being repeated.
5. Integration of Technology, Management, and Politics
A professional error-management system would have connected executive leadership, technological development, political monitoring, and market analysis.
Ambitions, risks, and technical realities would have been aligned earlier — instead of being corrected only after damage had occurred.
The Central Insight
The German automotive sector is not in crisis solely because mistakes were made — but because a binding system to identify, communicate, and correct those mistakes early was missing.
A robust error-management system would not have prevented all problems, but it would have made structural change more predictable, mitigated risks, and strengthened companies against global shifts.
This makes one thing clear: The future success of the industry depends less on individual technologies and more on the ability to systematically learn from mistakes and to view early systemic warning signals not as disruptions but as opportunities.
