March 22, 2023

According to figures from the German Federal Employment Agency, Germany’s automotive industry has lost 9% of its manufacturing jobs. This is what Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies, writes in a recent article for ifo Schnelldienst. “We are seeing a deindustrialization of the automotive sector caused by the transition to e-mobility. Battery manufacturing, software services, and digital business models already offset part of the loss and could increasingly do so in the future,” Falck says. However, shifts in competition – especially with China and the US – will be more decisive for German automakers’ future levels of manufacturing, he says.

In 2019, some 447,000 employees were involved in manufacturing products featuring combustion technology. These are directly affected by the transition from combustion engines to electric motors – partly because the production of electric motors is far less complex than the production of combustion engines. “Automakers are still producing vehicles with both engine types for now. In the years ahead, the phasing out of these parallel structures will further accelerate job cuts in manufacturing,” Falck says. He points out that the number of employees involved in IT has risen by almost 49% since 2013.

According to Falck, the relationship with China and the US in a changed geopolitical environment will determine the German automotive industry’s competitive position in the future and thus also its production volumes. With Tesla, he says, the US currently boasts the world’s largest manufacturer of electric cars in the market. At the same time, German automakers are producing significantly more vehicles in China than in Germany. What’s more, Chinese manufacturers are becoming more significant as local competitors push into the Chinese market in greater numbers, Falck says. China’s BYD and SAIC are already among the ten largest manufacturers of electric cars in the world.

Source: ifo Institute Germany
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