The German economy is on a path of crisis at the beginning of 2025. The challenges are great mainly for the automotive industry, the engine of the German economy. The situation is indicative of the giant Volkswagen, which was planning a lockout in three units in Germany until the holidays. Ultimately, however, management and unions agreed to cut 35,000 jobs and reduce production by almost 25%, so as to prevent layoffs and factory closures.

The opinions of German experts on the causes of the crisis differ: Automotive expert Stefan Barchel, from the German Institute Center of Automotive Management (CAM) speaks of a “combination of difficulties” and a “German polycrisis”. He estimates that in the context of the transformation of the automotive industry, “we will have to acquire new skills: on the road to electrification, software-defined vehicles, as well as autonomous driving.” For his part, the automotive expert Ferdinand Dudenhofer observes that German car manufacturers “understand the car of today very well, but in the car of tomorrow the leading role is played by high-tech companies”.

140,000 jobs lost between 2019 and 2023

Frank Schwope, a lecturer in automotive management, sees a glimmer of hope in the development of batteries, which are still in their early stages. Speaking to DW, he emphasizes: “Electrification batteries are far from being fully developed. Technological leaps are needed in this area. In addition, it is possible that there will be a leap towards solid-state batteries at the end of the decade, which could reshuffle the deck.”

The German automobile industry is called on in the new year, and the next, to cover lost ground. Otherwise there will be massive job losses, according to a report by economic research firm Prognos, which says that if the current trend continues, jobs in the automotive sector will fall by 186,000 by 2025.

In the four-year period 2019-2023, around 140,000 jobs have already been lost. Dirk Doze from the German Institute of Economics in Kiel IfW estimates that the situation in the German industry will get worse before it improves: “2025 will be a very difficult year for the German car industry. But it is also the year in which the right course for the future should be determined.”

The demand for electric vehicles will increase

Automotive expert Ferdinand Dudenhofer believes that German manufacturers should address the markets where most of the electrification is happening: “It’s partly China and maybe the US. However, we will have to see what the change of baton in the White House will bring and if Donald Trump finally turns his country to internal combustion engines.

Despite the challenges for German manufacturers, lecturer Frank Schwope sees the new year with a “mixture of skepticism and hope”. It assumes that the demand for electric cars will increase significantly in 2025 and 2026.

Editor: Stefanos Georgakopoulos