There's Trouble Brewing In Car-Loving Germany

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The perfect storm of factors appears to have struck.

The taglines for BMW and Porsche say it all. "The Ultimate Driving Experience" and "There is No Substitute". Germany's automakers, the Volkswagen Group, BMW, and Daimler, have dominated a significant portion of the country's economy for decades. Their supplier networks also play a key role. However, it appears times are changing as German car production took a troubling hit last year.

Bloomberg reports that last year, those mammoth-sized German carmakers experienced their lowest outputs since 1996. That's a 23-year low. A total of 4.66 million vehicles were manufactured in German factories last year which, according to German auto lobby group VDA, is a 9 percent decrease as a result of dropping demand from international markets. Although BMW, for example, does have a mega factory in Spartanburg, South Carolina, home of several crossovers, including the popular BMW X3 and BMW X5, a significant amount of the company's production remains in Germany.

2018-2020 BMW X3 Front View BMW
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2018-2020 BMW X3 Infotainment System BMW

Both VW and Daimler have US-based factories as well. There are other factors aside from reduced overseas demand, among them trade conflicts, slowing economies, and pollution concerns. The continued aftermath of VW's Dieselgate scandal also doesn't help matters. New emissions regulations are forcing the companies to spend billions to develop cleaner vehicles, such as EVs and plug-in hybrids.

There's also new competition from a once unlikely source: Uber. Ride-sharing is becoming increasingly popular and Uber's market evaluation is now about the same as Daimler's. The focus on performance, especially from BMW, Audi, and Porsche, can easily conflict with the need to produce more green-friendly vehicles.

2020 BMW X5 M Engine BMW/Uwe Fischer
2020 BMW X5 M Front Angle View BMW/Uwe Fischer
2020 BMW X5 M Rear Angle View BMW/Uwe Fischer

Earlier this week at the CES electronics show in Las Vegas, the Mercedes-Benz Vision AVTR Concept was revealed, featuring numerous advanced technologies coupled with an all-electric drivetrain and a variety of recycled interior materials. The "Avatar"-inspired concept also lacked a steering wheel, further hinting at an autonomous driving future. The news isn't all bad, however.

The VDA report claims Germany's domestic car market grew 5 percent last year, the highest since 2009 with Germany surpassing Norway as Europe's largest EV market last year. But the major issues of reduced global demand and a changing auto industry as a whole aren't going anywhere.

Germany's automakers do have some difficult times ahead, but never let a crisis go to waste. Now is also the time for innovation and engineering creativity, two things the Germans excel at.


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