The Chinese have been catching up with German industrial equipment imports with local alternatives for 2 decades. Now, the Chinese manufacturers are globally competitive. The same has played out in accelerated fashion in the light vehicle industry. The Germans have lost in manufacturing, their technology industry is a joke, and their financial sector is a nepotistic fraud. The reliance on Russian energy imports is truly the cherry on top.
Germany will quickly fade in global relevance and their purchasing power will stagnate, exactly like the UK in the past 15 years and Italy before that.
Sadly a common story in Europe. Too much nostalgia for former days of glory and no ability or willingness to break any eggs at all to make the omelette. The place largely operates as a living museum, and change and innovation is mostly tolerated rather than embraced.
I do however see it as an important counter weight to the floppy ephemeral nature of America culture. America will flail around here and there, sometimes good sometimes bad, bit Europe basically stays right on the linear path they have been on for decades and decades.
Living in Germany you really feel it. Everything is in decline but what's worse is Germans are in some perverse way proud of it, every shitty system, every fucked up backwards process is unavoidable and The Best Way To Do It (and also it's worse everywhere else in the world and Germany does it the best! (apparently)). There's so much low hanging fruit that could immediately improve people's lives but there's no appetite among the population to actually shake things up and change anything.
The whole system is built to keep people in their lanes: the highest income taxes in the world, no tax efficient ways to save, huge costs associated with buying property, the huge cost of property... Everything is supposedly free but nothing is available.
Honestly, you'd have to be stupid to move to Germany unless you are a refugee. I am not a refugee so my only excuse is that I was just stupid.
Efficient high volume and even precision manufacturing are no longer moats for the German industrial export industry to protect against Chinese competition.
Chinese EV brands innovated vertically-integrated business models and, unencumbered by legacy infrastructure and large unionized workforces, built highly automated factories from scratch - their low cost structures and huge state subsidies have allowed them to profitably sell pretty nice vehicles below VW's cost.
What does Europe have to offer China now? The cache of "attainable luxury" imports (Gucci, LV, Nike, Starbucks) is fading fast as local brands gain in prestige...
I think the answer is basically nothing besides largescale consumption. The interesting thing to see is whether China turns inward or projects power outward.
What is quality control like on Chinese goods these days? I'm not presuming it's bad, I just don't know.
That said, my experience with VW specifically isn't great either. Plus, the 30bn losses due to scammy diesel gate is massive compared to their market cap of 50bn.
There are other brands I'd be more sad about. Still, very rough for their employees
Depends on the price point. Cheap Chinese stuff is poor quality. More expensive goods are just as good as those marketed by western brands (and are often made in the same factories)
German cars are notoriously unreliable (well, a common refrain among owners is -- they are reliable as long as you spends lots of money maintaining them, and invariably anecdotes of a BMW 19xx still running like a champ will be offered. But on average, this is not true. You can ask mechanics.)
German cars are designed to be fun to drive -- and they are!
But their reliability to a layman -- not a car enthusiast, but a layman who doesn't have the inclination to baby their cars -- is not the best. Italian cars like Fiats are even worse. But boy are they beautiful.
Different design goals.
p.s. also if you baby any car, it will be reliable. But your mechanic bills will be substantial.
Can someone explain why they didn't go all in on EVs ten years ago? After all they had a lot more profits than Tesla to invest into R&D and a lot more knowhow on manufacturing cars. Instead they just sat there milking profits from ICE engines just like GM, Ford, Stellantis, BMW, Mercedes etc.
And now they have the legacy perception with Tesla taking sales on the high end and Chinese EV startups(who copied Tesla) squeezing them on the low end. They have no one to blame but themselves.
My guess is typical German conservatism and lack of imagination. For all the discipline and efficiency the Germans bring, they also bring a listlessness and a ridgedness that is never an asset in a dynamic environment.
I've worked with a few German startups and investors and the common thread is that there's too much process and not enough comfort with chaos to really be very innovative. Rapid change necessitates a level of comfort with uncertainty, which I think is culturally lacking in Germany for the most part.
It's proven very difficult for any legacy ICE manufacturer to successfully compete in BEVs. BYD is really the only example. Whipping around the Titanic is already extremely difficult, and you're right, German culture makes it basically impossible.
While German rigidity and risk-aversion might have made it more difficult (I used to work for a German multinational so I have some experience with this), it's true that for any big company -- even American ones -- that it is hard to disrupt yourself.
Clay Christiansen wrote a book about this called the Innovator's Dilemma.
So they've been doing that but they keep making what the market buys.
I think one of the problems is it's hard to keep up with the competition given a high cost base in Germany. Ironically one of the leading companies now is Xpeng which is making a Tesla 3 like thing for $16k, after turning itself around after a $700m investment from Volkswagen of all companies https://youtu.be/ci5b3GgK7OA?t=250
Their software is so terrible and unfixable with their management that they decided to spin off a different company so that it'd have a software startup mentality. But of course that failed too because the top management is still the same. So they put in a 4 billion investment into Rivian so they could get access to their software. The car software is universally terrible in all legacy car companies.
> “We are short of around 500,000 car sales a year,” VW’s financial chief, Arno Antlitz, reportedly told the hall. That, he said, was the equivalent of production from two factories. “It’s not to do with our product or poor performance. The market is simply not there any more.” He gave the company “one or two years” to turn the situation around. Experts estimate that VW has about 20,000 employees too many.
No, sorry - when it comes to maintenance, your product IS piss-poor. I owned one of 'em back in the aughties. Never Again.
Everytime I see something about Germany in the news I can't stop thinking about their nuclear power plants being shut down to satisfy an (incorrect) agenda. That obviously turned out to be a completely wrong move.
I don't see Germany being able to recalculating their route because they (and the classic european union) are so entangled in processes to keep their machine as is that any change now is too late, the iceberg is just a couple of decades ahead.
Would nuclear have really mattered? 1/10th of german industry operated on cheap RU gas as inputs/feedstock, likely much more than 1/10 in aggregate throughout the industrial chain. The composition DE industry / economic that worked well prewar doesn't work / compete when you remove the cheap gas, and US/MENA LNG isn't cheap. I suppose if they actually build very solid products they can still rationalize a premium to cover extra input costs, but RoW, well really PRC quality+quantity rapidly closing/haveclosed gap, and they'll have cheap RU inputs for a while. At least throughout war, maybe for a long time if pipelines makes delivery "nextdoor" like DE use to enjoy.
VW needs to die. The wages of VW employees are mindboggling. And paid for with public money. On top they push politics. They shouldn't be alive and every sensible German cheers at this development.
It doesn't need to die but they've not made a single redundancy since 1994, which speaks for it self. VW is just a microcosm of the sclerotic and backwards German economy.
Despite the protestations of management, product has been slowly getting worse and worse since Dieselgate. MQB was a great success, the MK7 Golf might be the best all around ICE of the century so far. But they’ve blown that lead with Dieselgate and then the stumbles on MEB and horrible user interface decisions. (Terrible infotainment, toggle button rear window controls, etc) This has rippled up to Audi as well.
I don’t know where they go from here. Hand the keys to Rivian maybe.
29 comments
[ 5.0 ms ] story [ 87.7 ms ] threadThe costs took away at least a decade of cash flow in supporting the transition to EV.
https://tradingeconomics.com/germany/electricity-price
https://www.macrotrends.net/global-metrics/countries/DEU/ger...
Combine the fact it’s significantly more expensive to manufacture in Germany, workers wages are feeling the pressure and revenue is flat
https://m.macrotrends.net/stocks/charts/VWAGY/volkswagen-ag/...
General trends are also non-favorable as the repo rate is increasing in the US
https://www.thedrive.com/news/repos-spike-in-2024-as-fewer-a...
Germany will quickly fade in global relevance and their purchasing power will stagnate, exactly like the UK in the past 15 years and Italy before that.
I do however see it as an important counter weight to the floppy ephemeral nature of America culture. America will flail around here and there, sometimes good sometimes bad, bit Europe basically stays right on the linear path they have been on for decades and decades.
The whole system is built to keep people in their lanes: the highest income taxes in the world, no tax efficient ways to save, huge costs associated with buying property, the huge cost of property... Everything is supposedly free but nothing is available.
Honestly, you'd have to be stupid to move to Germany unless you are a refugee. I am not a refugee so my only excuse is that I was just stupid.
Chinese EV brands innovated vertically-integrated business models and, unencumbered by legacy infrastructure and large unionized workforces, built highly automated factories from scratch - their low cost structures and huge state subsidies have allowed them to profitably sell pretty nice vehicles below VW's cost.
What does Europe have to offer China now? The cache of "attainable luxury" imports (Gucci, LV, Nike, Starbucks) is fading fast as local brands gain in prestige...
That said, my experience with VW specifically isn't great either. Plus, the 30bn losses due to scammy diesel gate is massive compared to their market cap of 50bn.
There are other brands I'd be more sad about. Still, very rough for their employees
German cars are designed to be fun to drive -- and they are! But their reliability to a layman -- not a car enthusiast, but a layman who doesn't have the inclination to baby their cars -- is not the best. Italian cars like Fiats are even worse. But boy are they beautiful.
Different design goals.
p.s. also if you baby any car, it will be reliable. But your mechanic bills will be substantial.
And now they have the legacy perception with Tesla taking sales on the high end and Chinese EV startups(who copied Tesla) squeezing them on the low end. They have no one to blame but themselves.
I've worked with a few German startups and investors and the common thread is that there's too much process and not enough comfort with chaos to really be very innovative. Rapid change necessitates a level of comfort with uncertainty, which I think is culturally lacking in Germany for the most part.
Clay Christiansen wrote a book about this called the Innovator's Dilemma.
https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma
Volkswagen to hit 1m electric cars milestone two years early (2019) https://www.theguardian.com/business/2019/dec/27/volkswagen-...
So they've been doing that but they keep making what the market buys.
I think one of the problems is it's hard to keep up with the competition given a high cost base in Germany. Ironically one of the leading companies now is Xpeng which is making a Tesla 3 like thing for $16k, after turning itself around after a $700m investment from Volkswagen of all companies https://youtu.be/ci5b3GgK7OA?t=250
No, sorry - when it comes to maintenance, your product IS piss-poor. I owned one of 'em back in the aughties. Never Again.
I don't see Germany being able to recalculating their route because they (and the classic european union) are so entangled in processes to keep their machine as is that any change now is too late, the iceberg is just a couple of decades ahead.
I don’t know where they go from here. Hand the keys to Rivian maybe.