Perfect regulatory capture is like putting a toddler in charge of your household - corporate organisms, like toddlers, do not know what is good for them, and are not willing to accept short term pain for long term gain.
I see parallels with unions in the U.K. in the 70s, as they were ultimately the controlling entity of a lot of industry - and they too were unwilling to accept short term pain for long term gain, which ultimately resulted in the collapse of British manufacturing, as money that should have been reinvested in plant upgrades and technology instead disappeared into exorbitant - unfathomable by today’s standards - pension plans and pay packets.
Anyway. I suppose this is just humans 101, and today it’s the German car industry insisting that eating their body weight in candy today will have no consequences tomorrow.
Here's the plain text in case you don't want to go to X:
>"I spent time in Shenzhen last year and when I saw Merz come back from China saying Germans need to work more I immediately knew what broke his brain because I lived the exact same cognitive shock
my first week in Huaqiangbei I burned through 4 prototype iterations of a motor controller board for less than a thousand bucks total, back home a friend was working on something similar and spent over 12 thousand for a single revision that took almost two months to arrive
when you live that contrast in your own hands with your own project something permanently shifts in how you see the world and it goes way deeper than speed & cost
what Shenzhen actually built is a collective learning organism, imagine 20 PCB fabs 15 injection mold shops 30 component distributors and a hundred firmware freelancers all within a 2km radius, looks insanely redundant from the outside until you realize redundancy is actually information density in disguise
I watched this firsthand with an injection mold supplier I was working with, this guy had seen a hundred founders iterate similar thermal designs over 6 months so he proactively modified his tooling before I even opened my mouth, he knew what I needed before I knew what I needed, the intelligence lives in the relationships between the nodes and it compounds daily
the west thinks about manufacturing as a cost center you optimize by centralizing…
China accidentally built a distributed neural network of manufacturing intelligence where knowledge diffuses horizontally across thousands of agents faster than any single western company can process internally
so when Merz comes back and says we need to work a bit more I think he saw the problem but COMPLETELY misdiagnosed the solution, telling Germans to work harder is like telling a horse to gallop faster when the other side built a combustion engine
the gap is ARCHITECTURAL
it’s ecosystem density, you need a custom connector in Shenzhen you walk 200 meters, in Munich you send an email and wait 3 weeks
it’s iteration speed, parallel search vs sequential optimization at the system level, it’s risk tolerance, Chinese founders ship something broken on Monday fix it Tuesday ship again Wednesday while European companies are still in the approval phase for the pilot program of the feasibility study…
and Merz only saw the surface, what he missed is the tier 2 cities like Hefei Chengdu Wuhan replicating the Shenzhen model at scale right now
BYD going from irrelevant to outselling every european automaker combined in roughly 5 years, Huawei building its own 7nm chip under maximum sanctions when every analyst said it was physically impossible & behind all of that a government that treats advanced manufacturing as an existential national priority while europe debates whether AI needs another ethics committee
I think what we’re watching is the most asymmetric economic competition in modern history and most western leaders are still framing it as a productivity problem when it’s actually an ontological one
Europe & America are optimizing variables that China stopped tracking years ago meanwhile China is compounding on dimensions the west has no framework to even measure
Merz at least had the courage to name it out loud and I respect that genuinely but working a bit more inside a broken architecture just means you arrive at the wrong destination slightly faster
Europe’s answer to China is always a committee, a regulation, a 5 year strategic plan and a press conference
China’s answer to anything is ship it tomorrow and figure out the rest next week
one side is trying to predict the future the other side is building it live and adju...
> Europe’s answer to China is always a committee, a regulation, a 5 year strategic plan and a press conference
> China’s answer to anything is ship it tomorrow and figure out the rest next week
Yes, god knows we'd never see the Chinese delivering 5 year strategic plans, and they're notably committee-averse.
A large part of China's success is they've been intentional about what they're doing - they've _had_ a strategy, whereas every time we consider that in the West, we're told that's a loser's bet and we need to just let the market do its thing.
Looking back, people had the exact same kinds of reactions (regarded as cheap trash => cutting edge) to the Japanese electronics industry 40 years ago, with the eact same takes (overstated rationalizations focussing on process, organization, culture; I could probably find like 20 different books discussing those in excruciating detail in a minute).
But the simplest explanation is just basic economics and nothing else (growth being fueled by cost difference, mostly from cheap labor, and to a far smaller extend network effects).
I predict Chinese growth slowing down exactly the same way other countries did as wage gaps get smaller.
While Germany should invest in EVs and Green Energy, that alone isn't blocking German economic growth.
Almost all German exports have seen a precipitous drop [0]. EV exports wouldn't have helped given that Germany's two largest trading partners (the US and China) both enacted trade barriers against foreign exporters.
When the US enacted the IRA under Biden, a large portion of Germany Inc shifted to the US [1], but the German government and EU decided not to enact subsidies [2].
Similarly, China demanded JVs for German manufacturing companies to enter the Chinese market, which Volkswagen (with SAIC), Siemens (with SEPG), Mercedes Benz (with BAIC), and others manufacturers complied with.
Germany's economy was hollowed out because Germany Inc decided to shift capacity to it's two largest unified markets.
It's not like the PRC nor the US are allowing German EV exports already - for example, all of VW's ID4s sold in the US and China are being manufactured in Tennessee and Shanghai respectively.
This is why the EU has been pushing for a "rules based order", becuase otherwise individual EU states lack export markets.
This [1] is what really brought Germany's industry down, not the green non-sense spouted by articles like this one:
> Gas prices rose to $70 per megawatt-hour in Germany — it makes it 6 times more expensive than in the US
Germany was relatively fine, industrially speaking, while it still had a working relationship with Russia and especially with cheap Russian gas. It all went to the gutters when the Americans imposed their imperial will on them, on the Germans (see also the Nord Stream fuck-up), and it has been a steady downhill road for the Germans since then.
To re-iterate, there's no German economic miracle that would allow them to be competitive against other indutrialised countries (such as the US) while they have to pay two or three times more for their energy inputs.
What Imperial will if you dont mind asking? That they stoped buying gas from country that attacked europe and tries to overthrow democracy in other EU countries? Their delusion was in turning off nuclear... and it was exactly what russia wanted. By funding anti nuclear protests in EU, and selling more and more gas to make Europe attached. So when Russia does something bad, it is harder to sanction them.
What happend in Germany is real political failure in seeing this, maybe even treason.
Non of these issues affect France because France had the foresight to invest in Nuclear tech that gave them energy independence from both the US and Russia while being green and sustainable. It's certainly not perfect e.g. France imports some Uranium from Russia but they are in a far better position than Germany. Germany has produced many brilliant people but it really has to self reflect on some of the major errors in big decisions it has made the past few decades.
> Germany was relatively fine, industrially speaking, while it still had a working relationship with Russia and especially with cheap Russian gas. It all went to the gutters when the Americans imposed their imperial will on them, on the Germans (see also the Nord Stream fuck-up), and it has been a steady downhill road for the Germans since then.
That's quite the reversal of facts. Germany cut off Russian gas after imperial Russia started a full invasion on Ukraine. That was Germany's decision and has little to do with the US. The US also did not force Russia to invade Ukraine and to targeted kill Ukrainian civilians for their decision to strive for freedom, democracy and prosperity rather than being a corrupt satellite state to Putin's terror.
Energy prices undoubtedly skyrocketed after that, but that's just the immediate result of finally breaking with the politically engineered dependence on Russia. For decades Germany made itself reliant on Russian gas. What might have started as optimism after the cold war and the hope for good mutually beneficial relations with Russia turned into corruption and irresponsible ignorance and short term thinking at best.
Energy prices in Germany are so high because the German government deliberately sabotaged the shift to renewables. German politics made Germany dependent on fossil fuels that you can burn exactly once and that Germany has to continuously, expensively dig out of the ground and keep importing because Germany lacks enough natural gas. Digging something out of the ground to burn it once is not economic when the alternative of harvesting the sun and wind that just keep on giving you energy indefinitely exists. But Germany decided to deliberately stall building grid technology and farms for harvesting free unlimited energy. Instead they turned to Russia to get gas for cheapish in the exchange for letting Putin live out his imperialist plans. Russia's aggression is not new. They invaded Georgia in 2008 and started the war against Ukraine in 2014. Germany started building the Nordstream 2 gas pipeline, which would have even furthered its dependence, in 2015, after all that. And they kept the plan when Russia backed Assad and commited war crimes against the Syrian people.
I'd really like to know which products that manufacturing in Denmark produces. Ozempic is a massive financial success, so maybe that is a large part of it?
The lesson from Ozempic would be "Just have a huge hit come out of your R&D department", I guess...
Interestingly there was a public discussion in Denmark around 2016, about how the Danish labor market and industry should not end up approaching 'German conditions', even though the Hartz reforms were envied by some economically liberal Danish politicians.
Germany’s powerful automotive lobby prioritized short-term dividends and executive bonuses over long-term survival. Instead of investing in EV innovation to future-proof the industry, they leveraged their influence with the conservative (CDU/CSU) and free-market (FDP) government parties to weaken national and EU emission targets.
This reliance on political lobbying rather than technological advancement was a fatal miscalculation: While executives spent the last decade fighting carbon taxes and stalling the EV transition, they ignored the reality of their primary export markets - most notably China where today German ICE cars are seen as obsolete - and the rest of the world rapidly pivoting to electric.
By choosing payday over progress, the "autobauers" & their political helpers have left the German workforce to pay the price. The looming job losses and economic instability are the direct result of a managerial class that traded their country’s industrial crown for a final decade of bloated bonuses.
It's not as simple as 100% of this is on the car manufacturers.
There's a lot at play, which in combination led to this "perfect" storm.
Energy policies and hence ever increasing energy prices, bureaucracy almost as bad as Italy, governements making technical decisions for unprepared manufacturers by setting goals of EV production numbers and above all phasing out the cornerstone of the countries engine, literally: ICE power units.
And yes, most management are of an era that truly doesn't understand the convergent challenges in a mixed market of ICE and EVs. Shortsighted decisions have been made, throwing out the baby with the bathwater - craftsmanship, vision and engineering prowess.
What was an engineering driven industry with a say in where all this is headed became a soulless marketing machine, merely scratching the surface of what needs to be done.
They created some very bad "sci-fi" by plastering screens everywhere in interiors while still treating software like some part you can outsource to the lowest bidding supplier, swapping these out every other model range or update.
Actual internal research and guidance got killed off around the early 2010s by outsourcing all of it externally.
Besides, the culture and politics within these corporations are the worst i ever encountered in my whole career.
It's a very grim picture we're looking at but there's nobody, neither in upper management across boards nor in politics actually being able to see the misery they're in, let alone doing something about it.
Glad i left almost 10 years ago but still sad, since all I had to witness is effecting society as a whole and not in a good way.
It's really just the beginning of what is to come.
The problem is that there wasn't a correction of these business policies. It still is the same as before, engineering talent gets outsourced and software and more frequently also hardware parts is something that Germany despises completely by now. You are in sales or legal, anything else is secondary.
Another big problem is the mentality. "We have always done it this way" and "I don't want to change it" is extremely prevalent. I say this as a German.
This is also reflected in the big political parties, which would rather keep these beliefs alive than inspire change.
I really don't see a solid economic future for Germany when enough other countries implement more progressive economic policies.
For me its as simple as mature companies are extremely difficult to reorient towards working at a loss through R&D.
People hold up China as an example but China was not displacing any local industry including its own. It's incredibly easy to do that because it's greenfield. Fast forward 20 to 30 years when new thinking might impact BYD or CATL's bottom line? They may not look so forward-thinking.
It's the standard innovators dilemma nonsense, with the added drama of the car case that the innovator (Tesla) shot itself in the foot due to a madman in charge.
The entire ecosystem of automaking is just like tech - clusters of complimentary industries. There's a symbiotic relationship between Mercedes, Ford, BMW, GM, etc and their suppliers -- many of whom in the american case were former subsidiaries of the automaker.
That's why Ford, GM, Porsche, Mercedes, BMW, etc have a hard time closing the deal on EV. The American car companies are more fucked because they've engineered the business around compliance requirements to mostly only make trucks. It's hard to eat your children. Meanwhile, BYD isn't run by a bipolar drug addict, and they are going to back up the truck, slowed down only by protectionism. I drove one when traveling, and it felt like driving a Tesla in 2015.
For companies building cars in Germany, the US and to some extent Japan & Korea, we're living in a do-over of 1976, except China is Japan.
As a German, I genuinely cannot comprehend this short-sightedness and ignorance:
Our current Chancellor (Merz) publicly boasts that Germans work too few hours and calls on them to work more [0] implying this would generate more tax revenue.
Yet working has arguably never been less rewarding for workers: Germany currently has the 2nd highest tax wedge among all OECD nations (≈48% for a single worker, nearly 13 percentage points above the OECD average) [2][3]. This is compounded by demand-side welfare measures for low earners such as Wohngeld (housing benefit) and pension supplements like Mütterrente ("Mothers' pension"), creating a massive redistribution from working people to non-working people.
Meanwhile, the German government has spent years failing to fully prosecute the CumEx/CumCum tax fraud scandal, a scheme through which banks and investors systematically robbed the German state of an estimated €36 billion in tax revenues [4][5].
The contrast could not be more glaring: squeeze workers harder while letting financial fraudsters off easy.
I've handed over my resignation for my FAANG job and am looking for a job in other countries as I don't see myself building a future here.
The Mütterrente is a good idea, because it rewards having children which end up paying the pensions. This leads to sustainable population replacement. If anything, this should be expanded to fathers as well (I don't mind mothers receiving more).
What's not such a great idea is paying the Mütterrente retroactively. Pensioners can't have children retroactively to stock up the tax base, so all this does is increase the tax burden for the current generation, which discourages them even more from having children.
> In Germany, the tax wedge for the average single worker decreased by 5 percentage points from 52.9% to 47.9% between 2000 and 2024. During the same period, the average tax wedge across the OECD decreased
by 1.3 percentage points from 36.2% to 34.9%.
That is a very popular opinion and I've held it too for a very long time. Until I read an issue [1] of The Economist in 2020 and did some digging afterwards.
Turns out, the real moat of any successful car industry so far wasn't brand recognition, lobbyists, tariffs, or the pleasing sound of a shutting car door. It's the combustion engine itself. Or rather the industry you're embedded in that provides the metallurgy and chemistry to reliably produce high quality engine blocks and seals. Because your engine needs to withstand high pressures and temperatures that go from below freezing all the way up to way over 2000K. And you also need the know how and experience to build all of that together.
None of that can be exfiltrated as a zip file or wished into existence by party officials.
The EV sidesteps all of that in one go. Now it's all down to who has the best batteries and who can do high quality assembly real cheap. Both points go to China.
Why? The same reason: The surrounding industry. It's what you get from doing (even simple) electronics for decades, cultivating a competitive industry for assembly and high quality battery cells.
The only hope for the incumbents was hydrogen instead of batteries because this again is engineering and seals.
The alternative would have been to become really good at batteries themselves. However, Europe's best chance to get there, Bosch, decided in 2018 not to go that way [2].
Once you let all of that sink in, you realise the inevitability of the current situation.
And they knew. All this time they knew. The rest was song and dance for politicians and shareholders.
This word-for-word applies to the US car industry too. The Europeans would do well to see the current state of US car manufacturers as a cautionary tale.
This is exactly what happened with a minor nitpick: the lobbyists and shareholders that orchestrated it obtained what they wanted (a quick buck) and got out unharmed, free to think about their next enterprise. The workers will be the ones to bear the cost, along with the environment.
China took over exports and manufactoring capacity 5 fold of what germany was doing in core industries: manufacturing, machine building and chemicals.
Its not just innovation, we missed and our stubbornes of just keep doing what we good at, its also china catching up and steam rolling us.
When I bought an EV, people around me told me the same thing and still do: they like the sound of engines, these EVs are not suitable for daily use, EVs will burn down, we hate renewable, we hate cables, we hate...
To match china, we would not only need to work a lot more, we would also need to work on saturdays, break a lot of labor laws we build up, reduce salary despite working more, reduce energy costs massivly and automate as much as possible.
A nitting machine from germany costs 60k. In china, with the same quality (because they catched up) is 20k. 20k!
And were i'm from (bavaria) most young man want to become Mechanical engineers because of BMW and co. No one wants to do IT (lets ignore the AI elephant in the room).
German chancellor Friedrich Merz ...
lashed out at German workers to
“simply do a little more,”
Germany literally pays people to do nothing.
A friend of mine, an engineer who works in the German car industry, recently told me that nowadays he has a lot of free time. Because the company he works for has so few orders that the company is granted "Kurzarbeitergeld" - the government pays 60% of the salary if the employees work less.
That blew my mind. If I had fewer orders, I would work more to increase the quality of my product and my efficiency. Working less as a reaction to losing market share seems completely counterproductive to me.
When my eldest daughter was in high school (~2010, Argentina) there was a provincial policy where if every single student had a result below a certain score in a test, the scores had to be re assessed against the maximum result.
The resulting situation here was that she was constantly bullied into underperforming. Both cases are actually similar in that each individual has a personal incentive to underperform - the difference is that in your friend's case the policy is granted at the company level so no single employee can defect and break it for the rest, while in my daughter's case one high scorer could invalidate the reassessment for everyone, which is exactly what made defection punishable and the bullying emerge naturally.
So let me get this straight: you have exactly one data point, and the second data point using is a German chancellor widely regarded as one of the worst by many measures. Right?
This is FUD. They said the same about the Greeks in 2008, it is complete BS. In any given org, passed a certain size you'll find ppl who slack a lot and people who work for three. Unfortunately that seems to the nature of large orgs, nothing special about Germans...
ps. I'm having a DejaVu. This is the exact same narrative Greek politicians used against the Greek population to justify them become poor overnight.
> If I had fewer orders, I would work more to increase the quality of my product and my efficiency. Working less as a reaction to losing market share seems completely counterproductive to me.
That may work if you are a sole proprietor or small business person, but that's not how shareholder owned corporations work.
A sole proprietor is willing to work more if business drops (effectively lowering their compensation rate) because they are the beneficiary of any future gains that may (or may not) result from their short term sacrifice. If they want their employees to do the same they have to give them the same deal.
A large corporation can't easily make its employees work much longer for the same pay (except in the very short term), nor can it easily get shareholders to be OK with increasing spending on labor. This usually ends with massive layoffs when it can't sustain itself anymore.
That's one reason that smaller companies can be more nimble.
Actually this is not as easy as it sounds. Quite a few companies opt not to go into 'Kurzarbeit' because it means that you go under extra scrutiny as it is only there to stop major layoffs, which would cost our social insurance system even more. There is typically enough mechanisms to make it unattractive enough, that even unions accept unpaid leaves instead.
IMHO there is bigger productivity problems. After COVID sick leave has massively increased. Many women do not work as much as they want because child care is still sketchy. There is often simply no incentive to work more because engineering careers are quite limited: general pay compared to expenses is really good, but top performers earn considerably less than in other countries.
How does this blow your mind? Your suggested action is illogical since the standard way to deal with this problem is to fire workers, but if demand is seasonal, it means you constantly have to fire and rehire, so instead of firing full workers, they just fire part of their working hours.
The crazy part is that the government subsidizes this, which creates perverse incentives, but that's a different problem.
You cannot indefinitely ask employees to do more for less money. According to law and job contracts you can only do so much unpaid overtime. Usually 10h instead of 8h, and only when justifiable. Everything else is illegal. Paying 60% and working less is hoping for the environment or situation at the market to change, whether or not that is realistic.
A very key problem is the common narrative that green policies and the EU allegedly caused the downfall of the car industry (-> "Verbrennerverbot").
In reality, a way bigger impact seems to be that the Chinese govt stopped buying German cars once they could build their own (which they have been always transparent about).
Unfortunately, this misdiagnosis leads to the wrong conclusion to double-down on a obsolete business model of the car industry, instead of diversifying away from it.
There is little the US could have done more to harm Europe and Germany in particular than engaging in the Iranian conflict. Qatar was supposed to be the replacement for lacking Russian deliveries.
In addition the current government is pro fossile fuels, and parts of it are the same south germans that keep building natural gas power plants.
Those plants play an important part in driving up electricity prices in the whole country, since the same people that insist on using natural gas also refuse to split the country into electricity price zones.
I have some experience with the German automotive industry (having worked at a company that is a service provider for much of the German giants), I can instantly confirm a few things, which are known by some and suspected by most:
Historically VW has been the "people's car" - a good car that people could afford and for the longest period that was the case: affordable and rock-solid. Around the late 2000s, that changed. VWs are no longer affordable and when problems hit, they hit hard - they are both time consuming and unless covered by a warranty, expensive. Also hard to fix even if it's something simple. That problem is cascading down the entire VW Group and it is hurting everyone along the way. Some companies under the VW Group are hit very hard by this. At the same time, the second big player, Mercedes, was never really affordable but lately their image of a tank-solid machine has cracked, suffering from a similar, brutally over-engineered, unmaintainable, engineering maze as VW. BMW is in a similar state as Mercedes but with a slightly different twist: BMW's are not to everyone's taste and I am saying that as an owner myself. But these days even the most die-hard fans acknowledge that the modern designs are absolutely atrocious. Top Gear were making fun of the Porsche Panamera back in the day but looking at new BMWs, I'd pick the Panamera in a heartbeat. In addition to their hard push for anti-consumer practices and outrageously over-engineered solutions.
All of this has painted German cars in a negative way - expensive and finicky. Most of the customers were happy to pay a higher price for quality and creature comforts but there is a line between comfort and something dumb like having to visit a mechanic in order to swap a dead battery - something which should have been a simple operation that you can do on the side of the road if it comes down to it. And even though I am happy with my current car and I don't plan on changing it anytime soon, if I were in the market for a new car, I'd definitely consider other options, knowing what I know.
My suggestion to the big-3 which will start solving problems: KISS.
I've mostly worked in smaller companies (max 250 employees) and recently joined one of the larger corporations (not automotive related).
The main issue I notice is how bad the communication is and how little can be done & decided. Before deploying a new Jenkins pipeline I need to speak to two different teams. It's insane how much time is lost doing meetings and syncs.
Germany could turn it around with laxer laws about permanent residency and new infrastructure. Allow people to live permanently in mobile homes, vans and caravans which they can rent to won from automobile makers, invest in campsites. The good future imo isn't megacities but distributed cities with families and social circles congregating.
Looks like they're taking a page right out of the USA playbook: Chase quarterly profits at the expense of the future, enrich large investors via stock buybacks, lay off workers, and rely on the government to subsidize the behavior. Probably not the model to emulate, but here we are.
Germany is a country that never moved past 1918, both in technology and society. All the successful industry is from that time and the mindset is too. They may have gotten rid of the Emperor but the top-down government and Prussian subservience are strong as ever. It's no coincidence that the GDR was even more controlling than the Soviet Union and crashed even harder. The German federal republic, too, is turning more and more into a paralyzed command economy. The entire public sector, health care, and all large corporation certainly work that way and it is the reason for their unfathomable inefficiency.
Ignoring EVs is a symptom and not a cause of the problems. It is impossible for these corporations to pivot or innovate, no matter in which direction.
I don’t know what the German carmakers are going to do, but I’m wondering if they should put eyes on some Chinese EV carmakers that are going to go defunct — quite usual in Chinese manufacturing philosophy, and buy them cheap. Then they can use the tech to export cars back to EU.
> Having ideas is difficult and expensive. Let's lobby instead!
> [..] spends around €10 million a year on lobbying – which sounds like a lot, but amounts to just 0.05% of VW's €21 billion R&D budget.
> The logic is clear: innovation is expensive and uncertain, whereas lobbying to keep current products on the road is cheap and reliable.
Complete non sequitur. This could more easily be read as "they don't care much about lobbying and are hard at work doing R&D instead", but then that would go very much against narrative the author is trying to spin for us here.
Also I distinctly remember industry voices being very much pro-electric, while it was dinosaur politicians fetishizing ICE cars and fighting to keep production going, long past the point VW even wanted to focus on them.
I don't think this one was a lobbying problem for once.
> It would be great to see a politician as angry about lobbying as Merz is about work-life balance.
Love it! Merz (and our minister of commerce Reiche) is a desaster for Germany and all of Europe. Tump attacks Iran and Gas prices hit 2,12€ (and even more) per liter and still they think betting on fossil fuels from their dictatorship-friends is a good thing.
Saving Earth is just not cost-effective (at least not for the "right" people).
68 comments
[ 3.4 ms ] story [ 83.7 ms ] threadI see parallels with unions in the U.K. in the 70s, as they were ultimately the controlling entity of a lot of industry - and they too were unwilling to accept short term pain for long term gain, which ultimately resulted in the collapse of British manufacturing, as money that should have been reinvested in plant upgrades and technology instead disappeared into exorbitant - unfathomable by today’s standards - pension plans and pay packets.
Anyway. I suppose this is just humans 101, and today it’s the German car industry insisting that eating their body weight in candy today will have no consequences tomorrow.
Here's the plain text in case you don't want to go to X:
>"I spent time in Shenzhen last year and when I saw Merz come back from China saying Germans need to work more I immediately knew what broke his brain because I lived the exact same cognitive shock
my first week in Huaqiangbei I burned through 4 prototype iterations of a motor controller board for less than a thousand bucks total, back home a friend was working on something similar and spent over 12 thousand for a single revision that took almost two months to arrive
when you live that contrast in your own hands with your own project something permanently shifts in how you see the world and it goes way deeper than speed & cost
what Shenzhen actually built is a collective learning organism, imagine 20 PCB fabs 15 injection mold shops 30 component distributors and a hundred firmware freelancers all within a 2km radius, looks insanely redundant from the outside until you realize redundancy is actually information density in disguise
I watched this firsthand with an injection mold supplier I was working with, this guy had seen a hundred founders iterate similar thermal designs over 6 months so he proactively modified his tooling before I even opened my mouth, he knew what I needed before I knew what I needed, the intelligence lives in the relationships between the nodes and it compounds daily
the west thinks about manufacturing as a cost center you optimize by centralizing…
China accidentally built a distributed neural network of manufacturing intelligence where knowledge diffuses horizontally across thousands of agents faster than any single western company can process internally
so when Merz comes back and says we need to work a bit more I think he saw the problem but COMPLETELY misdiagnosed the solution, telling Germans to work harder is like telling a horse to gallop faster when the other side built a combustion engine
the gap is ARCHITECTURAL
it’s ecosystem density, you need a custom connector in Shenzhen you walk 200 meters, in Munich you send an email and wait 3 weeks
it’s iteration speed, parallel search vs sequential optimization at the system level, it’s risk tolerance, Chinese founders ship something broken on Monday fix it Tuesday ship again Wednesday while European companies are still in the approval phase for the pilot program of the feasibility study…
and Merz only saw the surface, what he missed is the tier 2 cities like Hefei Chengdu Wuhan replicating the Shenzhen model at scale right now
BYD going from irrelevant to outselling every european automaker combined in roughly 5 years, Huawei building its own 7nm chip under maximum sanctions when every analyst said it was physically impossible & behind all of that a government that treats advanced manufacturing as an existential national priority while europe debates whether AI needs another ethics committee
I think what we’re watching is the most asymmetric economic competition in modern history and most western leaders are still framing it as a productivity problem when it’s actually an ontological one
Europe & America are optimizing variables that China stopped tracking years ago meanwhile China is compounding on dimensions the west has no framework to even measure Merz at least had the courage to name it out loud and I respect that genuinely but working a bit more inside a broken architecture just means you arrive at the wrong destination slightly faster
Europe’s answer to China is always a committee, a regulation, a 5 year strategic plan and a press conference
China’s answer to anything is ship it tomorrow and figure out the rest next week
one side is trying to predict the future the other side is building it live and adju...
> China’s answer to anything is ship it tomorrow and figure out the rest next week
Yes, god knows we'd never see the Chinese delivering 5 year strategic plans, and they're notably committee-averse.
A large part of China's success is they've been intentional about what they're doing - they've _had_ a strategy, whereas every time we consider that in the West, we're told that's a loser's bet and we need to just let the market do its thing.
But the simplest explanation is just basic economics and nothing else (growth being fueled by cost difference, mostly from cheap labor, and to a far smaller extend network effects).
I predict Chinese growth slowing down exactly the same way other countries did as wage gaps get smaller.
Nitter to the rescue!
https://xcancel.com/BetterCallMedhi/status/20276252470680658...
Almost all German exports have seen a precipitous drop [0]. EV exports wouldn't have helped given that Germany's two largest trading partners (the US and China) both enacted trade barriers against foreign exporters.
When the US enacted the IRA under Biden, a large portion of Germany Inc shifted to the US [1], but the German government and EU decided not to enact subsidies [2].
Similarly, China demanded JVs for German manufacturing companies to enter the Chinese market, which Volkswagen (with SAIC), Siemens (with SEPG), Mercedes Benz (with BAIC), and others manufacturers complied with.
Germany's economy was hollowed out because Germany Inc decided to shift capacity to it's two largest unified markets.
It's not like the PRC nor the US are allowing German EV exports already - for example, all of VW's ID4s sold in the US and China are being manufactured in Tennessee and Shanghai respectively.
This is why the EU has been pushing for a "rules based order", becuase otherwise individual EU states lack export markets.
[0] - https://oec.world/en/profile/country/deu#yearly-trade
[1] - https://www.ifo.de/DocDL/EconPol-PolicyReport_41_1.pdf
[2] - https://www.cnbc.com/amp/2023/02/14/biden-ira-germany-rules-...
> Gas prices rose to $70 per megawatt-hour in Germany — it makes it 6 times more expensive than in the US
Germany was relatively fine, industrially speaking, while it still had a working relationship with Russia and especially with cheap Russian gas. It all went to the gutters when the Americans imposed their imperial will on them, on the Germans (see also the Nord Stream fuck-up), and it has been a steady downhill road for the Germans since then.
To re-iterate, there's no German economic miracle that would allow them to be competitive against other indutrialised countries (such as the US) while they have to pay two or three times more for their energy inputs.
[1] https://x.com/MyLordBebo/status/2031015804179791877
That's quite the reversal of facts. Germany cut off Russian gas after imperial Russia started a full invasion on Ukraine. That was Germany's decision and has little to do with the US. The US also did not force Russia to invade Ukraine and to targeted kill Ukrainian civilians for their decision to strive for freedom, democracy and prosperity rather than being a corrupt satellite state to Putin's terror.
Energy prices undoubtedly skyrocketed after that, but that's just the immediate result of finally breaking with the politically engineered dependence on Russia. For decades Germany made itself reliant on Russian gas. What might have started as optimism after the cold war and the hope for good mutually beneficial relations with Russia turned into corruption and irresponsible ignorance and short term thinking at best.
Energy prices in Germany are so high because the German government deliberately sabotaged the shift to renewables. German politics made Germany dependent on fossil fuels that you can burn exactly once and that Germany has to continuously, expensively dig out of the ground and keep importing because Germany lacks enough natural gas. Digging something out of the ground to burn it once is not economic when the alternative of harvesting the sun and wind that just keep on giving you energy indefinitely exists. But Germany decided to deliberately stall building grid technology and farms for harvesting free unlimited energy. Instead they turned to Russia to get gas for cheapish in the exchange for letting Putin live out his imperialist plans. Russia's aggression is not new. They invaded Georgia in 2008 and started the war against Ukraine in 2014. Germany started building the Nordstream 2 gas pipeline, which would have even furthered its dependence, in 2015, after all that. And they kept the plan when Russia backed Assad and commited war crimes against the Syrian people.
(the real lesson here is "make a product that everyone wants")
This reliance on political lobbying rather than technological advancement was a fatal miscalculation: While executives spent the last decade fighting carbon taxes and stalling the EV transition, they ignored the reality of their primary export markets - most notably China where today German ICE cars are seen as obsolete - and the rest of the world rapidly pivoting to electric.
By choosing payday over progress, the "autobauers" & their political helpers have left the German workforce to pay the price. The looming job losses and economic instability are the direct result of a managerial class that traded their country’s industrial crown for a final decade of bloated bonuses.
There's a lot at play, which in combination led to this "perfect" storm.
Energy policies and hence ever increasing energy prices, bureaucracy almost as bad as Italy, governements making technical decisions for unprepared manufacturers by setting goals of EV production numbers and above all phasing out the cornerstone of the countries engine, literally: ICE power units.
And yes, most management are of an era that truly doesn't understand the convergent challenges in a mixed market of ICE and EVs. Shortsighted decisions have been made, throwing out the baby with the bathwater - craftsmanship, vision and engineering prowess.
What was an engineering driven industry with a say in where all this is headed became a soulless marketing machine, merely scratching the surface of what needs to be done.
They created some very bad "sci-fi" by plastering screens everywhere in interiors while still treating software like some part you can outsource to the lowest bidding supplier, swapping these out every other model range or update.
Actual internal research and guidance got killed off around the early 2010s by outsourcing all of it externally.
Besides, the culture and politics within these corporations are the worst i ever encountered in my whole career.
It's a very grim picture we're looking at but there's nobody, neither in upper management across boards nor in politics actually being able to see the misery they're in, let alone doing something about it.
Glad i left almost 10 years ago but still sad, since all I had to witness is effecting society as a whole and not in a good way.
It's really just the beginning of what is to come.
This is also reflected in the big political parties, which would rather keep these beliefs alive than inspire change.
I really don't see a solid economic future for Germany when enough other countries implement more progressive economic policies.
People hold up China as an example but China was not displacing any local industry including its own. It's incredibly easy to do that because it's greenfield. Fast forward 20 to 30 years when new thinking might impact BYD or CATL's bottom line? They may not look so forward-thinking.
The entire ecosystem of automaking is just like tech - clusters of complimentary industries. There's a symbiotic relationship between Mercedes, Ford, BMW, GM, etc and their suppliers -- many of whom in the american case were former subsidiaries of the automaker.
That's why Ford, GM, Porsche, Mercedes, BMW, etc have a hard time closing the deal on EV. The American car companies are more fucked because they've engineered the business around compliance requirements to mostly only make trucks. It's hard to eat your children. Meanwhile, BYD isn't run by a bipolar drug addict, and they are going to back up the truck, slowed down only by protectionism. I drove one when traveling, and it felt like driving a Tesla in 2015.
For companies building cars in Germany, the US and to some extent Japan & Korea, we're living in a do-over of 1976, except China is Japan.
Lobbies also moved Germany out of solar panel production, batteries and lately heat pumps.
So yeah, the legacy industry lobbies are the problem but not exclusively the automaker ones.
Our current Chancellor (Merz) publicly boasts that Germans work too few hours and calls on them to work more [0] implying this would generate more tax revenue. Yet working has arguably never been less rewarding for workers: Germany currently has the 2nd highest tax wedge among all OECD nations (≈48% for a single worker, nearly 13 percentage points above the OECD average) [2][3]. This is compounded by demand-side welfare measures for low earners such as Wohngeld (housing benefit) and pension supplements like Mütterrente ("Mothers' pension"), creating a massive redistribution from working people to non-working people.
Meanwhile, the German government has spent years failing to fully prosecute the CumEx/CumCum tax fraud scandal, a scheme through which banks and investors systematically robbed the German state of an estimated €36 billion in tax revenues [4][5]. The contrast could not be more glaring: squeeze workers harder while letting financial fraudsters off easy.
I've handed over my resignation for my FAANG job and am looking for a job in other countries as I don't see myself building a future here.
- [0] Merz urges Germans to work more CGTN (Feb 2026): https://news.cgtn.com/news/2026-02-28/Merz-says-Germany-must...
- [1] EUFactCheck Merz's claim rated "Mostly False": https://eufactcheck.eu/factcheck/mostly-false-we-need-to-wor...
- [2] OECD Taxing Wages 2025 Germany: https://www.oecd.org/content/dam/oecd/en/publications/report...
- [3] Tax Foundation Tax Burden on Labor, OECD 2024: https://taxfoundation.org/data/all/global/tax-burden-on-labo...
- [4] CumEx-Files Wikipedia: https://en.wikipedia.org/wiki/CumEx-Files
- [5] Stanford GSB CumEx and CumCum Scandals: https://casi.stanford.edu/news/germanys-cumex-and-cumcum-fin...
What's not such a great idea is paying the Mütterrente retroactively. Pensioners can't have children retroactively to stock up the tax base, so all this does is increase the tax burden for the current generation, which discourages them even more from having children.
> In Germany, the tax wedge for the average single worker decreased by 5 percentage points from 52.9% to 47.9% between 2000 and 2024. During the same period, the average tax wedge across the OECD decreased by 1.3 percentage points from 36.2% to 34.9%.
Sounds like Germany is getting better.
Turns out, the real moat of any successful car industry so far wasn't brand recognition, lobbyists, tariffs, or the pleasing sound of a shutting car door. It's the combustion engine itself. Or rather the industry you're embedded in that provides the metallurgy and chemistry to reliably produce high quality engine blocks and seals. Because your engine needs to withstand high pressures and temperatures that go from below freezing all the way up to way over 2000K. And you also need the know how and experience to build all of that together.
None of that can be exfiltrated as a zip file or wished into existence by party officials.
The EV sidesteps all of that in one go. Now it's all down to who has the best batteries and who can do high quality assembly real cheap. Both points go to China.
Why? The same reason: The surrounding industry. It's what you get from doing (even simple) electronics for decades, cultivating a competitive industry for assembly and high quality battery cells.
The only hope for the incumbents was hydrogen instead of batteries because this again is engineering and seals.
The alternative would have been to become really good at batteries themselves. However, Europe's best chance to get there, Bosch, decided in 2018 not to go that way [2].
Once you let all of that sink in, you realise the inevitability of the current situation.
And they knew. All this time they knew. The rest was song and dance for politicians and shareholders.
[1] https://www.economist.com/technology-quarterly/2020/01/02/ch...
[2] https://www.reuters.com/article/business/bosch-shuns-battery...
Three years later the car manufacturers sold the plant to China for another 10 billion...
Its not just innovation, we missed and our stubbornes of just keep doing what we good at, its also china catching up and steam rolling us.
When I bought an EV, people around me told me the same thing and still do: they like the sound of engines, these EVs are not suitable for daily use, EVs will burn down, we hate renewable, we hate cables, we hate...
To match china, we would not only need to work a lot more, we would also need to work on saturdays, break a lot of labor laws we build up, reduce salary despite working more, reduce energy costs massivly and automate as much as possible.
A nitting machine from germany costs 60k. In china, with the same quality (because they catched up) is 20k. 20k!
And were i'm from (bavaria) most young man want to become Mechanical engineers because of BMW and co. No one wants to do IT (lets ignore the AI elephant in the room).
A friend of mine, an engineer who works in the German car industry, recently told me that nowadays he has a lot of free time. Because the company he works for has so few orders that the company is granted "Kurzarbeitergeld" - the government pays 60% of the salary if the employees work less.
That blew my mind. If I had fewer orders, I would work more to increase the quality of my product and my efficiency. Working less as a reaction to losing market share seems completely counterproductive to me.
The resulting situation here was that she was constantly bullied into underperforming. Both cases are actually similar in that each individual has a personal incentive to underperform - the difference is that in your friend's case the policy is granted at the company level so no single employee can defect and break it for the rest, while in my daughter's case one high scorer could invalidate the reassessment for everyone, which is exactly what made defection punishable and the bullying emerge naturally.
This is FUD. They said the same about the Greeks in 2008, it is complete BS. In any given org, passed a certain size you'll find ppl who slack a lot and people who work for three. Unfortunately that seems to the nature of large orgs, nothing special about Germans...
ps. I'm having a DejaVu. This is the exact same narrative Greek politicians used against the Greek population to justify them become poor overnight.
That may work if you are a sole proprietor or small business person, but that's not how shareholder owned corporations work.
A sole proprietor is willing to work more if business drops (effectively lowering their compensation rate) because they are the beneficiary of any future gains that may (or may not) result from their short term sacrifice. If they want their employees to do the same they have to give them the same deal.
A large corporation can't easily make its employees work much longer for the same pay (except in the very short term), nor can it easily get shareholders to be OK with increasing spending on labor. This usually ends with massive layoffs when it can't sustain itself anymore.
That's one reason that smaller companies can be more nimble.
Really? Because most of the time what you see is huge layoffs and gutting the company's assets.
The crazy part is that the government subsidizes this, which creates perverse incentives, but that's a different problem.
If there is no money to pay them, they should get shares in the company. So if their R&D is successful, they participate in the outcome.
In reality, a way bigger impact seems to be that the Chinese govt stopped buying German cars once they could build their own (which they have been always transparent about).
Unfortunately, this misdiagnosis leads to the wrong conclusion to double-down on a obsolete business model of the car industry, instead of diversifying away from it.
In addition the current government is pro fossile fuels, and parts of it are the same south germans that keep building natural gas power plants.
Those plants play an important part in driving up electricity prices in the whole country, since the same people that insist on using natural gas also refuse to split the country into electricity price zones.
"Daddy, look, another stinky gas car!"
The kids already know it.
Maybe these writers should go invent a new battery! No amount of German Engineering is going to beat the costs of Chinese scale.
Historically VW has been the "people's car" - a good car that people could afford and for the longest period that was the case: affordable and rock-solid. Around the late 2000s, that changed. VWs are no longer affordable and when problems hit, they hit hard - they are both time consuming and unless covered by a warranty, expensive. Also hard to fix even if it's something simple. That problem is cascading down the entire VW Group and it is hurting everyone along the way. Some companies under the VW Group are hit very hard by this. At the same time, the second big player, Mercedes, was never really affordable but lately their image of a tank-solid machine has cracked, suffering from a similar, brutally over-engineered, unmaintainable, engineering maze as VW. BMW is in a similar state as Mercedes but with a slightly different twist: BMW's are not to everyone's taste and I am saying that as an owner myself. But these days even the most die-hard fans acknowledge that the modern designs are absolutely atrocious. Top Gear were making fun of the Porsche Panamera back in the day but looking at new BMWs, I'd pick the Panamera in a heartbeat. In addition to their hard push for anti-consumer practices and outrageously over-engineered solutions.
All of this has painted German cars in a negative way - expensive and finicky. Most of the customers were happy to pay a higher price for quality and creature comforts but there is a line between comfort and something dumb like having to visit a mechanic in order to swap a dead battery - something which should have been a simple operation that you can do on the side of the road if it comes down to it. And even though I am happy with my current car and I don't plan on changing it anytime soon, if I were in the market for a new car, I'd definitely consider other options, knowing what I know.
My suggestion to the big-3 which will start solving problems: KISS.
The main issue I notice is how bad the communication is and how little can be done & decided. Before deploying a new Jenkins pipeline I need to speak to two different teams. It's insane how much time is lost doing meetings and syncs.
Ignoring EVs is a symptom and not a cause of the problems. It is impossible for these corporations to pivot or innovate, no matter in which direction.
Germany faces much bigger problems than the auto lobby.
> [..] spends around €10 million a year on lobbying – which sounds like a lot, but amounts to just 0.05% of VW's €21 billion R&D budget.
> The logic is clear: innovation is expensive and uncertain, whereas lobbying to keep current products on the road is cheap and reliable.
Complete non sequitur. This could more easily be read as "they don't care much about lobbying and are hard at work doing R&D instead", but then that would go very much against narrative the author is trying to spin for us here.
Also I distinctly remember industry voices being very much pro-electric, while it was dinosaur politicians fetishizing ICE cars and fighting to keep production going, long past the point VW even wanted to focus on them.
I don't think this one was a lobbying problem for once.
Pensions, patent/IP law, land ownership crowding out affordability...
Birth rate drops dramatically
Shocked pikachu face
Love it! Merz (and our minister of commerce Reiche) is a desaster for Germany and all of Europe. Tump attacks Iran and Gas prices hit 2,12€ (and even more) per liter and still they think betting on fossil fuels from their dictatorship-friends is a good thing.
Saving Earth is just not cost-effective (at least not for the "right" people).