According to a report by Deutsche Bank (DB) Research, car production in Germany has been declining since late 2019, and unresolved raw material supply bottlenecks are expected to continue to have a negative impact, indicating that the country may have already reached “peak car” and will not return to previous production levels. According to the study, “because to continuing semiconductor shortages, 2021 will be another poor year for Germany as a vehicle production destination.” “Based on the fundamentals of the sector, we believe it is unlikely that pre-crisis levels of vehicle production will be achieved again,” DB study stated, adding that this would be true at least for the quantity of cars manufactured. “This implies Germany’s peak automobile manufacturing has already passed us by.”
The authors point out that decreased production levels in Germany have not resulted in a loss for carmakers. “This highlights the disparity between Germany as a vehicle manufacturing site and the health of the German auto industry,” according to DB Research. Due to the impacts of the coronavirus pandemic, decreasing demand for passenger vehicles first lowered production by 11.3 percent in 2019 and by another 23.5 percent in 2020.
While production levels improved marginally once the initial pandemic reaction restrictions were lifted, supply constraints for semiconductors from Asia kept vehicle manufacturing low, with 32 percent fewer cars manufactured in August 2021 than the previous year. In Germany, the proportion of electric vehicles in overall vehicle manufacturing is increasing, and plant retrofitting is causing additional problems. Furthermore, e-cars often require more micro chips than combustion engine automobiles, posing even larger challenges, according to DB Research. According to the authors, it appears that Germany’s carmakers are more prepared to survive the shift to electric vehicles than Germany as a car manufacturing site.
The automobile sector is one of Germany’s largest jobs and a foundation of the country’s regional economies. Despite being late to the electric mobility party, all major automakers have already declared a full or near-full transition to electric vehicles, and have reorganized and ramped up manufacturing capacity in Germany and abroad.