German industry thrives—but why is automotive lagging behind?
German industry is experiencing a major transformation, with most sectors showing strong growth. Over three-quarters of manufacturing output now comes from industries with rising demand over the past five years. Yet challenges remain, particularly in the automotive sector.
A recent study by the Ifo Institute highlights a clear trend: 76% of the manufacturing sector's gross value added is driven by industries with steadily increasing demand. Even traditional areas like metal production and chemicals now focus on high-growth segments. Economist Oliver Falck describes these developments as overwhelmingly positive.
However, the picture isn't entirely bright. The automotive industry stands out as an exception, facing fierce competition and a sharp decline in exports to China—halving in recent years. Unlike other sectors, it has struggled to shift toward growth-oriented products. Researchers argue that policymakers should focus on fostering innovation rather than protecting outdated structures. They suggest a hybrid model where products are developed in Germany but manufactured abroad, supported by better capital markets, tax incentives, and flexible regulations.
While German industry is evolving, the transition isn't uniform. Most firms now rely on growth-driven products, but the automotive sector lags behind. The call for innovation-friendly policies could shape the next phase of industrial development.
