The successful German car industry has made three big mistakes in the last ten years: Diesel, electric and China.
But nobody is stupid in the automotive industry: nowhere is the density of smart, experienced experts higher. Nowhere is it more fun to work on projects with colleagues than here.
And yet: everything together results in a lot of irrationality. Luca de Meo, CEO of SEAT at the time, used to challenge us with the statement: “This industry is full of bulls***t.“
Or in Forrest Gump’s words: “Stupid is as stupid does.”
The diesel crisis was a stupidity that everyone deeply regrets.
Background: Diesel engines are known to emit very little CO2. But diesel also produces nitrogen oxides (NOX). These can be filtered out. You just have to fill up with urea (AdBlue). This is an additional expense. Getting customers used to this disadvantage seemed impossible to the product strategists in 2010. If you compare this with the complicated charging process for electric vehicles, it seems absurd today.
Just stupid.
Then came the diesel crisis and everything came to light: the collusion, the defeat devices, the lack of supervision by politicians and the Federal Motor Transport Authority. As a result, people panicked and turned to electric vehicles in order to become more environmentally friendly and CO2-free.
Herbert Diess, ex-CEO of Volkswagen, trimmed the entire Group for this change in strategy: Billions were poured into the MEB and other electric kits, factories were converted, dealer contracts were terminated. Only to realize later that customers need a functioning charging infrastructure. And in heavily regulated Europe, no manufacturer can put this on the road for the mass market alone.
And that is why electric vehicles are currently not convincing normal customers. That was predictable and therefore, let’s say, not rational.
This is because sales of electric vehicles collapsed when subsidies expired at the end of 2023. The government cannot create a functioning market. At the same time, the renowned VDI (Association of German Engineers) published an elaborate study on the carbon footprint of vehicles with different powertrains in December 2023. It measured how much CO2 is emitted during production, use over 200,000 km and disposal. The results shocked many. Electric vehicles still emit 75% of the CO2 of diesel vehicles. Plug-in hybrids are on a par with electric vehicles.
The experts in the car industry have known it for a long time: investing a lot of money in the development of cars that hardly anyone wants and whose contribution to the carbon footprint is rather modest seemed illogical for a long time.
But the consequences of the next stupidity are only just becoming visible.
The Chinese will have taken over the global market leadership in traction batteries and electric vehicles by 2022 at the latest. They have “copied” car manufacturing from Western manufacturers, not least by forcing them all into joint ventures. All of them already have their partnerships, and in some cases the Chinese also have a stake in the European parent companies. Volvo is already Chinese.
The EU is now considering the introduction of punitive tariffs on the import of Chinese EVs onto the European market.
And that will be, as the American says, the next “shitshow” – and it will be announced. Because the Chinese have even more weapons in their “arsenal of revenge”: many top German cars only exist because China supplies the volume to spread the development costs. Just think of the Audi A8, the brand’s flagship: without demand from China, the car would simply not exist. And China is the growth market of the future, not Europe. So if the Chinese resist the punitive tariffs, it will be existentially painful for all German manufacturers.
That is not a guess. We already know that.
The perfect dilemma has been created, with our involvement: Diesel, electric, China. What a drama, right before our eyes!
Almost all options have been exhausted
Managers in the automotive industry are used to success and to problems simply being “bulldozed away”: I was in Wolfsburg on the day when Volkswagen transferred 22 billion dollars to the US government as part of the settlement in the diesel crisis. It was business as usual at the Wolfsburg plant. Not a single light bulb flickered that day
Today it’s different. And everyone knows it: diesel, electric and China have emptied the coffers and driven up debt.
Our hero, the German car industry, is in dire straits.
What options do top managers have?
More sales are almost hopeless. The markets are saturated. The core market of Germany and many other countries are on the brink of recession. With Renault and Stellantis, the competition in the mass market is no longer as sleepy as it was a few years ago. The Chinese are also taking a big slice of the cake.
Many costs are difficult to reduce. This is because regulation has regulated as if there were no tomorrow, when the German automotive industry would not wake up as strongly as it did in the 2010s.
Product investments can hardly be reduced or postponed because the requirements are tough. For example, the EU7 emissions standard. Under EU7, a Polo can no longer be driven conventionally and therefore becomes significantly more expensive. A comparatively environmentally friendly Polo!
Product investments can hardly be reduced or postponed because the requirements are tough. For example, the EU7 emissions standard. Under EU7, a Polo can no longer be driven conventionally and therefore becomes significantly more expensive. A comparatively environmentally friendly Polo!
Now we can talk about prices, and that is the greatest strength of the German manufacturers. All German brands (including Opel) have a high reputation and pricing power.
Now there is nothing left to do but reach deep into the toolbox of top managers. Takeovers, tough restructuring, plant closures, capacity reductions. For my part, I am preparing myself for precisely this scenario.
How this drama turns into a happy ending.
Let’s look at it another way: the drama of the German automotive industry follows the narrative structure of a Hollywood movie.
The dramaturgy of Hollywood films follows a standardized sequence that has become known as “A Hero’s Journey”.
Most Hollwood productions follow the concept of the Hero’s Journey
The scheme works as follows: At the beginning, the hero appears in his everyday surroundings. The characters are introduced. Then comes the adventure: the hero faces a new challenge, conquers the world and has to leave his familiar everyday life behind. And then adversaries appear. The hero has to defend himself against opposition and ultimately fight for his existence. And now comes the dramatic transformation: In this battle, the hero transforms himself – through his transformation (physically, psychologically) he gains the decisive powers for the final act: “Storming the Castle”. Using the last of his strength, the hero succeeds in defeating his opponents and achieving victory. The hero gets the girl and leads a happy life from then on.
We all have a right to a happy ending.
The history of the German automotive industry has so far followed the narrative structure of Hollywood exactly. And that’s why I firmly believe in a happy ending.
To understand this better, we need to rewind to the transformation. Because what exactly does the transformation of the hero mean?
First of all, the hero’s failure is structurally important for the story.
Without failure, there is no reason for the hero to change. Failure is essential for the entire story and for the credible development and transformation of the hero. He must fail in order to give up old habits, strategies, beliefs, attitudes and skills and replace them with new ones.
Failure and the associated pain are part of transformation
The hero must be put back into a state of learning. His ego, which resists change, must be conquered beyond doubt. Then our hero changes as a person. He changes his perspective on the problem and finds solutions that work. And in this he is human. That connects us with the hero. That’s why we love these movies: Because we subconsciously know that this is how life is. Failure hurts and failure stands for weakness and defeat. But failure is actually just the transition to a new state.
The German car industry must fail in order to transform itself.
Let’s be honest, people, the German car industry IS already failing today.
German manufacturers and suppliers are heavily in debt. The management is running out of options. The government is running out of money, but also the will to provide support. The public is calling on the industry to switch to electric, but customers don’t want to buy.
It is hopeless.
But it’s still a long way from checkmate. We can still make a few more moves in this drama.
Problems can never be solved with the same way of thinking that created them. Albert Einstein
As a result, the potential for change that lies within employees is only used superficially. The qualifications, inventiveness, creativity and willingness to change of the workforce are high. The cars rolling off the production line today are still great: excellent electric cars are coming out of Germany. Market shares in profitable markets are almost stable. Good money is still being earned.
And there is a lever here that the top managers in the German car industry have not yet used. We are learning this from Hollywood:
The failure of the hero can bring about a lasting, credible change in the minds of employees.
The strongest remaining lever is to change the mindset in the automotive industry.
Because the failure of the automotive industry has resulted in the failure of many personal careers. The automotive industry is ultimately the sum of the careers of the people who work in it. Without people, they consist only of empty factories and office buildings.
This is a crucial starting point that is obvious, but is used far too little. This is because managers prefer to focus on new products and technologies (or software), more efficient processes, better marketing, etc. and miss this opportunity because they avoid this hard truth. And they miss this opportunity because they avoid this hard truth. But this underestimates people’s ability to adapt and learn.
Why don’t we give employees the chance to take their future into their own hands? They are the experts who have already solved the most complex problems.
Because if the industry is changing, if the fundamentals of the business and the roles of employees are fundamentally changing, don’t beliefs, values, attitudes and mindsets also need to fundamentally change? And if this is the case, don’t managers need to shape the environment and provide tools and support to help people in the industry with their PERSONAL transformation?
Our car world has changed.
The toolbox for crisis management in 2024 contains different instruments than in 2015 or 2008.
The tools and interventions by management are also different. Lockdowns in particular have led to the digitization of many conventional tools that were previously only available for individual interventions.
And suddenly these tools are scalable and applicable to the transformation of the automotive industry.
But they are hardly common in the automotive industry. Our “Future Skill Designer” can help with the assignment. We have developed this tool for this purpose.
Please tell that to the top managers.
Tell the politicians so that they can support them. And keep your hands off the industry. Those responsible must support the PERSONAL transformation of their team.
Changing the mindset is a management task. It cannot be delegated. Managers are on their own.
The HR department can provide support. But mindset change is a management task and cannot be delegated.
The HR department can provide support. But mindset change is a management task and cannot be delegated.
