German Auto Industry: Navigating Challenges

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June 16, 2025

In recent months, the United States has made headlines for its decisions to impose additional tariffs on various goods, particularly targeting imports such as steel, aluminum, and automobiles. This protectionist stance has sparked concern across the globe, and in a recent interview, Hildegard Müller, the president of the German Automotive Industry Association, shared her apprehensions regarding these developments. She articulated that such tariffs could impede global economic growth and inflict harm on German automotive investments and employment within the U.S. market.

Müller highlighted that German automakers have significant investments in the United States and that the imposition of tariffs could escalate operational costs, thereby undermining their competitive edge. She stressed the need for dialogue to resolve trade disputes to prevent further escalation of tariffs. “Free trade and an open global market are central to the success of the German automotive industry, and any form of protectionism can damage the sector,” she stated passionately.

Turning to cooperation between the automotive industries of China and Germany, Müller emphasized that China is not only an essential market for the German automotive sector but also a key driver in the global development of electric vehicles and digital technology. She remarked on the robust collaboration between the two countries in the domains of electric vehicles and battery technologies, envisioning a future where the German automotive industry would deepen its cooperation with China in technical innovation and market expansion.

Addressing the European Union's anti-subsidy probe regarding Chinese electric vehicles, Müller remarked that tariffs should not be instruments of trade protectionism but rather issues to be resolved through dialogue and collaboration. She reiterated the German automotive industry's desire to see a fair and mutually beneficial trade agreement between Europe and China, which could secure the healthy development of the electric vehicle market.

However, Müller acknowledged several hurdles the German automotive sector currently faces. The industry is navigating challenges such as intensifying global competition, energy transition, digital transformation, and geopolitical uncertainty. She asserted that despite these hurdles, the German automotive sector remains competitive worldwide, especially in technology innovation and product quality. Yet, as the global market evolves—particularly with the swift advancements in electric vehicles and digital technologies—German automotive manufacturers must expedite their transformation processes.

From Müller's perspective, the German automotive industry is proactively driving towards electrification and digitalization. "In the next five years, we plan to invest €320 billion in research and innovation, with €220 billion earmarked specifically for electric vehicles and related infrastructure," she announced. She pointed out some noteworthy advancements that Germany has already achieved in areas such as autonomous driving, connected vehicles, and artificial intelligence technologies, while also recognizing the necessity for further investment.

At a recent seminar focused on automotive industry development trends, Müller delivered crucial remarks regarding the electrification transformation of the automotive sector. She noted that with the global push for green transportation and sustainable development, the industry's shift towards electrification has become an unstoppable trend of the times.

This transition process has significantly impacted traditional internal combustion engine sectors. As electric vehicles steadily increase their market share, positions dependent on traditional internal combustion engine technology, such as engine development engineers and workers on internal combustion engine production lines, may witness a decline in numbers. The bustling assembly lines that once highlighted the importance of internal combustion engines may see their activity wane over time.

However, Müller also pointed out that crises often conceal new opportunities. The advance towards electrification has created a booming era for battery manufacturing. From researching battery materials to designing and producing battery modules and recycling, each stage of this process requires a plethora of skilled professionals. For instance, to develop batteries with higher energy densities and enhanced safety, material scientists must continually explore new materials and test innovative formulas and processes. Furthermore, within the production sector of batteries, the operation and maintenance of automated equipment demand specialized workers knowledgeable in advanced technology. Emerging fields such as intelligent connected technology development and autonomous driving system testing are also in great need of various talents, as they promise to create a multitude of new jobs for society.

Forecasts from professional institutions suggest that by 2035, the German automotive industry could generate roughly 45,000 new job opportunities, which would provide a substantial boost to the employment market in Germany. Nonetheless, this transformation journey is not without its challenges. Müller specifically mentioned that for many small and medium-sized suppliers, the hurdles posed by this transition are particularly daunting. These enterprises frequently operate with limited resources and face immense financial pressure in research and technology development, equipment updates, and talent attraction. To meet the new demands of electric vehicle production, they must invest heavily in acquiring new production equipment and develop components suitable for electrification. However, issues related to funding often leave them struggling to keep pace.

Given this context, Müller, on behalf of the automotive industry association, urged the German government to provide more support. On one hand, she hopes the government will introduce special subsidy policies targeting small and medium-sized suppliers actively investing in electrification transitions by providing financial assistance to alleviate their cash flow pressures. On the other hand, she called for tax incentives to lower their operational costs. Additionally, the government could lead efforts to establish technical exchange platforms to promote cooperation and knowledge sharing between large enterprises and smaller suppliers, helping them to enhance their technical capabilities and better withstand the pressures imposed by transformation. Only through the collaborative efforts of the government, enterprises, and society can the German automotive industry ensure a steady progression along the electrification transformation path and achieve sustainable industrial development.

Müller expressed that the year 2025 will be a pivotal year for the German automotive industry and that government policy support is critical for the industry's transition. She called upon the new European Commission and the German government to provide more funding and policy support, particularly in research, infrastructure development, and energy policies. “Only through the joint efforts of the government, businesses, and society can the German automotive industry maintain its competitive edge in the global arena,” Müller concluded.