Why has German car production hit its lowest level since 1997?

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German Car Production Reaches Lowest Point Since 1997 Amidst Global Demand Weakness and Industry Transformation

German car manufacturers produced just 4.7 million vehicles in 2019, marking the lowest output since 1997. This represents a nine percent year-on-year decline, primarily attributed to weakening international demand, a situation exacerbated by trade tensions between the United States and China. The automotive sector is undergoing a significant transformation driven by technological advancements and increasingly stringent emissions regulations.
Declining International Demand and Exports

The decrease in German car production is largely a consequence of reduced demand from global markets. Auto exports from Germany saw a substantial drop of 13 percent, falling to 3.5 million units. This decline in foreign sales contrasts with a five percent increase in new car registrations within Germany itself, reaching 3.6 million. The shrinking share of global car production accounted for by Germany, down from nearly 12 percent in 1998 to below six percent in 2019, further underscores the industry's diminished global standing.
Regulatory Pressures and Technological Shifts

A major catalyst for the industry's upheaval is the European Union's forthcoming emissions legislation. From 2021, carmakers will be mandated to achieve an average carbon dioxide (CO2) emission level of 95 grammes per kilometre across their newly sold vehicle fleets in the EU, with substantial fines for non-compliance. This regulatory pressure is a primary driver forcing manufacturers to invest heavily in research and development for new technologies, such as automated driving and a pivot towards hybrid and all-electric vehicles, away from traditional internal combustion engines.
Impact on Employment and Future Outlook

The transition to electric powertrains presents a significant challenge to the German automotive workforce. Electric motors generally require less manpower for assembly compared to internal combustion engines, raising concerns about job security for a sector that employs approximately 800,000 people in Germany. Industry experts forecast a likely fall in sales of three to five percent for 2020, although a rebound in production is anticipated from 2021 onwards as manufacturers intensify efforts to boost sales of electric and plug-in hybrid vehicles.

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Why has German car production hit its lowest level since 1997?

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