As more electric vehicles (EVs) enter the market, German automakers are fighting to defend their reputation for excellent engineering.
- As pressure from government regulations pushes more automakers toward EV manufacturing, companies like Volkswagen, Mercedes-Benz, and BMW are looking to retrofit their factories for EV manufacturing.
- German manufacturers are competing with the U.S. and China, who have top EVs like Tesla and China’s BYD.
- Rising production costs due to the war in Ukraine have complicated German automakers’ plans to release EV versions of popular vehicles.
- Competition from Chinese manufacturers was already a concern for German manufacturers, but now clean energy incentives in the U.S. have made U.S. manufacturers a strong competitor.
Why it’s news
Clean energy incentives in the U.S. are drawing more investors and manufacturers to the states. More EV battery manufacturers are setting up shop in the U.S., priming the country to become one of the most profitable EV battery producers in the world, Bloomberg reports.
When combustion engines were the mainstream, German manufacturers held the title of one of the best automakers in the industry. The change of focus is proving to be a difficult adaptation for many manufacturers. Potential European customers are growing frustrated with the lack of EV inventory to choose from.
Calls for European countries to take EV manufacturing more seriously were prevalent at the World Economic Forum earlier this week. European leaders encouraged their countries to create subsidies and incentives to promote manufacturing at home.
The automotive industry is a giant in Germany—employing approximately 786,000 people within the country. Vehicle manufacturing also remains the country’s largest source of sales and exports and represents some of the most significant government investments. A decline in the German auto industry would affect a large portion of the overall German economy.
Last week, Germany adopted a plan to provide $1.1 billion in a broad European aid package to promote EV battery production. While the funding is significant, U.S. investment in battery production is much larger. Since the Inflation Reduction Act, the U.S. has invested nearly $28 billion in various assets related to EVs, Bloomberg reports.
If Europe plans to have a battery production startup within the continent, one of the best opportunities is Swedish company Northvolt. However, Northvolt has paused its plans to establish a manufacturing center in Germany. It is now looking to North America for its expansion.
Germany does have some battery manufacturing within its borders. The world’s largest EV manufacturer, China-based CATL, is constructing its first European cell factory in Erfurt, Germany. Volkswagen is building its own manufacturing facility in Salzgitter, Germany.