What If Germany Stopped Making Cars?

Imagine what would happen if Volkswagen goes the way of Nokia

The future of the VW brand is at stake.” When Thomas Schäfer, the mass-market marque’s newish boss, gave a presentation to his management team in early July, he did not sugarcoat its problems. High costs, falling demand, growing competition—the list goes on. “The roof is on fire,” he warned, echoing one of the most noted alarm calls in recent business history—from Stephen Elop, who in 2011 compared his company to a “burning platform” shortly after taking the helm at Nokia, then the world’s largest maker of mobile phones.

In the case of Nokia, the wake-up call did not help. A few years later the firm was dismantled and its mobile-phone business sold to Microsoft, which has since closed it down. Could mighty VW, its mightier parent group, which owns nine other brands, or even Germany’s mightiest industry as a whole really suffer a similar fate? And if it did, what would that mean for Europe’s biggest economy?

An imminent implosion of the car industry seems unlikely. In 2022 Volkswagen was the world’s largest carmaker by revenue, giving it plenty of cash to support its biggest brand. On July 27th it reported that sales rose by a healthy 18% in the first half of 2023, year on year, to €156bn ($174bn). BMW and Mercedes-Benz, Germany’s two other big automotive concerns, are in decent nick.

Yet disaster is no longer inconceivable. German industrialists are feeling real angst about the future. In July an index of business confidence from Ifo Institute, a think-tank, fell for the third consecutive month. German bosses echo Mr Schäfer’s list of concerns and add other gripes, from bunged-up bureaucracy to the delicate geopolitics of trade with China.