Volkswagen has become a source of concern, and car manufacturers like BMW are already struggling, warns CSU politician Ulrich Lange. In his guest contribution, he calls for a strategic shift.
By CSU transportation politician and Member of the Bundestag Ulrich Lange
Volkswagen has transformed from the strong player to the troubled man of the German automotive industry. Once the industrial heart of the sector with its suppliers and dealerships, the company now faces existential threats: its locations, jobs, technological leadership, reputation, and buyers are all at stake, along with political support.
Various toxins have insidiously infected the company over several years, pushing it to the brink of viability. Key contributors include dishonesty, loss of trust, and poor strategic decisions made in the past, with roots tracing back almost a decade.
First the emissions scandal, then “Electric Only”: VW is the only car manufacturer to stick with it
The emissions scandal of 2014/2015 marks a crucial turning point in this deteriorating path. For years, Volkswagen intentionally misled customers and authorities, with the fraud ultimately coming to light in 2015, plunging the company into the worst crisis of its history. The fallout has cost VW over 32 billion euros to date and has severely damaged the public’s trust in what was previously a respected car manufacturer.
This probably played a significant role in VW’s decision to abandon internal combustion and especially diesel engines, opting to turn a new leaf in its production history. In 2021, it was announced that VW aims to stop producing the last combustion engine models in Europe between 2033 and 2035, with all-electric vehicles being the only offerings starting in 2024 in Norway.
This made VW, alongside Mercedes, the first German automobile manufacturer to shift to an “Electric Only” strategy, and it remains the only one to fully commit to this approach. Other German car manufacturers continue to maintain a balance between internal combustion engines and electric vehicles, reflecting a new realism in their executive suites. Mercedes has even altered its strategy to favor combustion engines again.
VW, Mercedes, BMW, Audi producing electric cars more expensively than Tesla
The consequences of VW’s departure from technology openness could prove detrimental, as anticipated under the current conditions. German automakers are under significant pressure, particularly in the emerging electric mobility market where a fierce price war is expected. VW, Mercedes, BMW, and Audi produce electric vehicles at higher costs compared to Tesla.
This results in German-manufactured electric cars being offered at higher prices, diminishing their attractiveness against foreign competitors. The price issue is further exacerbated by increasing competition from China. While Chinese manufacturers do not yet dominate the German market, they are increasingly discovering opportunities within the German electric vehicle sector. A growing influx of Chinese electric cars, priced significantly lower than their German counterparts, is becoming evident in the market.
The traffic light coalition has created a chaos in funding
Due to their pricing issues, German electric vehicles are losing appeal not only against their foreign counterparts but also against combustion engine vehicles. VW still lacks an affordable electric model in its lineup. Particularly disappointing is the fact that Volkswagen, which once manufactured budget-friendly models like the Beetle and Golf, is currently unable to produce a cost-effective electric car. A model around 25,000 euros is forecasted to be introduced only by early 2026, which may be too late.
Moreover, uncertainty remains regarding the future of combustion engines. After more than a year and a half, the traffic light coalition’s transportation minister, Volker Wissing, has yet to provide clarity on whether combustion engines will have a future in Europe. The Minister’s promises to quickly establish regulations have not been fulfilled, and the new EU Commission has yet to clarify its position. Additionally, the traffic light government has created a chaotic funding framework for electric mobility, leading to consumer confusion; for example, the environmental bonus was abruptly canceled at the end of 2023.
This bonus had previously boosted electric vehicle sales, only for them to decline rapidly afterward. Another contributing factor to the waning appeal of electric vehicles is Germany’s failure to strategically prepare for the transition to electric mobility. There is a significant shortage of raw materials both domestically and across Europe. In contrast, China is actively perfecting its position in the electric mobility landscape, having strategically developed an industry along the entire value chain—from mining raw materials to refining them and producing battery cells.
The automotive location in Germany: It can’t go on like this
These developments highlight the need for a strategic overhaul if we want Germany to remain a strong automotive location. We require new solutions. However, we firmly reject financial state support or a four-day workweek. Instead, we believe it is crucial to create conditions that empower companies to act independently. For us, technology openness is paramount.
VW’s experience shows that vilifying specific technologies drives companies to commit to a single technology path unsuccessfully. Therefore, we advocate for a market-driven approach to determine the most promising technology. Additionally, we see it as essential to establish planning security and reliable prospects for our automotive companies, including providing clarity on the future of combustion engines at the European level.
The current indecisiveness must come to an end, as it can lead to hasty technological decisions that create significant problems for companies, as seen with VW. We do not believe that individual funding programs, such as bonuses for electric cars, are effective. The negative effects of the traffic light environmental bonus serve as a cautionary example. We also approach the revival of scrappage bonuses with skepticism. We seek regulatory clarity and consistency.
The problem for German automakers: electricity is too expensive
We aim to advance electric mobility by investing in the right infrastructure. This includes roads and bridges, railways, electricity grids, hydrogen and CO2 pipelines, and the expansion of charging and hydrogen refueling infrastructure. It is also crucial to reduce the financial burdens on our companies. The corporate tax burden should be lowered to a level that is internationally competitive. The high tax burden puts German companies at a disadvantage in the global market and constrains their ability to finance the investments necessary for transformation.
Additionally, we need to ensure competitive electricity prices for both production and consumers. Rising grid fees are increasingly becoming a central cost driver. As for charging electricity, we find it sensible to extend the reduction of electricity taxes to the European minimum for private consumers.
“The problem is bigger than VW”: BMW and others are already showing signs of weakness
We also attribute significant importance to reducing dependencies on foreign components and raw materials. Therefore, we need to expand our energy and raw material partnerships. In times of heightened geopolitical uncertainty, it is crucial for Germany and the EU to develop and expand such collaborations to ensure the continuation of domestic production.
Finally, we must strengthen free trade. We advocate for the conclusion of free trade agreements since free and fair market access and the elimination of tariff and non-tariff obstacles are essential for the automotive industry, which has an export rate of over 75 percent. We do not consider measures like tariffs, which could trigger a spiral of protectionism, to be the right approach.
Time is of the essence. Prompt implementation of these steps is vital to prevent other sectors of our automotive industry from contracting the damaging virus that has afflicted VW. Early signs of weakness are already emerging from companies like BMW. If this virus is not swiftly contained, an automotive collapse could ensue—with unimaginable consequences for our economy—the problem is bigger than just VW!
