China's Growing Influence in Europe Impairs Germans' Economic Dominance
In the rapidly evolving world of industry, Germany, once a powerhouse in sectors like automotive, machinery, and chemistry, is facing a significant decline in market share. This trend is evident in Europe, the U.S., and Asia, where the traditional automobile industry has struggled to keep pace with central future trends.
European countries have benefited from China's setbacks in the U.S. market, but Germany has not shared in this success. Instead, German automotive manufacturers have lost ground in China, a market they previously dominated. In the past two years, their demand and positive image have waned, with market share falling below 20 percent for the first time in decades.
The delayed strategic shift towards alternative drives and a lack of dynamism in areas such as connected vehicles and software solutions have been significant factors in this loss of market share. Meanwhile, U.S. and Asian providers have shown more agility in these areas.
The U.S. is imposing new tariffs of an average of 15 percent on almost all European imports, making the most important export market for many German industries more difficult to access. At the same time, Europe is dismantling trade barriers, potentially opening up opportunities in the large U.S. market.
China, on the other hand, has continuously expanded its global market share, particularly in Europe. Its strategically oriented industrial and trade policy agenda has allowed it to gain ground in the European market, while Germany has lost share.
Claus Michelsen, chief economist of the Association of Research-Based Pharmaceutical Companies (VFA), has emphasised the need for Germany to increase its dynamism in investments, innovations, and new business models to keep up with international competition. He advocates for an industrial policy agenda focused on renewal and speed in products, production technologies, companies, and workforce.
Qualification and flexibility between sectors are crucial in addressing the skills shortage, according to Michelsen. He also suggests that if the internal market is played as a strength, U.S. trade policy loses its scare factor. However, Europe's internal market is too fragmented in national and regional regulations, which hinders its competitiveness.
The VFA's analysis shows that China is gaining market share in European sales while Germany is losing it. High production costs, dependencies on international supply chains, and low flexibility in digital business models are contributing factors to this loss of market share for the automotive industries.
Michelsen stresses that Europe is not playing to its strengths, and the common European market, with its significantly larger volume than the U.S. market, could be a key advantage if it were more unified and less fragmented. Addressing these challenges will be crucial for Germany to maintain its competitive edge in the global market.
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