Germany’s car industry has lost 51,000 jobs in the last year. VW cut 35,000, ThyssenKrupp 11,000, and Bosch nearly 6,000. What’s causing the collapse in German industry? 

Crushed By Energy Prices

German manufacturers are cutting capacity because building things in Germany has become too expensive. One of the biggest culprits is energy costs. 

German businesses pay an average of 28.5 cents per kilowatt hour for electricity. That’s almost double the 14.8 cents that American businesses pay, and nearly triple costs in China. 

Germany’s electricity market is heavily regulated to promote clean energy. Electricity is also taxed heavily.

High energy costs means it makes more sense to expand in the U.S. or China, where prices are lower. 

Falling Behind Technologically

But it’s not just high costs that are killing German business. Many German companies have fallen behind technologically and are losing market share.

For years, Germany’s car makers counted on ballooning sales to China. But Chinese auto makers have been faster to transition to EVs, which has reduced sales for the Germans. 

As Germany loses market share in older industries like autos, it’s failing to gain a piece of new industries.

Companies like Nvidia and TSMC are making a fortune building out AI infrastructure. But without many tech companies of its own, Germany is left standing on the sidelines. 

Trade War Pain

As Germany falls behind domestic competitors in China, it’s facing greater difficulty selling to one of its closest friends: the United States.

Trump’s trade war has hit German industry hard. German exports to the United States have fallen to a four-year low since the imposition of new tariffs in April. 

Imagine you run a German car maker. If you produce a car in Germany, you’ll pay high electricity rates and hefty US tariffs. If you make them in Texas, you’ll pay half as much for electricity and no tariffs.

Which would you choose? 

Wrap-Up

German industry is being strangled by regulation, high energy costs, and aging technology. Unless the German government makes it easier to build energy infrastructure, job losses in Germany will only accelerate. 

If we want to avoid the same fate, we must build energy infrastructure. 

We need to pop up solar, natural gas, wind, and geothermal plants all over America. We should also invest in new forms of energy, like small nuclear reactors and nuclear fusion. 

If we can win on energy, our industries will dominate. But if we fall behind, our country will begin to look more and more like Germany.

More on tech: 

Janesville — Or Why AI Will Be a Disaster for Jobs

The End of Human Drivers: 7 Million Jobs at Risk

The Iron Monster: China’s Massive Bridge Building Robot

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