Question

Which elements of the General Environment are significant to the future of the German luxury car industry?

Answer 1

The major impact on the German automotive industry would be from the political and economic environment. Due to the pandemic and even before that, GDP is on a lower side and unemployment high.

The automotive industry is one of the most important industrial sectors in Germany, and in some regions it is a crucial element of the economic structure. This branch of industry not only drives innovation, growth and employment, but for several decades has also determined the development of transport and people‘s mobility habits. Against the backdrop of globalisation German car manufacturers and suppliers implemented radical changes: production processes and chains were reorganised, which involved relocating manufacturing locations abroad and often went hand in hand with a reduction in employment. As a result of falling tax revenues and job losses, the affected regions are facing economic and social consequences. The difficult financial situation of many states, and above all local authorities, limit their scope to pro-actively influence policy in the regions with impacted plants. This has been compounded by more recent developments, such as the question of the long-term availability of crude oil and years of steadily rising oil prices. They impose a financial burden on both producer and consumer. As road traffic is powered almost exclusively by fossil fuels, motorised transport is a major contributor to anthropogenically induced climate change and, consequently, must contribute to a reduction in greenhouse gas emissions within the framework of a climate policy. The resultant legal requirements have put pressure on the automotive industry to bring more fuel-effi cient cars on the market and consider longerterm strategies of modernisation. Another compelling reason are the rapid global developments, in particular in Asian countries such as China and India as well as in Brazil, Russia and South Africa. Economic growth in these emerging markets is driving urbanisation, and thus also driving an enormously dynamic development of motorised individual transport (MIT). Today, a large proportion of the cars produced by German car manufacturers is sold in these countries. Hence, exports account for a substantial part of these companies‘ sales. Meanwhile, highly effi cient automotive industries are established in these so-called emerging markets themselves. As a result, they can no longer be regarded as long-term export markets.