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Germany is bracing for a major electric vehicle shock

Volkswagen and the German car industry are retooling for a future without combustion engines. But thousands of smaller car-part makers fear for their future
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When Dirk Kosbad started working at the Volkswagen plant in Zwickau in 1990, his job was to assemble the Trabant, East Germany’s signature car, by hand. Now, over 30 years later, he works in the same factory as a shift supervisor: watching over orange robots gliding swiftly around a silver car frame, shooting tiny bolts of lighting here and there, welding together the various parts that will soon enclose a large rectangular battery. Zwickau is the nucleus for Volkswagen’s shift to electric mobility.

After over a century of unrivalled power, the internal combustion engine has had its day. The list of countries planning bans on the sale of combustion-engine cars is growing: Norway’s phase-out is scheduled for 2025, followed by the UK in 2030, and the European Union’s 27 member states in 2035. Europe’s mighty automotive industry, and its 3.7 million manufacturing jobs, finds itself in the middle of a perfect storm. Digitisation, automation and the public’s awakening to the severity of the climate crisis herald nothing short of a revolution. Some people see this as an opportunity. Others, fearing the worst, have started talking of Europe’s car manufacturing heartlands turning into a constellation of mini Detroits.

In recent years car manufacturers have been forced to invest billions of euros in the development of greener machines. In Zwickau, the transition has already happened. Starting in 2019, Volkswagen retrained its 8,500 employees on site and remodelled the entire production line to exclusively build electric cars. “In the beginning we were pretty scared,” says Kosbad, 57. “No one could have imagined that it would be a success story. Everyone here was sceptical.” But Volkswagen’s gambit appears to have paid off: demand for electric vehicles has soared, with new car registrations in Germany almost doubling from 2018 to 2019 and more than tripling from 2019 to 2020. While the 365,000 electric cars registered are just a tiny sliver of Germany’s overall 48 million, the growth is exponential: the number of electric vehicle registrations in the first four months of 2021 was three times the entire 2020 amount. Volkswagen, which is Germany’s largest carmaker, is now only second behind Tesla in global electric vehicles sales. Now, initial scepticism among the employees in Zwickau has given way to cautious optimism, Kosbad says. Those who previously assembled exhaust systems are laying cables for the battery engines; some retrained as high voltage technicians. You need fewer workers to make an electric car, but Volkswagen solved this problem by increasing its output – hence selling more than ever and laying off no one, at least for now.

But not everyone has Volkswagen’s billions. The backbone of Europe’s car industry is made up by about 10,000 small and medium-sized part suppliers – 1,200 of them in Germany alone. These companies make components like fuel tanks, gearboxes or exhaust systems, and collectively employ 1.7 million people across the EU27, compared to the big car brands’ 1.2 million, according to data by CLEPA, a car supplier trade association. Their entire product portfolio is doomed to become obsolete in an electrified future, but most of them don’t have the funds to reinvent their business overnight – which means that thousands of jobs are at risk.

Cars are Germany’s most important export, with sales totalling around €300 billion annually. Almost five per cent of all domestic jobs are directly linked to the automotive industry. “We have just under a million employees in the car industry in Germany. We assume that around 200,000 of them are acutely endangered, most of them from automotive suppliers,” says Wolfgang Lemb, chairman of IG Metall, Germany’s largest trade union. A recent report by the Boston Consulting Group predicted that a staggering 42 per cent of jobs will be lost in “internal combustion engine-focussed suppliers” across Europe between now and 2030 – that, according the firm’s calculations, will result in 280,000 people out of work.

In the face of this challenge, even big players are struggling to outmanoeuvre industrial oblivion. Last year, the board of one of the world’s largest automotive suppliers, ZF Friedrichshafen, which specialises in drive technologies, shocked its workers by announcing that up to 15,000 jobs would have to be cut. Half of the company’s business was reliant on combustion engines, and the swift transition to electric compounded by the slump in sales during the pandemic boded ill for car-part makers. To survive the crisis, ZF created its own retraining facility for 30,000 employees and acquired several smaller companies, broadening its portfolio to include autonomous driving and wind energy. A spokesperson says that owing to those measures, ZF managed to cut its reliance on combustion engines down to 27 per cent. Although 6,000 workers have left the company since the 2020 announcement – many of them accepting early retirement offers – and more cuts might follow, the spokesperson says that ZF is now in a better position than it was just a few years ago.

Other companies seem to be waiting for the inevitable. Take Selzer, a manufacturer of metal parts. The former family-run business – nestled in Germany’s hilly rural west, a 90-minute drive from Frankfurt – has been producing components for motors, brakes and gearboxes for almost 100 years. For 41 of those years, Sybille Brandenburger has been part of that story. She started in the pressroom, punching, bending and assembling metal components for gearboxes when she was 16. Now 57, she’s been shop chairwoman for 25 years. More than 80 per cent of Selzer’s business is directly dependent on combustion engine manufacturing, and the transition to electric has hit the business severely. Since 2018, more than half of the workforce has been made redundant due to drops in turnover. In 2020, the company stopped all its apprenticeships, effectively deciding against investing in its future. Brandenburger says she’s never experienced anything like it in her four decades in the business. “People tell me they can’t cope with the situation,” she says. “Some have had their second or third child or just bought a house, some are too old to start afresh. We’re all afraid that one morning we arrive at work and the gates are shut.”

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Many small and medium-sized companies across Europe are similarly unprepared. An IG Metall survey of 2,000 European businesses, employing over 1.7 million people, found that almost half had no or no sufficient strategy to face down the challenge. Lemb partly blames major car brands for the crisis: he says that throughout the last 20 years, car manufacturers strong-armed smaller companies into repeatedly lowering their prices, thus depriving them of precious resources and stifling any potential for upgrading.

According to Judith Kirton-Darling, deputy general secretary of IndustriAll Europe, a European trade union federation, the EU’s proposal to ban the sale of internal combustion engines by 2035 has to be accompanied by a policy framework that rises to the enormous task ahead. The shift, she says, is too big for companies to navigate alone. “This is the biggest industrial revolution in more than a century. It is a colossal economic change, which is coming,” Kirton-Darling says. She likens the impending crisis to the decline of northern England’s heavy industry and Detroit’s car industry. And if the situation is not managed properly then the continent might soon face its very own Brexit or Trump-esque shocks. “When there’s a lot of structural change, you create a lot of uncertainty for people. And there are political consequences of that because there are those who are waiting to exploit social anxiety.”

In Germany, the notorious Mittelstand – the country’s bedrock of successful small and medium-sized businesses – is often described as the heart of its prosperity, and rightly so. It makes up the lion’s share of the German economy and accounts for more than half of all domestic employment. Right now, many of these companies, like Selzer, are flailing, as despondent employees fret about whether their paymaster will make it through the decade. Many Selzer workers are already looking elsewhere, but Brandenburger says she’s not willing to give up hope just yet. “Sometimes I find myself counting the years until I can retire, wishing I wouldn’t have to go through this,” she says. “But then I stop myself. This is my lifetime. It’s precious and I’m not going to wish one day away.”

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This article was originally published by WIRED UK