An Auto Industry at Its Limits

New companies from the U.S. and Asia are more technologically advanced than traditional German companies. These latter have to work much harder now.

In the old industrial world, German carmakers were at the pinnacle of achievement. But that was, after all, the old world. The new one holds a bitter realization for self-confident German car people, namely that they are reaching the limits of their abilities. This can be seen with software, for example, the most sophisticated application of which is the self-driving car. First, the Germans failed to realize that it represented a lucrative potential business. Then they didn’t want to accept that competitors could take over. At the next stage, German companies failed to join forces with each other. Then Volkswagen’s solo attempt, Cariad, demonstrated how difficult it is for giant corporations with deep traditions to restructure themselves at such a fundamental level.

And the next mistake is pinning all hopes on those who are trying to capacitate these companies quickly and at great expense. The goal to control auto software and interconnectivity is a good one. But the learning curve will get steeper. Young companies in the U.S. and Asia do not have to travel this path; they are starting from where traditional German car manufacturers need to get to.