For over a century, Germany’s auto industry has been more than a set of factories. It has been a national emblem — engineering precision, export muscle, and economic dominance. Brands like Volkswagen, BMW, and Mercedes‑Benz weren’t just carmakers; they were symbols of industrial excellence. Yet today, that industry finds itself in a rare existential quandary: a retreat back toward the very technologies the world has pledged to phase out.
This is not simply a matter of product mix. It’s a battle over strategy, jobs, exports, environmental credibility, and the future of an entire industrial ecosystem.
Diesel and Combustion Still Foundational — Despite the Buzz Around EVs
The narrative of inevitable electrification has dominated automotive headlines for years. Governments, environmental groups, and tech‑savvy consumers have pushed the view that battery‑electric vehicles (BEVs) are the future. But numbers on the ground in Germany tell a different story.
In 2024 and 2025, demand for purely electric passenger cars in Germany weakened sharply, with private electric vehicle orders falling dramatically — nearly halving in some dealerships — while interest in diesel and gasoline vehicles grew at the same time. One industry survey reported BEV orders down by nearly 47% compared with the previous year, and diesel and gasoline engine orders up by about 24%. (Clean Energy Wire)
Meanwhile, diesel hasn’t disappeared. Though its overall share has declined in recent years, diesel still represents a significant slice of Germany’s new registrations, and petrol cars have even seen market share expand. Analysts noted that, with ICE vehicles accounting for over half of all new registrations in 2024, average CO₂ emissions from new cars actually increased.
In other words: the German market, and thus German manufacturers, have seen a resurgence — or at least a persistence — of combustion engines just as electrification has stalled.
Government Policy Swings and Market Reality
This mismatch between rhetoric and reality didn’t happen by accident.
Berlin’s abrupt cancellation of electric vehicle subsidies at the beginning of 2024 cut the legs out from under domestic demand. Coupled with high vehicle prices, underdeveloped charging infrastructure, and energy cost disadvantages relative to global competitors, a perfect storm undermined the domestic EV market. (CE Interim)
Industry insiders — and even some political leaders — responded by pushing back hard against EU rules designed to phase out fossil‑fuel vehicles. In December 2025, the European Commission softened its planned 2035 ban on new petrol and diesel cars after sustained pressure from Germany and other member states. Rather than a full ban, automakers are now only required to achieve a 90% reduction in CO₂ emissions by 2035, and manufacturers can offset the remaining 10% via green steel, biofuels, or e‑fuels. Plug‑in hybrids, range extenders, and other combustion variants are still permitted. (euronews)
This moment marks a symbolic retreat from electrification dogma — one that the industry itself lobbied for. German officials publicly argued that flexibility was essential to protect jobs and industrial capacity.
Economic Consequences: Jobs, Factories, and Export Vulnerability
The cost of this strategic hedging, however, has been steep.
German carmakers and suppliers have announced tens of thousands of job cuts. Volkswagen alone plans to reduce its German workforce by 35,000 by 2030. Automotive suppliers like Bosch, ZF Friedrichshafen, and others have already revealed dozens of thousands of layoffs and restructuring plans. (Saffarazzi)
Experts attribute these cuts to weak sales, overcapacity, and a failure to pivot quickly to the electric platforms that global markets are increasingly adopting. EV production — which German manufacturers were betting would become the growth engine of their future — has not met projections. Registration data shows that electric cars once counted for a modest share of new vehicles but then fell in market share as consumer interest waned domestically. (CE Interim)
Compounding these pressures, Germany’s traditional strength in diesel and petrol powertrains is eroding abroad too: China’s market for combustion engine vehicles has shrunk rapidly, as that nation — the world’s biggest auto market — shifts toward electrification. In China, conventional ICE vehicles went from dominating registrations to being overtaken by electric and plug‑in hybrids. This trend has had knock‑on effects on German exports and profitability. (Clean Energy Wire)
The fundamental problem is that German factories are expensive to operate — wages, energy costs, and regulatory compliance sit far above those of competitors in Spain, Portugal, China, or the United States. With overcapacity and falling demand in key segments, the already thin margins disappear, prompting difficult decisions about workforce and plant closures. (CE Interim)
Environmental and Strategic Ironies
From a climate perspective, the consequences of this retreat are stark.
Transport remains one of Germany’s largest sources of greenhouse gas emissions, and studies have shown that older diesel vehicles contribute disproportionately to air pollution and related health risks. Removing older diesel cars from the fleet could cut emissions and save lives — but backing away from electrification slows that progress significantly. (theicct.org)
For many analysts, the German strategy reflects short‑term industrial defensiveness more than long‑term environmental leadership. If Germany continues to hedge its bets on diesel and hybrid technologies while global competitors fully embrace electric powertrains, the country could lose market share irreversibly. China’s electric vehicle champions are already far ahead in terms of production volume and cost competitiveness in key segments. (CE Interim)
What Industry Leaders Are Saying
Voices from within the automotive world underscore the tension.
Some executives argue that flexibility is necessary; others warn that clinging to combustion technology will undermine global competitiveness. In internal discussions, leaders have variously called diesel “absolutely clean” with modern filtering — signaling defensive positioning — and insisted that BEV momentum is real but uneven. (Industry commenters have reflected both of these perspectives, albeit without formal citations in public statements.) (Reddit)
Political figures, too, have entered the fray. German leaders have lobbied Brussels to keep hybrid and combustion engine options on the table, framing flexibility as necessary for economic stability. But critics — environmentalists and climate scientists alike — argue that this appeasement sends confusing market signals that actually slow down innovation and electrification momentum.
Looking Ahead: A Country Between Two Automotive Futures
Germany now stands at a crossroads: continue propping up the old combustion‑engine order and risk being outpaced globally, or accelerate toward electrification and face painful domestic industrial transformation.
Either path has consequences:
Keeping ICE alive may preserve jobs in the short term but weakens Germany’s position in the most dynamic segments of global auto markets.
Pushing fully toward electrification threatens thousands of traditional jobs and requires massive investment in new technologies, supply chains, and infrastructure.
What’s clear is that neither diesel nor petrol can sustain Germany’s automotive empire at its historical level. The world is shifting toward electrification, and participating halfway risks falling behind both technologically and economically.
In this context, Germany’s carmakers — and the policymakers who influence them — must decide whether to lead a radical transformation or anchor themselves to familiar engines that history is fast leaving behind. The stakes are nothing less than the future of one of the world’s most storied industrial sectors.
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