VDA President Hildegard Müller calls for paradigm shift: reforms instead of regulation and more strategic foresight for successful transformation

VDA President Hildegard Müller called for a paradigm shift from politicians at the association's annual press conference: "We have to generate confidence through strategic foresight. The principle of crisis and the associated constant self-entertainment must end. What is needed now is reforms instead of regulations – and less micromanagement."

Overcome crisis mode through strategic sovereignty

Due to the constant crisis mode of the last few years, politics is moving too much into defensive and reactive behavior - and thus reveals two glaring deficiencies: "The traffic light coalition does not manage to develop self-determined and forward-looking ability to act. It is even less successful in conveying the impression of having a strategy and a clear goal. Overregulation and bureaucracy paralyze growth and innovation. This leads to an increasing loss of trust – among industry and the population," Müller analyzed.

"The motto must be 'act instead of react': have the courage to reform – towards a strategy that provides orientation and puts the focus back on the core tasks. This includes, above all, making the location internationally competitive again, concluding trade and raw material agreements as well as energy partnerships, reducing red tape and generating innovative strength through technological openness. Developments must be measured and evaluated regularly in order to make adjustments if necessary to ensure that goals are achieved. Politics must act again and anticipate challenges in advance: act proactively instead of reacting retrospectively. This is the only way we can manage strength and resources and develop resilience against crises," Müller emphasized.

Location becomes weak point of successful transformation

"I want this country to become the engine of Europe again, and for us to develop and export the innovations and technologies that enable climate-neutral growth worldwide. The problem: What is central to this has become our greatest weakness. A competitive, attractive, globally favored location is the basis for growth and prosperity. In the past year we have not made any significant progress in many important areas like competitive energy prices, competitive tax system, reducing bureaucracy. Raw material and energy partnerships have hardly been concluded, and free trade agreements are making virtually no progress," Müller said.

The development is all the more dramatic in view of the upcoming election year: "If Germany loses, Europe continues to lose its economic power and attractiveness. Then we will also lose relevance - in a world in which Europe and its economic power are required more than ever to shape and advocate our values," Müller warned.

Latitude for business ensures creative scope for politics

That’s why Müller calls for a paradigm shift: "Reforms instead of regulation. Pragmatism instead of micromanagement. Regulation has a slowing effect when not only goals but also the instruments are set politically. I am convinced that latitude for the economy creates and secures the basis for actually realizing ambitious goals. This is how we can master the transformation and at the same time remain a leading economic nation. We need a modern mix of market-oriented economic policy and creative industrial policy - especially with a view to international developments. Subsidies may be necessary as supporting measures to promote future technologies or to strengthen resilience - keywords include semiconductors or battery factories. At the same time, combating symptoms instead of long-term strategic elimination of the causes of lacking competitiveness is no long-term transformation strategy."

Data and artificial intelligence as central fields of action

With regard to the European Data and AI Act, Müller warns: "If we stick with this mentality and type of politics, we will leave the field to others. We have huge potential here: our manufacturers and suppliers have all the prerequisites to set standards and benchmarks worldwide. Here too, it is crucial to find the right balance between necessary regulation and leveraging opportunities."

"That's why, firstly, we have to use and expand on our strengths: good qualifications - especially in companies, a highly developed industrial landscape, our high level of international experience and networking. This is a good basis for innovations in this area. Secondly, it must be ensured that inefficient or missing digital infrastructure does not become a limiting factor for our progress in this area. And thirdly, we must have the courage to make development and experimentation possible. Regulation is only the second step. It shouldn’t be in the first place," says Müller.

Success stories for confidence and hands-on optimism

Particularly in times of uncertainty, confidence is needed: "We are successful and a global leader – be it in automated driving or in the circular economy – and we don’t talk about it enough. We are capable of innovating: It's not for nothing that our companies are at the forefront internationally when it comes to patent applications for future technologies. Success stories are so important for the mood in our country - and motivate people to get started. Because the success of this massive transformation requires every single one of us."

Müller further explains: "German cars, commercial vehicles and suppliers enjoy a high reputation worldwide. Our brands stand for tradition and innovative technological leadership. The German car companies as well as the automotive medium-sized companies stand for pioneering spirit, quality, outstanding brands and decades of experience and success. We will do everything we can to ensure that it stays that way and are making huge investments to achieve this. Our guiding principle is to actively advance the path to climate neutrality. We accept our responsibility for the success of the transformation. From 2024 to 2028, manufacturers and suppliers to the German automotive industry will invest around 280 billion in research and development worldwide. The focus is on transformation, especially electromobility including battery technology, autonomous driving and digitalization. This means that our manufacturers and suppliers are investing an estimated 56 billion euros worldwide in research and development during this period - thus continuing to increase their R&D spending."

"The innovative strength of our companies is our recipe for success: We seize the opportunity to further develop our tradition - and at the same time to be pioneers with the aim of shaping things in the long term. As the automotive industry, we will act with our strengths - and want to use the strengths of our country and our continent. Because we want to continue writing the success story in this country. That’s why we never tire of promoting more competitiveness," Müller continued.

Show responsibility and attitude

With a view to increasing populism and extremism in Germany, Müller warns: "We all – and by that I explicitly mean the economy – must stand up for our values, for our democracy and take responsibility.

The leverage is at our disposal: around 780,000 people are employed in companies in the German automotive industry alone. And not only in our companies, but also beyond, we have to encourage people to take a clear position. The economy must be a role model."

Forecasts for 2024 on market, production and export

As part of the press conference, VDA chief economist Dr. Manuel Kallweit also announced the most important forecasts for 2024: "For the German market, we expect a decline of 1% to a further 2.8mn units in 2024. This is around a quarter less than in the pre-crisis year 2019. We are assuming lower sales of electric cars (minus 9% to 635,000 units). While sales of plug-in hybrids (PHEV) are expected to increase by 5% to 185,000 units, we expect a decline of 14% to 451,000 units for purely battery-electric vehicles (BEV).

The markets in Europe (U27, EFTA & UK; +4%) and the USA (+2%) are expected to grow slightly faster than the Chinese market (+1%) in 2024 due to the weak previous year's level. We expect a moderate increase of 2% for the global passenger car market. This means that the level of 2019 would almost be reached again.

The VDA expects domestic passenger car production to move sideways this year (±0%; 4.1mn units). The reason is, among other things, the overall economic weakness. We expect positive developments in the domestic production of electric cars. This is likely to rise further in 2024. We expect a significant increase of 19% (BEV: +25%, PHEV: ±0%). Foreign production by German group brands is expected to increase by 4% with the production of 10.6mn cars.

With regard to exports, we expect a slight increase of 1% to a good 3.1mn units in 2024. This corresponds to an export quota of 76%. For heavy commercial vehicles, we assume a decline of 10% for Europe (U27, EFTA & UK) and 5% for the USA. In China, we expect growth of 8%.
The economy in the trailer and body industry was already in reverse gear in 2023. Figures for both total trailers (-13%) and heavy semi-trailers >6t (-18%) fell significantly. This trend is likely to continue in 2024, albeit with somewhat less momentum."
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