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THE LIFEBLOOD OF THE GERMAN ECONOMY

Around 10 years ago, Chancellor Angela Merkel made waves for claiming that one in seven Germans is either ”directly or indirectly” linked to the automotive sector. 
While there may be more than a touch of exaggeration in her remark, the German automotive industry is an international powerhouse. Not only does the industry account for over 25 per cent of Europe’s total sales of passenger cars, they export approximately 3.5 of the 4.6 million cars manufactured each year.

Germany’s automobile sector is home to some of the world’s biggest and best-known names, from Volkswagen to high-end manufacturers like BMW and Daimler/Mercedes-Benz. But it also includes some of the world’s leading parts suppliers – namely original equipment manufacturers, such as Bosch and Continental, as well as a myriad of small and medium- sized enterprises along the value chain. These are the so-called ‘hidden champions’ of the German economy.


According to the latest research issued by the economic development agency, Germany Trade & Invest, the auto sector listed a turnover of EUR 435.3 billion – around 20 per cent of Germany’s total industry re- venue. Indeed, this global market leader constitutes the very backbone of the German economy.

Yet, the industry is driving not only wealth, but also urbanization, increased rates of car pollution, and congestion. The challenges are piling up for the auto- motive industry, and there is a great need to address them through technological solutions. Electric mobility is far cleaner than oil and gas; car sharing promises to decrease the number of vehicles in use worldwide; and autonomous driving will help to boost the capacity of streets – whether in urban centres or highways.

Since the southern regions of Baden-Württemberg and Bavaria are leaders in high tech and mechanical engineering, investment into research and innovation is greater here than any other part of Germany*. To that end, the federal government al- locates a quarter billion euros annually to research and development that’s aimed at transforming the industry to e-mobility (Germany Trade & Invest). Much of the work is being done in battery technology and recycling.

Driving Innovation

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 * Source: https://www.fdiintelligence.com/article/75469
The automotive industry is undergoing a period of radical transformation – from the development of electric vehicles, alternative fuels, growing urbanization, and the rise of car sharing to meeting the needs and preferences of younger generations. All the while, the global demand for mobility is increasing.

The United Nations anticipates that the world population will increase from 7.8 to 9.7 billion by 2050. Urbanization is expected to reach 68 per cent by 2050, versus 55 per cent today. And the number of people who can afford a personal vehicle is ever-increasing. As a result, the global fleet of light vehicles is expected to grow from 1.2 to 1.6 billion by 2040.
 
Of course, urban growth is tied to the three dimensions of sustainable development, namely: economic, social, and environmental. Well-managed urbanisation, informed by an understanding of population trends over the long run, can help to maximize the benefits of agglomeration while minimizing environ- mental degradation and other potential adverse im- pacts of a growing number of city dwellers.

’Hidden champions’ is a term coined by Hermann Simon to refer to companies that are among the top three in the world market, but have a sales volume of less than five billion euros, and are little known to the general public text.