The third and most important factor is an irreparable loss of consumer confidence. Scandals come and go, but the persistence of negative news reinforces negative views. Consumers have been paying premium prices not, as it turns out, for premium quality, but in support of an illegal cartel. Many customers have been duped by false emissions claims. Consumers’ rational response would be to seek alternatives or to pay less. Either way, high margins cannot be maintained.
All three factors are colluding against the German car industry at a time when it should be in the advanced stages of developing new technologies, like the next generation of electrical engines or driverless cars. But the car industry itself and German car experts tend to be complacent. A study by Germany’s Ifo Institute for Economic Research makes the comforting point that the German car industry holds one-third of the patents for electric engines and for hybrids. But the number of patents is a poor indicator of real innovation. It misjudges the dynamics of a fast-changing market. Companies need different kinds of engineers and scientists to produce an electric, self-driven car than for an emissions-cheating diesel vehicle.
The German government still vigorously defends the interests of the car industry in Brussels, but the politics of the car has changed over the past 15 years. The number of cheated car buyers in Germany now vastly outnumbers the number of auto workers.