Is "Technological Neutrality" Causing the Decline of German Industry? The "Inability to Decide" Disease of the Automotive Giant Defeated by Chinese EVs

"The technology that will become the winner of the future should be decided by the market, not politics."

At first glance, this idea sounds rational and fair.

Electric vehicles, hybrid cars, fuel cell vehicles, and internal combustion engines using synthetic fuels. Instead of the government choosing one, all possibilities are left open, leaving it to corporate innovation and consumer choice. This policy philosophy has been called "technological neutrality" or "technological openness" in Germany.

However, Martin Gornig, who researches industrial policy at the German Institute for Economic Research, warned that these appealing words are actually weakening the competitiveness of German industry.

Leaving all options open does not necessarily mean a cautious and wise policy.

In reality, there are limits to research and development costs, engineers, manufacturing facilities, electricity, raw materials, factory sites, charging networks, and sales networks. If resources are dispersed in multiple directions, it may not be possible to invest on a sufficient scale in any field, potentially failing to cultivate technologies that can win in the global market.

Gornig's issue is not a simple "EV promotion theory."

More fundamentally, it is a question of whether the state and companies can decide what to prioritize and what to give up during a major industrial transformation.

The Rules of Automotive Competition Changed by China

For many years, German cars have held a special position in the Chinese market.

Brands like Volkswagen, BMW, Mercedes-Benz, and Audi were highly regarded as symbols of quality, durability, safety, driving performance, and social status.

Even though they were expensive, German cars were chosen because they were more complete than products from Chinese manufacturers, and owning one was a proof of wealth.

However, with electrification and digitalization, the criteria for evaluating cars have changed significantly.

In the current Chinese market, not only the smoothness of the engine and stability at high speeds are important, but also battery performance, charging speed, driver assistance, in-car software, voice operation, smartphone integration, and digital experiences like videos and games are emphasized.

The speed at which new models are introduced and the frequency of software updates are also much faster than traditional European manufacturers.

Chinese manufacturers do not treat EVs as merely "cars with engines replaced by motors."

They design cars as digital products integrating batteries, semiconductors, artificial intelligence, communication, energy management, and entertainment services.

In this competition, the engine and transmission technologies accumulated in the 20th century alone cannot maintain superiority.

While German companies are exploring the next direction while protecting their past strengths, Chinese companies have created new evaluation criteria themselves.

Gornig poses the harsh question: "Aren't Chinese consumers beginning to wonder why they should buy more expensive German cars instead of domestic products?"

Brand power is not an asset that remains forever even if product superiority is lost.

If there is no performance or experience to justify the price difference, past fame will quickly fade.

"Researching Everything" and "Winning in Everything" Are Different

Those who support technological neutrality argue that no one can accurately predict the future.

This claim itself is correct.

Technologies that currently seem promising may hit a dead end due to resource constraints, price, safety, consumer behavior, or international situations. Conversely, technologies that are currently costly may rapidly spread due to sudden innovations.

Therefore, leaving diverse options open in basic research and early demonstration stages is highly meaningful.

However, the diversity of research and the priorities of industrial policy are not the same.

At the commercialization stage, large factories must be built, supply networks established, engineers trained, and nationwide infrastructure deployed.

Providing the same scale of support for all technologies is financially and temporally impossible.

For example, if you try to nurture EVs, synthetic fuels, hydrogen, and plug-in hybrids as main technologies for passenger cars simultaneously, funds will be dispersed into charging facilities, hydrogen supply networks, synthetic fuel manufacturing facilities, vehicle development, and human resource education.

Companies, too, will be uncertain about what the core technology of the future will be, leading them to repeatedly make small new investments while extending the life of existing factories.

Meanwhile, if competitors make huge investments in one direction, they will gain a significant advantage through cost reductions from mass production and learning effects from accumulated manufacturing experience.

While the German side is discussing "not completely abandoning any path," the Chinese side has created a huge market for EVs and batteries, allowing related companies to grow.

Leaving options open is not cautiousness but an excuse to postpone decisions.

This is the problem with technological neutrality that Gornig criticizes.

Is It the Freedom of Technology Being Protected, or the Interests of Existing Companies?

The term "technological neutrality" also has another political function.

For existing industries, rapid technological transformation involves significant pain.

The automotive industry centered on internal combustion engines has a huge supply network formed over many years, including engines, fuel injection, exhaust treatment, transmissions, lubrication, and cooling.

Many parts become unnecessary with EVs, and for some companies, their main business may shrink or disappear altogether.

Therefore, policies that keep internal combustion engines, synthetic fuels, and hybrids for the future are convenient for maintaining existing facilities, employment, patents, and trade relations.

Of course, you cannot abruptly stop an industry while ignoring employment and the regional economy.

The problem is whether policies to secure a transition period are transforming into policies that prolong old structures for a long time.

When new technologies threaten existing ones, companies often appeal for "freedom of choice."

However, in reality, they may be using the term technological diversity to delay full investment in new technologies and protect the value of existing assets.

Gornig sees technological neutrality as playing a role in protecting vested interests related to old technologies rather than promoting the emergence of new technologies.

The criticism is not because the German automotive industry lacked technological capability.

It is a criticism of the inability to decide the direction of transformation despite having world-class talent, capital, brand, research facilities, and sales networks.

Cannot Win by Directly Competing with China in Mass Production

Gornig does not believe that Europe should compete with China in exactly the same way.

China has built large-scale production capabilities for EVs and batteries against the backdrop of a huge domestic market, a wide-ranging parts supply network, industrial support from the government and local authorities, short product cycles, and intense price competition.

Even if Europe now enters the same low-cost mass production competition aiming to "produce cheaper and more than China," it will not be easy to catch up.

The proposed strategy is to focus on specialized "niches."

Here, niche does not mean retreating into a small market.

It means targeting areas that are less likely to become simple price competitions, such as advanced technology, customer-specific design, safety, durability, regulatory compliance, and system integration.

An example given is robots working on construction sites.

Industrial robots in factories repeat the same actions in relatively controlled environments.

On the other hand, construction sites have different terrains, weather, materials, personnel, and work processes each time. Machines operating there require advanced image recognition, control, safety design, durability, and adaptability to each site.

In such areas, Germany can combine its long-accumulated strengths in precision machinery, sensors, control engineering, industrial software, safety standards, and vocational education.

Medical devices, industrial AI, special materials, power control, resource recycling, manufacturing equipment, and research instruments are similar.

Instead of dominating the global market with low-priced products, create products that are evaluated as "difficult to substitute for that use."

Germany has many medium-sized and small enterprises that hold high global shares in specific industrial fields, even if they are not known to general consumers.

Gornig's proposal can be seen as reconstructing this traditional strength to fit the era of robots, AI, electrification, and decarbonization technologies.

Will Tariffs on Chinese-Made EVs Save German Companies?

Tariffs on Chinese-made EVs have become a major point of contention in Europe.

Those who support tariffs argue that since Chinese companies benefit from government subsidies, low-interest loans, favorable land and electricity, and a huge domestic market, competition with European companies is not fair.

If low-priced imports take over the market before European companies can build a new industrial base, the production capacity within the region itself will be lost.

Once factories, skills, personnel, and research and development bases are lost, rebuilding them later is difficult. From the perspective of security and supply networks, certain defensive measures are necessary.

On the other hand, Gornig emphasizes the danger that broad and permanent tariffs could delay reforms in German companies.

If tariffs raise the prices of competitors, European manufacturers can maintain a certain market without significantly improving their products.

Consumers will end up buying overpriced cars, and companies will be less pressured to reduce costs, improve software, and shorten development times.

German car manufacturers produce and sell in the Chinese market and are deeply involved in joint ventures and parts procurement with Chinese companies.

If tariff battles intensify, German companies themselves could suffer significant losses due to Chinese retaliation.

The German Automobile Industry Association has also shown a cautious stance on additional tariffs on Chinese-made EVs.

The reason is not just the principle of free trade. The reality is that Chinese business supports employment and research and development in Germany and generates investment funds for electrification.

However, Gornig is not saying that unfair subsidies and market domination should be left unchecked.

If unfair practices are confirmed, there is room to take targeted, time-limited measures.

The important thing is not to replace industrial reform with tariffs.

If tariffs are introduced to create a grace period, it must be clear what will be improved during that time.

Where to invest in batteries, software, charging performance, production costs, parts supply, and resource recycling. Can companies compete independently after the protective measures end?

Protection without purpose and exit does not stop decline but only delays it.

Voices on Social Media Highlight "Defeat Was Predicted Years Ago"

When the automotive industry is discussed on German-speaking social media and forums, a prominent reaction is that "this failure did not happen suddenly."

The spread of EVs, the growth of Chinese manufacturers, and the importance of software have been pointed out for years.

Nevertheless, there is criticism that German politics and companies could not break away from the success experience of internal combustion engines and postponed a full-fledged transformation.

In such posts, the term "technological neutrality" is often used with irony.

It is perceived not as a word to broaden future options but as a political expression to prolong existing engine-related businesses.

News that German cars are struggling in the Chinese market also receives opinions that it is natural to choose Chinese or Korean cars when comparing prices and functions.

The era of accepting a large price difference based solely on brand name is over.

Particularly criticized are in-car software, operation screens, voice functions, charging speed, standard equipment, and pricing.

While German cars are evaluated for driving performance and interior quality, there are voices that say they are not worth the price in terms of overall product strength, including digital aspects.

Complaints include "Despite being expensive, they lag behind competitors in digital functions" and "If you claim to be a luxury car, you should at least lead in technology."

These reactions align with Gornig's awareness of the issue: "Aren't Chinese consumers beginning to wonder why they should buy more expensive German cars?"

Counterargument: "Overestimating Chinese Cars and Underestimating German Cars"

However, the discussions on social media are not unified in one direction.

There is also a counterargument that pessimism about the German automotive industry is exaggerated.

Even if Chinese manufacturers have an advantage in batteries and price, German companies still have strengths in safety design, body technology, stability at high speeds, durability, quality control, after-sales service, and brand trust.

Furthermore, in the Chinese market, overproduction and fierce price-cutting competition are progressing, and not all EV manufacturers may survive in the long term.

Selling at low prices and in large quantities does not necessarily mean sustainable profitability or absolute technological superiority.

From this standpoint, the expression "German cars are already inferior to Chinese cars" is considered rough.

German manufacturers are also investing in new-generation EVs, batteries, and software, and it is argued that current sales slumps should not be used to definitively predict future defeat.

In fact, while there is an evaluation that German manufacturers were delayed in EV development, there are also surveys and evaluations in recent years that show they are catching up technologically.

The issue is not that technological capability has been completely lost, but whether they can correct the speed of commercialization, pricing, and the gap with consumer expectations.

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