In Germany, one thing became increasingly clear: efficiency may be debated in the boardroom, but the pace of change is ultimately determined by the society beyond it. Once the transformation of the automotive industry begins to affect jobs, cities, and voters, it is no longer a matter for companies alone.
Governments Under Growing Pressure
If you speak only with business leaders across Europe, it is easy to reach one conclusion: Europe's industrial community wants greater openness. It wants deeper engagement with China and faster access to Chinese technology, supply chains, and talent.
If, instead, you look to Brussels and follow the direction of EU policymaking, you may arrive at almost the opposite conclusion. Europe appears to be strengthening its trade defenses, tightening investment screening, expanding data regulation, and reinforcing supply-chain security—while increasingly defining China as a systemic competitor.
Both conclusions are true.
The difference is that companies pursue efficiency. Governments must manage the social consequences of efficiency.
Seen from this perspective, the European Union's anti-subsidy investigation into Chinese electric vehicles, higher import tariffs, stricter scrutiny of foreign subsidies, and stronger localization requirements are about far more than trade.
They also reflect Europe's response to concerns over industrial sovereignty, employment, and public sentiment.
European policymakers are not simply worried about rising sales of Chinese vehicles. They are also asking whether Europe could develop new strategic dependencies in batteries, software, electronics, photovoltaics, and other green technologies. They worry about the erosion of critical industries, about whether Chinese companies—supported by advantages in cost structures, capital, and industrial policy—may outcompete local firms under conditions that Europeans perceive as unequal, and about whether voters will ultimately blame globalization for job losses and rising economic insecurity.
European governments therefore face a delicate balancing act among three competing priorities.
Industry needs to remain competitive.
Society demands stability.
And governments must preserve control over strategically important capabilities.
These objectives do not always point in the same direction.
Businesses want to reduce costs by integrating Chinese supply chains, while local governments seek to preserve domestic factories. Consumers welcome more competitive products, while labor unions fight to protect employment and labor standards. Europe needs Chinese investment, yet it is equally concerned about becoming dependent on China in strategically important industries.
At the heart of Europe's policy dilemma lies a fundamental reality: industrial efficiency and social stability cannot both be maximized through the same set of policies.
This tension is not the result of inconsistency. It is the inevitable outcome of multiple legitimate interests pulling in different directions.
Industrial policy has never been solely about industry.
It is also employment policy, regional development policy, and, ultimately, social stability policy.
Volkswagen: The Difficult Politics of Transformation
The largest restructuring discussion in Volkswagen's history has become a microcosm of nearly every contradiction confronting Germany's automotive industry today.
The proposals under public discussion could affect as many as 100,000 positions and trigger a fundamental reassessment of the long-term future of plants in Hanover, Emden, Zwickau, and Audi's Neckarsulm facility. Proposals to close four factories have met fierce resistance from labor representatives and other stakeholders and have not been formally adopted. Yet the underlying questions—how to adjust production capacity, product portfolios, and employment—have by no means disappeared.
The pressures facing Volkswagen are difficult to ignore.
Manufacturing costs in Germany remain high. Some factories are operating below optimal capacity. The Group continues to manage a highly complex portfolio of brands and vehicle platforms. Returns on electrification investments are under pressure, while competition has intensified in both China and global markets. Without reducing fixed costs, it becomes increasingly difficult to sustain investment in software, electrification, and the next generation of products.
From management's perspective, workforce reductions, organizational consolidation, and factory restructuring are part of ensuring the company's long-term viability.
But an automotive plant in Germany has never been just a factory.
It supports an entire regional ecosystem—employment, tax revenues, suppliers, local businesses, and the broader fabric of community life.
That is why Volkswagen's restructuring plan quickly evolved from a corporate decision into a political negotiation involving labor unions, local governments, state governments, and the company's management.
Germany's system of co-determination gives employee representatives substantial influence on the supervisory boards of large corporations. Local governments may also shape corporate decisions through shareholdings and legal arrangements. As a result, Volkswagen cannot implement restructuring through unilateral management decisions as rapidly as companies operating in more market-driven economies often can.
From the outside, this is frequently interpreted as evidence of German industry's lack of efficiency.
From another perspective, however, it is precisely one of the institutional foundations that has helped German industry maintain long-term social stability.
It compels companies to consider not only the gains from greater efficiency, but also the consequences borne by employees, communities, and society.
The transformation of Germany's automotive industry is therefore far more than a question of technology or corporate governance.
It is, at its core, a profound negotiation over how the costs of industrial transformation should be shared across society.
Three Europes, Three Clocks
Germany's businesses, governments, and ordinary citizens live according to different clocks.
Each measures time differently.
Each responds to change differently.
For companies, time is measured by competitive cycles.
Three to five years is enough for an automaker to miss a technological window—or for a market leader to become an industry follower. If products, software, costs, and organizational capabilities cannot be transformed within a few years, companies risk losing both market share and investor confidence.
From management's perspective, change is simply not happening fast enough.
For governments, time is measured by electoral cycles.
Policymakers must respond to factory closures, energy prices, employment, and public sentiment long before the next election. A policy that may strengthen Europe's industrial competitiveness over the next decade can still lose political support within a single four- or five-year term if it brings short-term job losses or regional decline.
From a government's perspective, change must remain manageable.
For ordinary workers, however, time is measured by the course of a lifetime.
Capital can move into new industries. Companies can close factories, sell businesses, and reallocate production.
People cannot reinvent their careers so easily.
A 45-year-old mechanical engineer in Germany is unlikely to think first about whether Europe's automotive industry will regain its competitiveness by 2035. More immediate questions matter far more: Will I still have a stable income over the next decade? Can I realistically retrain in software or artificial intelligence? Will my family have to relocate? Will I need to rethink my retirement plans?
From the perspective of ordinary employees, change often feels too fast.
Companies want to complete their transformation within three years.
Governments want to preserve stability until the next election.
Workers want to believe that the next twenty years of their lives can still be planned.
None of these perspectives is inherently more legitimate than the others.
Yet they are extraordinarily difficult to reconcile.
If companies move only at the pace employees can comfortably absorb, they may miss the market altogether.
If they move at the speed demanded by global competition, they risk shifting an excessive share of the adjustment costs onto workers and local communities.
If governments protect existing jobs for too long, they may weaken their industries' long-term competitiveness.
If they pursue efficiency alone, they risk deepening social divisions and provoking political backlash.
This is the three Europes that I encountered in Germany.
An industrial Europe convinced that change is imperative.
A social Europe hoping that change will not destroy the life it has painstakingly built.
And a political Europe struggling to keep change under control.
Their differing attitudes toward China's automotive industry are therefore about far more than differing perceptions of China.
More fundamentally, they reflect the fact that they do not share the same benefits—or bear the same costs.
Companies may improve efficiency by adopting Chinese technology and integrating Chinese supply chains.
Workers may instead face job displacement and profound changes in the nature of their work.
Consumers may benefit from more affordable and more intelligent vehicles.
Industrial regions, meanwhile, may lose factories, investment, and employment.
Europe as a whole may emerge stronger through competition.
But the costs of transformation are rarely shared equally.
More often, they are concentrated in particular factories, particular cities, and particular generations of workers.
That is why Europe's complex response to China is, at its heart, a single question:
Who should bear the cost of industrial transformation?
