The Auto Industry's iPhone Moment

Welcome to Issue #48 of The German Autopreneur!

This is also the final edition for 2024.

I started this newsletter in February. Back then, we were just 100 readers. Today? 17,000.

The feedback means everything to me. You tell me how these insights help you make better decisions. That they've become part of your weekly routine. And best of all: You share my drive to push change in automotive.

In July, I took the next step: I made this newsletter my full-time job. I launched a premium version (in German). Since then, I've been traveling to China, Vietnam, South Korea, Japan, and Mexico. Talking to industry leaders. Researching markets. Connecting the dots to see the big picture.

My premium subscribers make all this happen. They give me the freedom to write what needs to be said - and the ability to focus entirely on analyzing our industry's transformation. Digging deeper. Creating more value. And with such strong support, I am planning to launch the English premium version later in 2025.

Thank you for your trust!

Today, we'll look at automotive in 2024. What changed? What did we learn? And most importantly: What's next for 2025?

📱 2024: The Auto Industry's iPhone Moment

2024 is ending. Looking back, it will be remembered as a turning point. Legacy automakers finally faced reality: The tech advantage they held for decades? Gone.

China Shows the New Reality

China made this shift crystal clear. The country isn't just the biggest market anymore. China has become the global tech leader. New trends, technologies, and innovations? They start in China now. What happens there shapes our entire industry.

Think of China as a massive testing ground. New technologies get implemented faster here than anywhere else. Consumer adoption rates are incredible. What works in China today will likely spread globally tomorrow.

The numbers tell the story: Traditional automakers are loosing ground in China. German brands show how dramatic this shift is. Their market share in China dropped from 25% pre-pandemic to just 15% today. And this year, all of them have seen double-digit declines in sales.

Who's winning? A new generation of automakers:

• BYD: 3.9 million deliveries in 2024 (forecast)

• Tesla: 680,000

• Li Auto: 600,000

• Huawei: 500,000

• Zeekr: 230,000

• Xpeng: 180,000

• Xiaomi: 130,000 (first year)

None of these companies is older than 30 years. All are growing double-digits - in a stagnant market.

And there's more: Their key suppliers are tech companies - not traditional auto suppliers. The entire automotive value chain is shifting.

Old Strategies Don't Work Anymore

2024 taught us a hard lesson: Traditional automakers struggle to transform alone.

VW's software unit CARIAD shows why. VW created it to build software capabilities in-house. They hired 5,000 software developers. Invested $13 billion over 5 years. The result? They failed.

The surprising part? They had the talent. The skills. The resources. But they couldn't overcome their own corporate structures. Old-school management. Bureaucracy. A culture that couldn't think software-first.

The message was clear: They couldn't transform from within.

The result? Traditional automakers now seek help outside. VW partners with Rivian (US) and Xpeng (China). These partners should fill their capability gaps. Will this strategy work? The next few years will tell.

The Impact Hits Home

2024 brought the consequences to Europe's doorstep. VW announced plant closures for the first time ever. Ford cut jobs massively. Suppliers like Bosch, Continental, and ZF? Thousands of layoffs.

Germany was hit particularly hard. High energy costs. Too much bureaucracy. Rising labor costs. Slow digitalization. Germany used to be the world's automotive powerhouse. Now it's losing its competitive edge.

But there's more to the story: Customer expectations are drifting apart globally. What Chinese buyers want in a car today is completely different from what European or American customers expect.

The result? Development and production are moving to China, the US, and India. These regions offer better conditions and more dynamic markets. Plus one crucial advantage: They're closer to end customers.

The Auto Industry's iPhone Moment

2024 made something crystal clear: This isn't evolution. It's revolution. A completely new product category is emerging.

Remember life before the iPhone? We had phones back then. Mainly for calls and texts. Then the iPhone arrived - and suddenly, calling became just another app. A completely new product had emerged.

That's exactly what's happening with cars now.

Here's the fatal mistake many make: They see EVs as evolution. Just swap the engine. Replace combustion with electric. Done.

Tesla understood first: Software first, hardware second. China got this quickly. They didn't just copy Tesla's approach - they built an entire industry around it.

The electric motor is just the tip of the iceberg. It's the change everyone sees and understands. But what's really changing goes much deeper: A completely new product category is emerging. How we use it. How we buy it. What we expect from it.

In the new car, getting from A to B is just one of many features. Just like making calls on an iPhone.

And even though this is happening right before our eyes, many traditional automakers still can't see it. In Germany, we spent years debating drive technologies - hydrogen or battery, synthetic fuels or plug-in hybrid. Meanwhile, a completely new product emerged.

And we didn't even notice.

What's Next for 2025?

China's competition gets tougher. Prices drop. Innovation speeds up. Meanwhile, Donald Trump returns to the White House.

For European automakers, this is especially critical. The US market was their safety net, helping balance losses in China. With Trump and his new "Chief-Efficiency" Elon Musk, even this becomes harder.

But there's good news too:

Traditional automakers are finally awake. And for European manufacturers, their position between the superpowers US and China might turn into an advantage. They can learn from both markets. Work with both. And most importantly: Sell their products in both markets.

It's a new game. With new rules. We learned these rules the hard way in 2024. Time to start playing.

🔗 Michael Dunne (LI) | Michael Sura (LI) | NYT | TWC | Zeit | The Economist | WSJ

That's all for today.

Feel free to reply to this email with your thoughts.

Thank you for your trust in 2024. My best wishes for the the new year!
— Philipp

PS: If you find value in this newsletter, please share it with someone who might benefit. Your support helps me continue my independent work for the automotive industry.

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