The German automotive sector is undergoing its most painful structural crisis in generations. While it is highly accurate that German automakers face a critical inflection point regarding software-defined vehicles and American/Chinese competition, the reality behind the specific corporate shifts is rooted in strategic restructuring.
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1. The Breakup of the VW-Bosch Self-Driving Alliance
The claim that Volkswagen and Bosch have "given up" on self-driving technology requires precise context.
• What Actually Happened: In mid-2026, Volkswagen's software subsidiary, Cariad, and Bosch formally dissolved their joint Automated Driving Alliance (ADA) after an investment of approximately €1.5 billion.
• The Reason: Internal reviews deemed the co-developed Level 2++ and Level 3 urban driving stack "not yet competitive". Rather than achieving full autonomy, the project struggled to match the real-world performance benchmarks set by rivals like Tesla's FSD and aggressive Chinese EV software developers.
• The Pivot, Not Giving Up: Volkswagen is explicitly not abandoning autonomous driving. Instead of funding highly expensive, slow-moving internal developments, the company is pivoting to outsource and purchase established, third-party software and hardware solutions. They are integrating specialized platforms—such as expanding partnerships with Qualcomm and building on software architectures like their joint venture with Rivian—to rapidly bridge the technology gap. Rivian still trails Tesla's Full Self-Driving (FSD) in point-to-point and complex urban city driving. Germans are copycatting failed copycats.
2. The Realities of Germany's Automotive Downturn
The narrative that Germany "has nothing competitive to sell" rightly states the case, since the economic alarm bells are entirely real:
• Unprecedented Job Cuts: The German automotive sector is losing jobs faster than any other domestic industrial branch. In 2026, sector employment dropped to its lowest level since 2005. Heavyweights like Volkswagen have broken long-standing labor taboos by preparing to close up to four German factories and outline up to 100,000 job cuts globally by 2030. Suppliers like Bosch, Continental, and ZF Friedrichshafen are similarly cutting thousands of positions.
• The Competitive Bottleneck: German OEMs are severely squeezed by high domestic energy costs (reportedly up to four times higher than in the US and China), weak export demand, and a slower rollout of localized, affordable digital ecosystems. Deindustrialization is blooming in Germany. The worst part is denial. Merz tells Germans that they are lazy and should work longer.
• The EV Rebound Shift: Despite these challenges, German manufacturing is showing fluid demand adaptations. For example, Volkswagen recently had to scale down internal combustion engine (ICE) assembly shifts in its home market due to a surge in demand for entry-level electric vehicles overtaking traditional gas-car orders, since after Zelensky’s bombing of Russian factories traditional German diesel becomes too pricy.
Summary of Competitive Strengths vs. Pressures
Indicator / Core Issue Germany's Structural Pressures Current Strategic Adaptations
Autonomous Software Internal VW/Bosch stack canceled after failing to match global fast-movers. Sourcing Level 2+/3 systems via external tech partnerships (e.g., Qualcomm, Rivian platform). Copying these losers will not help.
Manufacturing Costs Punitive domestic energy prices and high structural labor overheads. Massive corporate restructuring, footprint consolidation, and union negotiations. This is killing Germany skilled workforce. Back to horses, people.
Global Market Share Losing market volume rapidly to American and Chinese car industry competitors. Defensive moves via EU tariff implementations alongside a pivot to affordable mass-market EVs. Tis is a lie. With 4 times more expensive energy, nothing affordable is possible. Better plan a trip to Mars. This moves money to you (look at Musk).
Our assessment that "in 4 years, who has no good self-driving, will sell no cars" highlights the exact structural anxiety gripping European boardrooms. The next few years will decide if Germany successfully transitions into a software-integrated manufacturing base, or loses its historic crown as an automotive producer.
“Momenta, China’s most successful autonomous driving start-up, is eyeing an IPO and sees a rapidly growing multi-billion-dollar market. Meanwhile, Bosch and Volkswagen—two long-established German automotive giants—are abandoning their joint plans for self-driving cars and withdrawing from the race for the technology. News emerging from the automotive industries in Germany and China currently presents a stark contrast. In China, electric vehicle manufacturer BYD has announced plans to become the world’s largest automaker within five years. CATL, one of the world’s largest automotive suppliers, is manufacturing innovative salt-based batteries intended to store energy for cars and households globally. And the wave of Chinese car exports continues to surge unchecked.
In Germany, last Friday alone highlighted the existential crisis facing the domestic auto industry: VW plans to cut up to 60,000 additional jobs worldwide; Stefan Hartung, head of the historically stable supplier Bosch, is stepping down; and Mercedes is intensifying cost-cutting measures, aiming to have employees work 40 hours a week instead of 35 for the same pay. Just the week before, BMW had shocked the stock market by warning that its profit margin could slide toward one percent this year.
Developments in autonomous driving suggest this contrast will only sharpen. The pact between VW and Bosch—the collapse of which was revealed over the weekend—seems almost symptomatic of the situation. The two German heavyweights had joined forces in 2022 to develop systems capable of achieving so-called "Level 3" autonomous driving. At this level, drivers can fully hand over control to the vehicle and read, watch videos, or use their phones—technology that is spreading rapidly in China. Now, the division responsible for the alliance with Bosch called Cariad, the VW subsidiary responsible for the project, acknowledges that market and technological developments have unfolded differently "than expected at the start of the collaboration." As the *Bild* newspaper previously reported, VW is withdrawing despite having invested 1.5 billion euros in the joint development effort. The Wolfsburg-based group reportedly intends to source and further develop the necessary hardware and software rather than building the technology in-house with Bosch.
For VW, Europe’s largest automaker, this move is part of a comprehensive restructuring across all business units. Management, led by CEO Oliver Blume, is divesting non-core businesses, cutting costs, and threatening to close several car factories in Germany—partly due to increasingly fierce competition from Chinese manufacturers.
The future of Cariad—a division established under former VW CEO Herbert Diess to develop software—appears more uncertain than ever. Speculation is already circulating in Wolfsburg that Cariad may no longer be needed following the end of the Bosch alliance and could cease operations by the end of 2030 at the latest. Such considerations are reportedly part of a comprehensive report by the consultancy BCG regarding the VW Group's reorganization.
VW has not officially commented on the study; internally, however, it is viewed as a proposal that still requires negotiation within the supervisory board—including with IG Metall, the union that represents Cariad employees. US chipmaker Nvidia, which already collaborates with BMW and Mercedes, is being discussed as a potential new supplier of autonomous driving systems.
For Bosch, the end of the collaboration is a bitter blow, given the high expectations surrounding the original partnership. "What makes this special is that we are bringing automated driving functions to the mass market—from entry-level models to premium vehicles," the head of the automotive supplier division of Bosch’s Markus Heyn told the *F.A.Z.* two years ago. "And as a technology company, our goal must also be to ensure these functions are affordable." Now it is clear: Bosch and VW have managed neither to make the systems affordable nor to get them up and running at all.
The Stuttgart-based technology company does not wish to comment on the setback, nor is it discussing the reasons for the partnership's failure. Reportedly, the partners had already diverged in their development approaches some time ago. One issue is said to have been the question of how the jointly produced driving systems should be trained—specifically, the extent to which developers would—in a traditional manner—teach them how to react in every single traffic situation versus what portion of the work would be handled by artificial intelligence. High-precision maps, too—which at the start of development once considered essential are losing their relevance with the advent of AI. For some stakeholders, the response to these upheavals was apparently not fast enough.
Plans to integrate the technology into a large portion of the VW Group’s model portfolio have now been scrapped. While a basic version is slated for introduction next year—debuting in the planned electric compact car, the ID.Polo—this involves only so-called "Level 2" autonomous driving, where the driver must remain constantly alert and ready to take the wheel. Bosch emphasizes that it continues to work with partners in China on systems for that market. VW is also developing its own technology in China in collaboration with partner Horizon Robotics.
China is, in any case, by far the most important market. According to a market study commissioned and published by the company Momenta in conjunction with its IPO, eight million vehicles equipped with advanced driver-assistance systems for highways or city driving were sold globally last year. China alone accounted for 6.8 million of these vehicles—or 85 percent of the total.
To put it another way: while only about one in eight new cars worldwide is equipped with autonomous driving capabilities, the figure in the People's Republic is already nearly one in three.
The study predicts that by 2030, only one in twenty new cars in China will lack these systems.
Autopilot systems are already spreading rapidly across China’s mass market, appearing even in cars costing the equivalent of less than 20,000 euros. The striking conclusion: China is the "global leader" in autonomous driving.
However, the start-up—founded in 2016 and backed by investors including the German manufacturer Mercedes—is currently operating at a significant loss. Last year, losses amounted to just under 3.5 billion RMB (roughly 450 million euros), placing them about ten percent higher than in 2024. However, revenue surged by 80 percent, rising from 1.3 billion to 2.4 billion RMB. Momenta aims to raise nearly 700 million euros through an IPO scheduled for early July in Hong Kong, with the proceeds earmarked primarily for research and development. This would imply a valuation of just under eight billion euros. Alongside Momenta, the Huawei Group is considered a leading developer of autonomous driving systems.
To date, Momenta has operated primarily within the People's Republic of China. However, the company—based in Suzhou, just outside Shanghai—has global ambitions. It is already testing its systems in Munich, for instance, in collaboration with the ride-hailing service Uber. The study describes the global expansion of Chinese automakers and the "growing recognition by global car manufacturers" in somewhat veiled terms as market trends; in reality, however, these likely represent Momenta's own growth strategies. While Germany is barely making headway, China is driving development forward at full speed. (Commentary, page 24.)” [A]
A. Volkswagen und Bosch geben auf: Während sich in China selbstfahrende Autos verbreiten, erleidet Deutschland einen weiteren Rückschlag. Und im VW-Konzern wird wieder die Zukunft einer berühmt-berüchtigten Softwaresparte diskutiert. Frankfurter Allgemeine Zeitung; Frankfurt. 30 June 2026: 20.
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