The difficulties faced by Germany's automotive industry are affecting the financial situation of its wealthiest regions and directly impacting residents' wallets.

Automakers benefited from export prosperity in the years before the pandemic, making German automotive cities among the richest in the country and even in Europe. Image source: Getty Images/C. Koall

German automotive hubs once saw car exports make them one of the richest regions in Europe, but now they are gradually entering a difficult period. Wolfsburg, Ingolstadt, and Stuttgart (home to Volkswagen, Audi, and Mercedes-Benz respectively) have seen significant tax revenue declines as their flagship companies' performances have deteriorated.

The result is a chaotic budget, forcing officials to borrow money, raise fees, and cut spending to close the growing funding gap.

In Friedrichshafen, a high-income community on Lake Constance in southwest Germany and home to automotive parts supplier ZF, the city plans to double daycare costs over the next two years, which will be a significant hit for many families.

The Ingolstadt government has both borrowed heavily and cut public events and municipal staff, even canceling the purchase of Christmas trees in public spaces.

"The city is in a deep financial crisis. There's no other word for it," said Dorothea Deneke-Stoll, deputy mayor of Ingolstadt, to DW.

Image source: picture-alliance/P. Schickert

Record Deficit

The crisis is not limited to the automotive industry. German cities, after years of economic decline, are experiencing expanding fiscal deficits. Increased overseas competition and falling demand have weakened exports, while rising domestic energy and labor costs have eroded profit margins.

German cities rely heavily on business taxes to maintain annual budgets. In the years before the pandemic, this income continued to rise with growth in overseas operations.

But the growth slowed. Although tax revenues increased between 2023 and 2024, they lagged behind inflation.

René Geißler, a researcher at the Willy Brandt University who studies community finances, said that tax revenues have "stagnated" and called this "a negative signal because, in a healthy economy, taxes should continue to grow."

A recent report by the Bertelsmann Foundation noted that, at the same time, pressure on expenditures remains high due to increased immigration, an aging population, and expanded social welfare programs.

The German Association of Cities has warned that total community deficits across the country could reach 30 billion euros in 2025, exceeding last year's record of 25 billion euros.

The drop in tax revenue in automotive cities is particularly noticeable. Automotive companies have repeatedly issued profit warnings, forcing city planners to revise their budgets. Ingolstadt's 2025 tax revenue is expected to be less than half of the initial budget. Stuttgart expects a deficit of nearly 40% of its 2024 income. German law requires cities to balance their budgets, forcing local officials to extend the budget planning cycle until winter without finalizing it.

Wolfsburg and Ingolstadt are still seeking solutions, and Stuttgart Mayor Thomas Fuhrmann said in November that it was necessary to revisit the 2026-2027 budget plan.

"The foundation we had planned no longer exists," he wrote, "we must review the budget again."

No More Prosperity

Automakers benefited from export prosperity in the years before the pandemic, making German automotive cities among the richest in the country and even in Europe. In 2023, Ingolstadt ranked second in per capita GDP in Germany, behind only Wolfsburg, with both cities ranking in the top five of Europe.

However, Audi and its parent company Volkswagen have faced performance pressures in recent years. In the first half of 2025, delivery volumes in China declined by 10%, which also affected parts manufacturers.

Deneke-Stoll said, "We certainly realize that the automotive industry is undergoing a transformation, moving towards electric vehicles and related areas, which also affects suppliers in Ingolstadt and further impacts the overall situation."

However, the scale of the tax shortfall still surprised the cities. Ingolstadt initially expected a deficit of 30 million euros in the coming years, but the actual figure is nearly three times that - 88 million euros in budget gaps from 2026 to 2029.

In Ingolstadt, finding cost-cutting measures has become a daunting task. Over 90 items of expenditure, including waste collection, landscaping, and elderly services, have been listed for reduction. Canceling the purchase of Christmas trees can save about 20,000 euros, and other measures are also essential. Deneke-Stoll said the city has already taken on debt earlier this year and may need to increase property taxes again.

"This has sparked a huge debate in the city council," she said, "but according to my calculation, this path is unavoidable."

Revisiting the Budget

Cities are gradually cutting back on expanded public services from the prosperous period.

In Friedrichshafen, families previously benefited from low childcare costs, thanks to a unique profit-sharing mechanism with parts supplier ZF. The ZF shareholder, the Carl von Linde Foundation, manages and allocates funds for social and cultural projects. However, as ZF's performance declined, the foundation had to use its reserves. The latest budget will significantly increase childcare costs: fees for children over three years old will double, and for children under three, they will triple by 2026.

Flora Pfaff, a mother of three, told DW that this is a big blow to families: "Many people living in Friedrichshafen accept high rent because low childcare costs can offset expenses."

Geißler believes that the transition of the automotive industry will pose a serious challenge to certain cities. The model of "high wages + high welfare + a good city life" built around the automotive industry will be difficult to sustain in the future.

But Deneke-Stoll believes that Ingolstadt can find a way out. For example, in the case of the Christmas tree issue, citizen groups have already started to contribute, helping to fill part of the gap.

"I won't say that the city's prosperity is threatened," she said, "but the upcoming budget cuts will be tangible changes for residents."

Source: DW

Original: toutiao.com/article/7586479878065652274/

Disclaimer: This article represents the views of the author."