The crisis in Germany’s revered car industry is taking a toll on its wealthiest regions — and hitting the pocketbooks of residents.
Their worldwide exports transformed them into some of the most prosperous regions in Europe, but now Germany’s auto capitals are veering toward harder times.
Cities like Wolfsburg, Ingolstadt and Stuttgart — home to Volkswagen, Audi and Mercedes, respectively — are seeing dramatic drops in tax revenues as their flagship firms struggle.
The result has been a messy budget season, with officials scrambling to cover widening funding gaps through borrowing, higher fees and spending cuts.
In Friedrichshafen, a high-earning community on Lake Constance in southwestern Germany and home to auto parts supplier ZF, the city is set to more than double fees for daycare over the next two years, a shock for many families.
In Ingolstadt, the government is cutting public events and trimming city staffing while borrowing big. It even nixed the purchase of Christmas trees for public spaces.
“The city is in a deep financial crisis. There’s no other way to put it,” Dorothea Deneke-Stoll, deputy mayor of Ingolstadt, told DW.
Record deficits
The pain reaches beyond the auto industry. Cities across Germany are facing growing deficits after years of worsening business conditions. Tougher competition and falling demand overseas have eaten into exports, while higher energy and labor costs at home have eroded margins.
German cities lean heavily on commercial taxes to fund their annual budgets. In the years leading up to the pandemic, those revenues continued to rise as business boomed overseas.
The pace has slowed, however. While tax revenues still grew between 2023 and 2024, they were outpaced by inflation.
Rene Geissler says there’s a “stagnation of tax revenues.” The researcher focused on community finances at the Technical University Wildau told DW called this “a negative signal, because in a healthy economy tax revenues are always growing.”
Spending obligations have meanwhile remained high, with increased migration and an aging population drawing more attention, as well as an expansion of some social benefits, according to a recent report by the Bertelsmann foundation in Gütersloh, Germany.
The Association of German Cities has already warned that total shortfalls among communities are poised to reach €30 billion ($35.28 billion) in 2025, eclipsing last year’s record deficit of €25 billion.
By comparison, it’s a clear drop in tax revenues that stands out in Germany’s car cities. A spate of profit warnings across the industry have forced city planners to continuously update calculations made earlier in the year.
In Ingolstadt, tax revenues for 2025 are expected to be less than half of the original calculations. Stuttgart was estimating a shortfall of close to 40% lower than revenues in 2024.
German cities are required by law to balance their budgets, leading officials to draw out their planning into the winter.
Wolfsburg and Ingolstadt are still looking for solutions. Stuttgart’s mayor, Thomas Fuhrmann, announced in November that the city would also have to return to its plan for 2026 and 2027.
“The basis on which we wanted to build isn’t there anymore,” he wrote in an online post. “We have to go back to the drawing board.”
Reversal of fortunes
Car manufacturers rode an export boom in the years before the COVID-19 pandemic, cementing German auto cities as some of the most prosperous in the country and continent.
Ingolstadt boasted Germany’s second highest GDP per capita in 2023 behind Wolfsburg, and both were in the top five regions in all of Europe.
But Audi, like its parent company VW, has struggled in recent years. Sales in China have been disappointing, with a 10% year-on-year fall in deliveries already in the first half of 2025. Parts manufacturers have struggled alongside car producers.
“We recognize of course that the auto industry is in a period of transformation, with the move to electric vehicles and other areas that go with it,” Deneke-Stoll said. “That also affects suppliers in Ingolstadt, and that contributes to the larger picture.”
The scale of the shortages still took the city by surprise. Ingolstadt originally calculated a €30 million deficit for the coming years. The actual amount is now almost three times as much — an €88 million budget hole between 2026 and 2029.
In Ingolstadt, identifying savings has become a painstaking process. Among the more than 90 earmarked items were cuts to trash services, park maintenance and services for senior citizens.
While the halt on Christmas-tree purchases saves an estimated €20,000, other solutions will still be necessary. The city took on new debt earlier in the year and it may have to raise property taxes, according to Deneke-Stoll
“That’s been a big point of contention in the city council,” she said. “But by my calculations we can’t avoid going down that path.”
Rethinking the budget
Communities are now winding back services expanded during the good years.
Families in Friedrichshafen have benefited from low childcare costs thanks to a unique profit-sharing structure with parts supplier ZF. The Zeppelin Foundation, a charitable organization which is the majority owner of ZF, manages and disburses the funds for social and cultural programs in the city budget.
Those dividends have been shrinking with ZF’s struggles, forcing the foundation to tap its reserves. The newest budget raises childcare fees dramatically, doubling the monthly costs for children over the age of three and tripling them for those under three by 2026.
Flora Pfaff, a city resident and mother of three, says the new costs will hit families hard.
Source : https://www.dw.com/en/why-germanys-auto-capitals-face-financial-crisis/a-75163370
