More old-fashioned collaboration is needed for Germany’s digital future

The automotive industry is still the ultimate symbol of Germany’s mighty economic prowess. It accounts for 20% of Germany’s total industrial revenue, and directly employs 800,000 workers, with millions more indirectly dependent on it through its myriad supply chains.

The big German automakers – VW, Daimler, BMW, Audi and Porsche – are in hot water with EU competition authorities, who are charging them with cartel-like behaviour going back over decades. The main charges relate to collusion on the technical details of diesel exhaust treatment systems.

The Volkswagen cheating scandal on diesel emissions may turn out to be just the tip of the iceberg, once the European competition authorities set about really examining the latest allegations. We know from their recent treatment of corporate giants such as Apple and Google that they are prepared to make examples of even the biggest players if they suspect foul play, in the form of a company or an industry sector abusing its dominant position.

Yet again, diesel is at the heart of the latest motor industry scandal. That’s because cheaper running costs have kept diesel cars the preferred option for many consumers, despite their higher rate of oxide emissions, which cause respiratory problems.

This favoured status is obviously about to change. After Paris and Madrid, last week Stuttgart became the latest city to increase calls for an outright ban on diesel vehicles.  In the hometown of Mercedes-Benz and Porsche, this ban could come into effect as early as January next year, following the decision of a judge that the city’s clean air plan was insufficient, and a ban on diesel cars is justified.

With most of Europe now introducing deadlines for a ban on all new petrol and diesel vehicles – the UK announced last week a date of 2040, similar to France – who will still be buying diesel cars in five years time?  Norway is targeting 100% of new car sales being zero-emission vehicles by 2025 – in less than eight years time. In Norway, electric cars now represent 42% of new vehicle registrations, as against 2% in most other countries.

While German cars dominate the luxury end of the market, and their engineering superiority can protect their market share to some extent, the big German car producers are only too conscious of the threat posed by electric and self-driving vehicles, intelligent thermostats and other innovations, with little German input.

To see how quickly products and services can fall out of favour, we’ve been viewing Dead Mall Series, a collection of videos on YouTube highlighting the demise of prominent American shopping malls. What’s most striking is how recently many of these malls were built, barely 25 years ago, and are now nothing more than eerily abandoned temples to a consumerism where the rules changed fundamentally within a generation.

Although many malls in America are still thriving, the shift in consumer behaviour not least due to online commerce is threatening a retail industry that is now shedding jobs at an alarming rate. While parallels with Germany may be tenuous, and to the real estate industry in particular, one phenomenon is common to both – the role that digitalisation is playing in transforming industries.

It is exciting to witness the heightened awareness in Germany of the critical role now being played by the digitalisation of all processes in real estate. REFIRE attended a very useful event featuring up-and-coming proptechs in Berlin recently – excellently organised by Heuer Dialog – and the subject of digitalisation is now on everybody’s lips. Real estate in all its forms is an even bigger industry in Germany than car and truck manufacturing, and yet it is backwards in many respects in its approach to whole-heartedly embracing the digital future.

Property, unlike a car manufacturing industy, is immovable – possibly why the real estate industry lags its cousins in other productive sectors. But despite Germany’s propensity to produce superior products, the country is still a laggard in its approach to matters digital. The new winners, for manufacturers as well as for real estate professionals, will be those who gather the best data, and know best how to combine them to offer the best digital services.

The motor industry has high-level German engineering skills but few German companies innovative enough to provide the software for entertainment and e-commerce services inside the vehicle. The real estate industry needs to develop platforms that can truly hoover up all the relevant data about a building and its occupants – and add real value with that data.

But German firms are still falling short in seeing the need for these open platforms, which provide incentives for third parties, including competitors, to develop applications for them. There is still a strong instinct in Germany to hoard information, a distrust of too much openness, an obsession with data-protection, and a fear of giving away intellectual property that could promote the speedy spreading of technology.  This needs to change.

There are signs that the nascent start-up culture, particularly evident in Berlin, may be pre-saging a shift in attitudes towards risk-taking, without which no truly home-grown German digital platform providers will emerge. But it will take more than just engineering expertise to bring German real estate fully into the digital age. Developing precision tools, while useful, is not enough. The car manufacturers, obviously used to much more collaboration than was generally known, could yet provide some relevant lessons here.