The New York Times reports that “among eight advanced economies studied by the International Monetary Fund, Germany’s was the only one projected to shrink this year” and the Bundesbank said that economic output was expected to “more or less stagnate again in the third quarter of 2023.” There is more than one reason for this, including high energy costs associated with the Russia-Ukraine War. But one contributing factor is that the esteemed German automotive industry has become a drag on rather than an engine for the economy.

This was illustrated on Monday at the huge I.A.A. Mobility auto show in Munich, where electric cars from China stole the show. According to the article, Volkswagen has lost its status as the top car seller in China, and now China is threatening to eat up a large share of the European car market. Another way of putting this is that Germany was too slow to get to work on producing electric cars and now they’re paying the price.

The mistake is understandable. Germany has a sterling reputation for producing gasoline and diesel vehicles, and their brands are extremely strong. A loyal BMW driver probably wants a new and improved model, not some newfangled electric engine. But gas and diesel vehicles are being phased out. In March, the European Union confirmed “an end to the sale of gas-powered cars in 2035.” That means BMW needs a new brand, and it has been dragging its feet.

The result is that Europeans are attracted to new Chinese cars that have virtually no brand recognition or loyalty. It reminds me of the late 1970’s and early 1980’s when American car manufacturers underestimated the consumer attraction of fuel efficiency and rapidly lost market share to Japanese automakers.

The lesson here is twofold. First, there is big money in building the post-fossil fuel economy. Second, those who try to hold onto their current brands or focus too much on maximizing the old model while it lasts are going to be left in the dust. This is why we can’t listen to people like Sen. Joe Manchin of West Virginia or Governor Doug Burgum of North Dakota. The Biden administration is positioning the country the right way by trying to get out in front of these coming changes rather than clinging to the dirty past.