In 2017, Germany exported a record €1.28trn-worth of goods, 6.3% more than the year before. The infrastructure can barely keep up.
In Rotterdam in the Netherlands, the main port through which these exports are shipped, Rhine barges sometimes have to wait for four days.
Germany is suffering a dearth of pallets, and labour shortages are becoming more acute. These are problems that other countries would love to have.
One reason for Germany’s success is that its labour reforms of the early 2000s, combined with the relatively cheap euro, have made its exports highly competitive.
Another is a specifically German magic formula: an abundance of conservative, meticulous firms that are good at fine-tuning tried-and-tested methods honed over many decades.
Most of the firms in the DAX index, which consists of Germany’s 30 largest traded companies, still make the same sort of things the country was making almost a century ago: cars, chemicals and machine parts.
SAP, the youngest DAX company, was founded in 1972. Germany’s corporate birth rate is the lowest in any large European economy.
The country’s conservative industrial model is now being put to the test “on a scale that perhaps has not yet been fully understood”, as Angela Merkel puts it.
Technological disruption in many important industries is forcing them to compete with new rivals.
Nowhere is that truer than in the mighty car industry, which accounts for one in seven jobs in Germany, one in three euros spent on innovation and one-fifth of all exports by value.
A visit to Stuttgart brings these numbers to life. The home of Porsche and Daimler (the owner of Mercedes-Benz), this south-west German city exudes wealth and success.
But in the laboratories and factories, angst hangs in the air. The cause is summed up by a new spaceship-like showroom slap in the centre of the city that belongs to Tesla, the innovative car firm created by Elon Musk, an eccentric American billionaire.
Tesla produced the world’s first all-electric luxury car back in 2012.
Its models have been fitted with the hardware required for full automation since 2016, and it is due to bring out its first car without a steering wheel in 2019.
German carmakers are lagging behind, and some have recently been accused of cheating in emissions tests.
It is not that Germans are not innovative. The first hybrid car, the Semper Vivus (pictured above), was designed by Ferdinand Porsche in 1900; the first self-driving car, the VaMoRs van, was built by Mercedes in 1986 (both are now in museums).
Mrs Merkel has presided over an increase in R&D spending to 3% of GDP. About 34% of global electric-car patents are German. The country’s firms are expert at teaming up with academics and shop-floor workers to put new inventions into practice.
Recently they have focused on automating and digitising traditional production processes under the heading “Industry 4.0”.
In Sindelfingen, Daimler’s airport-sized factory on the edge of Stuttgart, a vast assembly hall is uncannily quiet except for occasional clunks and whirrs. On a production line a robot arm lifts a newly pressed roof, rotates it and sets it onto a car body.
Staff monitor the machines, sticking post-it notes on the glass walls of their office. This process of refinement has been going on almost continuously since carmaking began at Sindelfingen in 1926. But Tesla and all it stands for has rendered it insufficient.
“We have a long tradition of seeking perfection and thinking everything through,” says Michael Hafner, who runs Mercedes-Benz’s self-driving car programme. The German way is to issue a new product only once it is absolutely right, explains Moritz Mueller-Freitag, a technology writer.
Whereas Tesla beams refinements of its automated driving software to cars already on the road, Daimler updates its “Drive Pilot” programme (which mitigates the effects of sudden braking) only when it brings out a new model.
Mr Hafner points out that new managers at Mercedes-Benz are now trained to accept that not everything will succeed: “If you try out new things quickly and every xth experiment works out, that’s sometimes faster than iterative progress.”
When the car industry’s main job was to fine-tune the internal-combustion engine, there was no need for leaps into the dark. But when new technologies are transforming the very meaning of the terms “car” and “engine”, makers must make much bolder changes—and the collaborative, corporatist style of German management does not lend itself to those.
The shift to automation highlights the growing importance of computer software even for traditional German engineering firms.
In a glass complex amid rolling hills an hour north of Stuttgart, Stephan Hönle, head of automated driving at Bosch, explains his technology firm’s co-operation with Mr Hafner at Mercedes-Benz.
“This”, he says, brandishing an octagonal black sensor for a car bumper, “needs an algorithm.” Yet the mentality update is taking its time.
The chancellor has repeatedly promised to invest in digital technology and skills but so far has delivered relatively little. As Brigitte Zypries, a former economy minister, likes to put it: “In the age of the internet of things, the United States has the internet. Europe has the things.”
German industry recognises the need to catch up. In March last year Daimler announced it was speeding up its work on electric cars and would link up with Bosch to create self-driving taxis within three years; that resulted in the collaboration between Mr Hönle and Mr Hafner.
The question is whether German firms can combine their tried-and-true magic formula with some Anglo-Saxon thrust and vim.
Matthias Wissmann, who for nearly 11 years was the German carmakers’ chief lobbyist, thinks they can: “Two worlds are coming together.”
Positive signs include the Daimler-Bosch collaboration; the German government’s easing last year of regulations governing self-driving cars, which has made testing easier; and new industry-funded chairs at German universities in subjects like electrochemical engineering to help the country catch up on its rivals.
Indeed, Mrs Merkel herself has said she wants a self-driving car when she is older. If her country gets things right, it might even be German.
This article was first Published in the Economist