The crisis in Germany's model city
Why Stuttgart's troubles matter far beyond Baden-Württemberg
Dear Reader,
When Berlin failed to open its new airport on time, Germans shrugged and said “typisch Berlin”.
The capital has always been treated as Germany’s exception. It is the city of delayed infrastructure projects, overwhelmed bureaucracy and permanently strained finances. If a Berlin infrastructure project opens ten years late and billions over budget, it may be embarrassing, but it is hardly a cause to question the very fundamentals of the German model.
When the same thing happens in Stuttgart, however, it is harder to laugh. Long associated with the Schwabian virtues of thrift, ingenuity and hard work, the state capital of Baden-Württemberg has made a name for itself across the globe for engineering excellence.
Yet this week, the opening of Stuttgart 21 — the city’s long-awaited underground railway station — was pushed back yet again. When construction began in 2010, the station was supposed to be up and running in 2019. The latest target date is now 2031.
According to reports, one reason for the delay is that around 1,000 kilometres of cable need to be replaced after the wrong type was installed. The project has become a byword for dysfunction that surpasses Berlin’s worst nightmares.
Nonetheless, Stuttgart’s deeper troubles lie elsewhere. For decades, it was one of the richest and most successful cities in Europe. Today it is struggling with collapsing tax revenues, mass job cuts and a budget deficit large enough to trouble a small European country.
What is happening in Stuttgart offers a glimpse of where Germany’s future lies if its industrial decline continues.
Berlin can distort foreign perceptions of Germany — it gives the impression of a place on the rise largely because it started from such a low base after reunification. A city like Stuttgart is a better barometer of the country’s economic health. It represents the model on which modern German prosperity was built.
For the best part of a century, the city has been synonymous with industrial success. Home to Mercedes, Porsche and Bosch, the wider Stuttgart region has long been awash with money generated by global demand for the very best of German engineering.
From London to Los Angeles, the city crest could be seen adorning the bonnets of sports cars owned by the well-to-do. Porsche was so proud of its roots in the city’s Zuffenhausen district that it put the city’s emblem of a rearing horse onto its logo. The Mercedes star symbolised the ambition to conquer land, sea and air.
This provincial German town had big ambitions.
The proceeds could be seen everywhere. Tax revenues funded one of Europe’s most celebrated opera companies, a first-class healthcare system, and ambitious infrastructure projects. The decision to bury Stuttgart’s central railway station underground and rebuild it as the centrepiece of a vast European rail network reflected a city brimming with confidence in its own future.
Over the past two decades, Stuttgart’s automakers more than any others came to symbolise Germany’s deep penetration of the Chinese market. As recently as the beginning of this decade, roughly one in every three Mercedes and Porsche vehicles sold worldwide was bought in China. For millions of upwardly mobile Chinese consumers, German luxury cars represented the pinnacle of automotive prestige.
How quickly things can change.
The rise of electric mobility — and its rapid adoption in China — has left Stuttgart’s carmakers scrambling. Chinese consumers reportedly found Mercedes’ electric models too cramped and increasingly preferred domestic competitors. The company suffered the humiliation of failing to sell a single EQE in China during one month in 2024. Overall, Mercedes sales in the country have fallen by around a quarter. With profits sharply reduced, the company has embarked on a €5 billion cost-cutting programme.
The story at Porsche is similar. Its profits collapsed by an eye-watering 91 per cent last year, driven largely by falling demand in China. Bosch, which supplies many of the technologies underpinning Germany’s automotive industry, has also been caught in the downdraft.
Job cuts were the inevitable consequence. Unfortunately for the manufacturers, years of success bred a degree of complacency. Employment agreements negotiated during the boom years made large-scale redundancies impossible. As a result, firms have resorted to offering extraordinary severance packages to encourage staff to leave voluntarily. Team leaders at Mercedes have reportedly been offered more than half a million euros to walk out the door. Even then, only around 5,000 employees have accepted.
Bosch and Porsche have both announced major rounds of redundancies, while all three industrial giants have closed facilities or sold off smaller business units. Last year, angry Bosch employees staged an eye-catching protest by erecting a gravestone declaring the “death of Bosch values” outside one of the company’s sites.
The impact on Stuttgart’s finances has been staggering. Thanks largely to business taxes paid by the car industry, the city collected around €1.5 billion in trade taxes in 2023. Last year that figure fell to just €700 million.
The collapse in revenue left city hall facing a deficit of roughly €750 million simply to fund day-to-day operations — a shortfall that, scaled up to national level, would be enough to create serious difficulties for a small European country.
During the golden years, those revenues helped finance subsidised childcare, major investment in hospitals, and generous cultural spending. Without them, the city has been forced into an abrupt search for savings. Kindergarten fees have risen sharply. Plans for new cycle paths have been shelved. Homeless shelters have seen funding cut. The opera house has been ordered to reduce staffing levels.
The German media have been full of speculation that Stuttgart could become the next Detroit. The comparison is obvious. America’s former automotive capital also grew fabulously wealthy on the back of a small number of car manufacturers before suffering a painful decline.
Whether Stuttgart becomes the next Detroit is almost beside the point.
The city remains one of the richest places in Europe. Mercedes, Porsche and Bosch are still global giants. The research institutes, universities and engineering firms that transformed the wider region into Germany's industrial powerhouse have not disappeared overnight. Optimists point to the fact that Baden-Württemberg still invests far more in research and development than any other part of Germany. New high-end products will emerge, they insist.
Yet the speed of the reversal is hard to ignore. Just three years ago, Stuttgart was collecting €1.5 billion a year in business taxes and spending as though the money would never stop flowing. Today it is cutting services, searching for savings down the back of the sofa, and running up large new debts.
For a long time, Germans could dismiss Berlin, with its dysfunction and reliance on subsidies, as an amusing anomaly. The capital was the exception. Cities like Stuttgart were the rule: prosperous, export-driven, and well run. If that model is beginning to crack, Germany's problems run much deeper than a delayed railway station.