Exports all over the world made it one of the wealthiest regions in Europe, but now Germany’s automotive metropolises are facing difficult times.
Cities like Wolfsburg, Ingolstadt and Stuttgart – headquarters of the Volkswagen, Audi and Mercedes corporations – are recording dramatic losses in their tax revenue.
The result has been a chaotic budget season as officials struggle to plug widening funding gaps through borrowing, higher taxes and spending cuts.
In Friedrichshafen (state of Baden-Württemberg), a high-income city on Lake Constance in southwest Germany and home to auto supplier ZF, the city will double child care fees over the next two years, a blow to many families.
In the Bavarian city of Ingolstadt, the local government is cutting public events and municipal staff while also taking on a large amount of debt. It has even banned the purchase of Christmas trees for public places. “The city is in a deep financial crisis. There’s no other way to say it,” Dorothea Deneke-Stoll, deputy mayor of Ingolstadt, told DW.
Record deficits
The crisis goes beyond the automotive industry: cities across Germany are faced with growing deficits after years of adverse circumstances. Competition and falling foreign demand have led to a decline in exports, while high domestic costs have squeezed profit margins.
Cities rely on corporate taxes, which increased as the economy boomed before the pandemic. Between 2023 and 2024 they continued to rise, but below inflation. René Geißler, an expert in local government finance, warns of “stagnation” in tax revenues, a “negative sign, because in a healthy economy these revenues are constantly growing.”
According to the Bertelsmann Foundation, spending remains high due to migration, an aging population and expanded social benefits. The German Association of Cities predicts a total deficit of 30 billion euros for 2025, which would exceed the record figure of 25 billion in the previous year.
In Ingolstadt, tax revenue in 2025 is expected to be less than half of the original estimate. Stuttgart, also in Baden-Württemberg, expects a deficit of almost 40 percent below its 2024 revenue.
German cities are required by law to balance their budgets, which has prompted authorities to extend their planning until winter. Wolfsburg and Ingolstadt are looking for solutions.
Stuttgart’s mayor Thomas Fuhrmann said in November that the city also had to review its plans for 2026 and 2027. “We have to start from scratch again,” he warned.
Change of course
Car manufacturers experienced an export boom in the years before the COVID-19 pandemic, making German car cities the wealthiest in the country and the Old Continent. Ingolstadt recorded the second highest GDP per capita in Germany in 2023 after Wolfsburg and was both in the top five regions across Europe.
Like its parent company VW, Audi is in trouble. Sales in China fell by 10 percent in the first half of 2025, which also affected suppliers.
“The industry is in a phase of transformation towards electric vehicles and their derived areas,” which “has an impact on suppliers in Ingolstadt,” says Deputy Mayor Deneke-Stoll. The size of the deficit surprised them: the city estimated it at 30 million euros, but now it faces a deficit almost three times that size, which corresponds to a budget hole of 88 million between 2026 and 2029.
Identifying possible cuts has become a complex task as more than 90 items include waste disposal, park maintenance and aged care. Suspending the purchase of Christmas trees will save 20,000 euros, but more and more effective measures are needed. Ingolstadt has taken on new debt and could increase property taxes, a decision controversial in the council.
The city took on new debt earlier this year and could be forced to increase property taxes, according to Deneke-Stoll. “That was a big point of contention in the city council,” he emphasizes. “But based on my calculations, we can’t avoid going down this path.”
Rethink the budget
Communities cut services that had been expanded during times of prosperity. In Friedrichshafen, families benefited from low childcare costs thanks to the profit-sharing structure with the provider ZF and the Zeppelin Foundation, which finances social programs.
Flora Pfaff, mother of three, warns that this will have an impact on families. “Many accepted the high rents because they were compensated by childcare,” he told DW.
René Geißler, for his part, believes that the automobile transition will put cities to a tough test: “It will be difficult to maintain the quality of life.” And Deputy Mayor Deneke-Stoll trusts the people of Ingolstadt: civil society groups are already helping, for example with Christmas trees. “Prosperity is not at risk, but there will be visible cuts,” he emphasizes.
(cp/ms)
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