Few places in Germany are as intricately linked to the country’s fate as Wolfsburg, the home of Volkswagen. Founded as a Nazi model town, populated by the workers building Adolf Hitler’s ‘people’s car’, Wolfsburg reinvented itself after the Second World War and became a beacon of recovery and peaceful German ambition. Today, it has the highest GDP per capita of any city in Germany. Yet, much like the country, it looks to the future with fear. As its entire existence depends on the ailing German car industry, Wolfsburg worries: will it become the next Detroit?

At first glance, Wolfsburg might seem an unlikely symbol of Germany’s economic unease. Neat, prosperous, and meticulously planned, it is dominated by the monumental VW plant, which still ranks among the largest car factories in the world. Yet to look closely at Wolfsburg today is to glimpse the deeper structural malaise afflicting Germany’s once-mighty industrial power. As Detroit once did for the United States, Wolfsburg mirrors the fate of its nation’s manufacturing heart – a city built on the dream of mobility, modernity and prosperity, now confronting the limits of its model.

Wolfsburg’s origins are unusually charged with history. It was founded in 1938 as the ‘City of the Strength-Through-Joy Car’ – a brand new town conceived by the Nazi regime to house the workers building an affordable car for the masses. The project was equal parts social engineering and propaganda: a vision of the modern worker, disciplined and industrious, serving the national project through technology. When the war ended, British occupation forces chose not to dismantle the Volkswagen works, preserving the infrastructure that would soon drive West Germany’s postwar recovery. From that point, Wolfsburg’s fortunes rose with Volkswagen’s. As the company became a symbol of the Wirtschaftswunder, the ‘economic miracle’, the city grew into a prosperous showcase of the Federal Republic’s rebirth.

For decades, Wolfsburg was the emblem of industrial success. With Volkswagen as its heartbeat, it still reached a GDP per capita of around €146,000 per person in 2022 – more than twice that of London, which has the highest rate in the UK. However, all of this hinges on one company. VW employs 62,000 people in a city of 130,000 inhabitants. ‘Without VW, this city and the entire region would die’, a local resident remarked. ‘We’d become a European Detroit.’

That comment, made in jest a decade ago, now reads more like prophecy. The city’s dependence on its corporate patron has always been near-total. When the company stumbled, so did the town: between 1991 and 1994, tax revenues fell by nearly a third, a foretaste of how exposed Wolfsburg was to the vicissitudes of the car market. Last year, revenue from business tax fell by 40 per cent, causing a city that was once not only debt-free but able to build a rainy-day fund, to plan for austerity measures.

Today, the warning lights are permanently on. Volkswagen’s plant in Wolfsburg has the capacity to produce 870,000 vehicles per year, yet it built barely 490,000 in 2023. Last year, the company announced that it was considering factory closures in Germany for the first time. The EU’s plans to ban the sale of new petrol and diesel cars from 2035 are looming, energy prices are high, regulation is tightening, and the global shift toward electric mobility has put German manufacturers under unprecedented strain. Chinese electric-vehicle makers – leaner, subsidised and quicker to innovate – are capturing market share, while the EU’s regulatory framework and the energy transition have driven up costs at home. For a city that lives and breathes Volkswagen, the consequences are existential.

Although a deal struck with German unions spared Wolfsburg from immediate layoffs, the company still aims to reduce its domestic workforce by 35,000 – amounting to around a quarter of the total – by the end of the decade and trim manufacturing capacity by 700,000 vehicles. The shift exposes deep structural issues in Germany’s economic model – and nowhere is this more visible than in Wolfsburg, VW city.

The parallels with Detroit are not exact but instructive. Both cities thrived as company towns built around a single industry that once embodied national identity. Both enjoyed decades of affluence before the logic of globalisation and deindustrialisation began to turn against them. Detroit’s decline came suddenly, triggered by the oil shocks of the 1970s, foreign competition, and corporate mismanagement. Wolfsburg’s reckoning is slower, but no less dangerous: the internal combustion engine, the product that defined its prosperity, is threatened by technological transition and political pressure, and the transformation to electric mobility demands capital, software and chemical expertise and a nimbleness that legacy firms like Volkswagen have struggled to muster. It will also never require the same quality and quantity of mechanical engineering that has provided so many well-paid jobs in the city.

Efforts to diversify have been made. Wolfsburg AG, a joint public-private initiative between the city and Volkswagen, has sought to attract tech start-ups and build a service sector less dependent on car manufacture. Yet such projects remain modest compared to the scale of the challenge. The problem is not simply one of local employment but of national structure. Germany’s economic model – export-driven, manufacturing-intensive, and reliant on its automotive and machinery base – is showing strain.

Wolfsburg becomes, therefore, a lens through which to view a broader story: a high-cost industrial economy struggling to reinvent itself. The same factors that once made Germany formidable – precision engineering, incremental innovation, dense supply chains – now risk becoming liabilities in a faster, more volatile global market. Productivity growth has stalled, investment lags behind competitors, and the energy crisis following Russia’s invasion of Ukraine has exposed the fragility of the country’s industrial core. Germany also has plenty of connected headaches from slumping educational standards to high energy costs.

The irony is striking. Wolfsburg, born as a utopian vision of German modernity, now stands as a case study in how that very model is running out of road. To call it ‘the new Detroit’ might still overstate the decline – Volkswagen remains profitable, and Wolfsburg has not endured the social collapse that befell its American counterpart – but the comparison captures an essential truth. Both cities embody the fate of an industrial economy confronting its own decline.