Why are German films often so formulaic even though Germany...

I have seen some very good German movies. It is not that they don't exist, but they hardly ever achieve much fame. Especially since people have been accustomed to the dominance of US popular culture.

Es geschah am helllichten Tag

Besides these, there are some really good children's movies: More recently, the Bibi und Tina series as just one example. Looking back into the 80s and 70s, as well as into the present, I would even say that movies for children are what the German Film industry excels at. There is much less screaming and cake throwing and slimy monsters and much more discussing of matters that affect children in real life (even in phantasy plots) than in most US children's movies as far als I know them. The GDR was particularly well known for excellent children's movies but the west was and is good at it, too.

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Lola rennt

In Wirtschaftswunder times, most Western German movies were junk but the GDR produced some very good ones, e.g. Western movies and Spur der Steine; in the 70s Paul und Paula. I definitely recommend both!

Zur Sache, Schätzchen (and its sequel)

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What is of absolutely horrible quality is the “movies” that are produced for TV. They are famously bad.

Here is a list of some (by no means all) German movies that are considered Classics (and a few that should be, in my opinion):

Es war eine rauschende Ballnacht

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And many I can't think of at the moment.

Berlin - Sinfonie einer Großstadt

In jenen Tagen

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Die Feuerzangenbowle

Nackt