In the early afternoon 15th Panzer Division, having rested after its night drive, came roaring up, made its first strike to the north, swung wide of Sidi Rezegh and then turned east to encircle the main British force from the west This now had the 90th Light to the north, 21st Panzer to the east, Battle Group Mickl, a new formation chiefly artillery in composition, and Ariete to the south-east.
When the German units were in position Mickl Group, supported by a machine gun battalion and 8th Panzer Regiment, began to exert pressure upon the New Zealanders. Then the British corridor into Tobruk came under fire. Fresh, unsupported, and unsuccessful British attacks to rescue the trapped colonial troops were made from the south but these were thrown back by the combined strengths of Mickl Group, Ariete Division, and the left wing of 21st Panzer Division. British armour then probed for a weak spot in the German ring and Axis reconnaissance units reported that enemy forces were in movement from Bir el Gobi in the west. The 21st Panzer came under pressure from British forces outside the encirclement. During the night of 30 November/1 December, the South Africans made an unsuccessful assault to break the German noose and the New Zealanders were then ordered to break out south-eastwards.
In the foggy light of 1 December the 15th Panzer made its killing thrust from the north of Sidi Rezegh. The battle group was made up of 8th Panzer Regiment with elements from 90th Light, 200th Regiment, a machine gun battalion, 15th Motor Cycle Battalion, and two battalions from 33rd Artillery Regiment as well as a 21cm howitzer battery. Heavy resistance by 8th Army at first delayed the advance but by 10.40hrs the encircled Imperial troops had been captured while outside the ring 4th Tank Brigade and other British units mounted a series of fierce assaults on Mickl Group and 21st Panzer Division to ease the pressure upon the trapped New Zealanders.
By late afternoon of 1 December it was nearly all over. The 15th Panzer and 90th Light Divisions had overcome the British defences and by linking hands had cut Tobruk off again, although the garrison of the town had lengthened the perimeter by a further 8 miles and held the strategic height which dominated the Axis supply route.
As the December daylight faded the remaining New Zealand units were destroyed one by one and by 2 December, after five bitter days of battle the fighting died away. Two thousand prisoners had been taken, together with more than 40 guns and a mass of equipment. The last two days had truly been a battle of attrition and at the close of the fighting foe and friend alike sank exhausted to the ground. Operation Crusader had ended.
Although 2 December marked the end of the Crusader offensive the campaign continued and the immediate post-battle interlude was used by both sides to regroup their forces. Each side had at least one division which was still ready for action. For the British this was 4th Indian which in the days after Crusader sealed off once again and even more strongly the Axis garrisons in Bardia, Sollum, and Halfaya.
On the German side 15th Panzer was still fit for action but the strength return of that formation gives an indication of how hard had been the battle. On the evening of 1 December only 11 Panzer II, 24 Panzer III, and 3 Panzer IV remained. The Africa Corps report for 3 December stated that more than 167 of its tanks and armoured cars were a total loss. The Italians had lost more than 90 of their armoured fighting vehicles but the British had suffered the destruction of over 800 machines. In personnel the German casualties were 600 killed, 1900 wounded, and 2200 missing. The Italians suffered less as the bulk of their forces were not so deeply involved. The British and Imperial forces had lost heavily and more than 9000 of 8th Army had been taken prisoner.
Most battles have a tactical and a strategic outcome. Strategically the British won the day for they wece able continually to reinforce their Army and go on to push the Axis forces out of Cyrenaica. The Germans had gained a tactical success and had used mobility, the speed of attack, and the greater range of their tank guns to reduce the numerical superiority of their British opponents. When attacking they struck at the weakest part or element of the 8th Army line with the strongest possible force and, when forced on to the defensive had fought aggressively. Their intention had been to destroy the British force; mere possession of ground they saw was unimportant and could under certain conditions be a burden. They had, therefore, been prepared to give ground temporarily to conserve strength in order that, at the appropriate time, strength would be available for them to make a counterstroke and to regain the territory which had been lost.
Against the new British attack which opened on 8 December and which had come up from Bir el Gobi the Germans had no more strength and as the Italian motorised Corps could not be ready in time to take up its defensive position, panzer group ordered the withdrawal to begin. The Axis troops fell back upon the Gazala line but so closely did the British pursue them that they reached the Gazala positions at the same time as the Italians.
Cyrenaica was indefensible. Rommel recognised the truth of that thesis or, to qualify the thesis, it was indefensible with the forces which he had available. Wavell had been the first to prove and Rommel had gone on to show that the deserts which lay to the south of the great curve of the Gulf of Bomba presented no obstacle to the determined commander. Although he resolved not to give ground without a battle and was prepared to offer the most determined resistance whenever possible, Rommel's decision to withdraw from the province was completely misunderstood in Rome, Berlin, and, even by his superior, Bastico. This latter set his face absolutely against the evacuation of territory until Rommel offered him the alternative of either agreeing to give up ground or of trying to hold Cyrenaica without German troops, for Rommel was quite prepared to leave the Italians to fend for themselves if his plan was not followed. Kesselring, the Supreme Commander South, intervened and together with a number of German and Italian officers opposed Rommel's intention for they considered the loss of Cyrenaica would have political repercussions for Mussolini. Rommel dealt with their objections poim by point and convinced them that, in view of the continuing and omnipresent problems of insufficient men and supplies, there was no other choice.
A new British thrust on 16 December threatened the panzer force with encirclement but Rommel ordered that battle be avoided and that his troops break out. He knew the true weakness of his command and that if it were to stand and fight then its strength would be reduced to a point where Tripolitania could no longer be defended. Nothing but defeat could be gained from fighting.
The Axis forces flooded westward withdrawing past the fortress of Tobruk and giving ground in the face of 8th Army's pressure. By Christmas Benghasi had fallen, although at a high cost to the British in men and material, and still the rearward movement continued until the whole Axis army had moved back to take up the new battle line in the prepared positions which ran from Marada to Marsa el Brega. By 7 January this move had been carried out and. with a shorter line to defend, Rommel could now begin to build up strength again to mount an offensive which would capture Cyrenaica and drive forward to the Suez canal. Hundreds of miles to the east Halfaya still held out unsupported and without hope of reinforcement. It was to continue its resistance until 17 January but then when its water supply was cut the garrison surrendered.
Rommel's counter-offensive opened on 19 January and under cover of a sand storm the Panzer Army made a surprise thrust towards El Agheila. Two days later an infantry and a machine gun Battle Group Marcks, was led in person by the German commander-in-chief through the mine-fields east of Marsa el Brega while the main of Africa Corps moved south of the Via Balbia. Agedabia was captured and immediately the Stuka squadrons occupied the field and from this front line position came into action against British tank forces. If the offensive had shocked the British it had come as a complete surprise to Rommel's superiors in the OKW and in the Commando Supremo, for Rommel had allowed no word of his intentions to be known.