I disagree they def had the capability all was needed was the initiative. In ASIP, Colonel Bauer and several other innovative German officers provide this. And it's provided one of the longest lasting TL's in this thread. Winner of a Turtledove as well. But you're entitled to your opinion though. I still disagree.Anyway I think A Shift In Priorities' premise best answers the OP.
Except the most advanced tanks developed by the end of the first world war only had speeds of at most 15km/hour over flat terrain, even slower in France, and operational limits of at max 100 kilometers. This is far too little to achieve operational level encirclement of entire armies. And even if an "encirclement" could be achieved the tanks would have far outrun their infantry support, leaving them vulnerable to destruction. British troops would have have no trouble escaping from the extremely porous encirclement; even during the second world war it was extremely difficult to keep encircled troops trapped even under the best of circumstances. Plus British and French tanks were more numerous by several hundred vehicles. And not only that, by the German offensive in 1918 had no chance of real success anyways; German forces outran their own supply lines very quickly, dooming their advance long term.
Achieving succesful armored encirclement is an extremely complex art which the Germans, whether or not they had better or more tanks, simply lacked the skill, material, and supplies to pull off.