German automakers struggle with a crisis in 2025 due to tariffs, falling profits, and strategic pivots, but experts see potential for recovery.
German automakers are in crisis due to stagnant sales, falling profits, and frequent strategy shifts, as reported by DW World. In 2025, the industry faced record losses exacerbated by U.S. tariffs imposed by President Donald Trump and billions in restructuring costs.
Financial Struggles of Major Players
Porsche experienced significant setbacks, shifting from fully electric models to new combustion-engine vehicles at a cost of about €3.9 billion, which nearly wiped out its profits amid tariffs. Volkswagen and Mercedes-Benz saw revenues stagnate and profits drop sharply in 2025, with combined earnings before interest and taxes falling to €24.9 billion for BMW, Mercedes, and the Volkswagen Group, the lowest since 2020.
BMW stood out with only a 3% decline in net margin, performing better than its counterparts. Overall, German car companies earned nearly 44% less in 2025 compared to 2024, highlighting the sector's volatility.
Historical data shows that in 2018, the three major manufacturers—Volkswagen, BMW, and Daimler—generated around €30 billion in net profit, which dropped to €16.6 billion in 2020 due to the COVID-19 pandemic. Profits soared to over €40 billion in 2021 amid supply chain issues that favored premium models.
In early 2026, Volkswagen regained market leadership in China with a 13.9% market share, surpassing Geely at 13.8%, driven by steady demand for combustion-engine models as electric vehicle subsidies declined. This turnaround eased some pressures on German firms in the world's largest car market.
Experts like automotive consultant Frank Schwope noted that despite the downturn, German carmakers remain profitable and continue paying dividends, comparing current figures to pre-COVID levels. Car analyst Jürgen Pieper highlighted challenges including technological transformation, long decision processes, and weakness in China.
Looking ahead, German automakers are investing in solid-state batteries, with Volkswagen planning mass production by 2028 and BMW and Mercedes-Benz targeting 2030. Analysts see incremental improvements in products as a sign of sustainable progress for the industry.
