In the first half of 2025, Mercedes-Benz saw its profit fall by 56 percent, Volkswagen's profit fell by a third, while BMW's pre-tax profit fell by 29 percent
German car manufacturers they intend to plead again for sales incentives at today's meeting with Chancellor Friedrich Mertz electric cars. The state will help, but the problem lies elsewhere.
Never before has state support been so crucial to the survival of the German automotive industry. The crisis "Automotive Summit" (Autogipfel) this Thursday (October 9.10) in Berlin between political leaders, representatives of the automotive industry and trade unions, is taking place at a time of deep crisis and at a time when the sector is facing stagnation, mass layoffs and a difficult transition to electric vehicles, writes Deutsche says.
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Once dominant in engineering sophistication and brand prestige, manufacturers such as Volkswagen, BMW and Mercedes are now lagging behind Chinese rivals in software innovation and capturing the electric vehicle market. Chinese companies like BYD and Nia are aggressively expanding into the European market, offering cheaper and more technologically advanced electric vehicles.
Meanwhile, US President Donald Trump's protectionist policies have dealt an additional blow to the German auto industry's most important export market.
Now, signals are piling up that Berlin is preparing for a decisive response during this crucial meeting with the automotive sector.
German Chancellor Friedrich Mertz has called for the abolition of the planned ban on internal combustion engines in the European Union, which should enter into force in 2035.
The measure, introduced three years ago, provides for heavy fines for automakers if they fail to cut carbon dioxide emissions, but Merc's conservatives have called it a "straitjacket" for the auto industry's competitiveness. The ban is currently under review in Brussels due to strong lobbying by the car industry.
On Monday, Mertz said the planned ban was "wrong," adding: "We shouldn't be banning, we should be enabling technologies. That's my goal."
Craig Maley, chief strategist at research firm Cox Automotive, believes that Merc's call for a delay could undermine confidence in the transition to electric vehicles.
"Consumers need clarity, not ambiguity in these uncertain market conditions," Maley told DW. "While some are concerned that the 2035 deadline is stifling innovation, consumers need reassurance that electric transportation is the technology of the future."
Other analysts, such as Sander Tordoir, chief economist at the London-based Center for European Reform (CER), see Mertz's defense of petrol and diesel as a "sideshow" to the much bigger threat facing Germany.
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"It's hard to argue that a ten-year deadline is the main reason why Germany lost half of its net car exports in the last four years," Tordoir told DW. "Obviously there's something else going on - and that's China. That's why an industrial and trade response to China is needed."
Tordoir added that it was not clear whether Germany could overturn the EU regulation so easily on its own, while local media reported that a compromise could be reached at Thursday's meeting that would allow the sale of hybrid vehicles - those that combine a battery and an internal combustion engine - beyond 2035.
Ahead of the talks, German Finance Minister Lars Klingbeil (SPD) announced the extension of tax breaks for electric vehicles to re-stimulate demand – both in the private, business and public sectors. The tax credit, which was due to expire on January 1, 2026, is now set to be extended until the end of 2030.
"An obvious step would be to reintroduce the subsidies for the purchase of electric vehicles, which Germany abolished at the end of 2023, and then harmonize them at the level of the European Union," says Tordoir of the CER, alluding to a discount of up to 7.500 euros for the purchase of a new electric vehicle. "Across the continent there is excess capacity and a shortage of demand for European cars. That's why we have to operate in the demand sector."
German business daily Handelsblat reported this Tuesday that Berlin wants to combine support for the auto industry with aid to the domestic steel sector. This would allow automakers to relax their CO₂ emissions targets if they use European "green" steel, which is more environmentally friendly than China's.
The problems of the German auto industry have been described as a "polycrisis" - marked by slowing sales of electric cars, fierce Chinese competition, rising US tariffs, high energy and labor costs, and structural changes towards electromobility.
In the first half of 2025, Mercedes-Benz recorded a 56 percent drop in profit, to 2,7 billion euros, Volkswagen's operating profit fell by a third, to 6,7 billion euros, while BMW's pre-tax profit was reduced by 29 percent, to 4,02 billion euros.
Car exports from Europe to China, dominated by Germany, fell by 42 percent in the first half of the year, according to Eurostat data. In the same period, exports to the US decreased by 13,6 percent.
The sector lost around 6,7 percent of Germany's workforce, nearly 52.000 well-paid jobs – between June 2024 and June 2025, according to a report by global consultancy EY.
The crisis has also spread to parts suppliers, with almost half of them describing their current situation as "bad" or "very bad", according to a survey by the German Association of the Automotive Industry (VDA).
Almost two-thirds of suppliers are planning layoffs, and about 80 percent are planning to postpone, move abroad or cancel planned investments. Almost no one plans to increase them, because they do not expect business conditions to improve in the near future, according to a survey published this week.
Tordoir called on Berlin and Brussels to pay more attention to strengthening the European car industry as a whole, noting that France, Italy and Spain are also losing world market share to China.
"The best way out is to encourage our own, European market, which is still large and has the potential to create more demand than now," Tordoir explains to DW.
France, for example, has revised its incentive program of up to €7.000 per vehicle to exclude those from outside the EU, including Chinese vehicles produced with high-coal energy. Chinese electric vehicles also face EU tariffs of up to 45,3 percent, although many manufacturers have negotiated significantly lower rates.
Some analysts believe the EU should adopt a global strategy to stem the flood of Chinese electric vehicles that receive heavy subsidies from Beijing. This, they say, can be achieved by strengthening relations with other major car manufacturers in the world, such as Japan, South Korea, the United States and Great Britain.
Despite numerous challenges, car production in Germany is far from over. With the right mix of policies and strategic investments, many experts believe that the industry can be given the time it needs to adapt, innovate and remain competitive in a rapidly changing global market.
Sander Tordoir, for example, believes that the European automotive industry "still has room for improvement, and Europe definitely has the potential to build the cars of the future."
"It's worth providing some support to stay in the race and to get the transition to the new era right," says Sander Tordoir, chief economist at the London-based Center for European Reform.
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