2025 was a record-breaking negative year for German car manufacturers. In addition to tariffs imposed by US President Donald Trump, companies faced billions in costs from strategic restructuring.
Porsche was hit particularly hard. Rather than sticking exclusively to fully electric models — which fell short of sales expectations — the carmaker is now shifting back to developing new combustion‑engine vehicles. The roughly €3.9 billion ($4.5 billion) cost of this pivot, combined with tariffs, almost entirely erased last year’s profits.
Volkswagen and Mercedes‑Benz also saw revenues stagnate in 2025, while profits fell sharply. BMW was a notable exception: while profits at Volkswagen and Mercedes were nearly halved, BMW fared significantly better, with a decline in net margin of only about 3%.
Bleak mood in German car industry
Overall, German car companies earned nearly 44% less in 2025 than in 2024. BMW, Mercedes and the Volkswagen Group together reported earnings before interest and taxes of just €24.9 billion in 2025 — the lowest level since 2020, according to calculations by the German business daily Handelsblatt.
The mood in the industry is bleak, but Frank Schwope, an automotive consultant and lecturer at the Cologne University of Applied Sciences for SMEs (FHM Köln), says the firms are far from collapse. “All of them are still making profits, and dividends are still being paid out,” he said, noting that manufacturers were spoiled by the exceptionally high profits of 2021–2023. He suggests comparing current profits to levels around 2019 for perspective.
COVID and the German car industry
In 2018, Volkswagen, BMW and Daimler (now Mercedes‑Benz) generated a combined net profit of just under €30 billion. The low point came in 2020, when the three made around €16.6 billion amid pandemic shutdowns — still better than feared. Then 2021 became a boom year: combined profits exceeded €40 billion as supply shortages pushed up prices and companies focused on more profitable premium models.
Car market remains volatile
Those swings underline how volatile the car business is. “First, I see the technological transformation and its costs; second, structural problems such as overly long decision‑making processes; and third, the weakness of the Chinese market,” car analyst Jürgen Pieper told DW.
For Volkswagen, growing competition from domestic Chinese manufacturers hit market share there. But at the start of 2026 a turnaround began: data from China’s passenger car association reported by Reuters showed VW regaining market leadership in the first two months of the year. With a combined market share of 13.9% (together with partners SAIC Motor and FAW Group), VW moved back into first place, followed by Geely at 13.8% and Toyota at 7.8%. The shift was driven largely by falling government subsidies for electric vehicles, which squeezed pure EV makers like BYD, while demand for traditional combustion models from VW and Toyota held up.
Car industry remains in flux
Regardless of performance in key markets such as China and the US, the pressure to adapt is intense. “Automakers continue to be restructuring projects and will have to review their structures every year. The geopolitical situation, punitive tariffs and new Chinese competitors are not making life any easier,” Schwope said. He also pointed to the expected widespread adoption of autonomous driving around 2030.
Pieper said BMW is particularly well positioned, crediting its technological openness. BMW benefited from not focusing solely on electric vehicles, having completed much of its development spending for new models, and by ramping up production at its Spartanburg, South Carolina plant — which helped it avoid some US tariffs. The Spartanburg plant builds around 400,000 cars a year, with over 60% exported.
Schwope is optimistic about Porsche. “A luxury manufacturer like Porsche will certainly recover from the crisis faster than a mass‑market producer like Renault or Fiat,” he said. “A Porsche customer sticks with their car; an Opel customer might switch to a Chinese brand.”
German carmakers still on the brink?
Pessimists claim Germany’s carmakers are finished, but Schwope disagrees. “The obituary is premature,” he said. He recalled how Tesla was once seen as unbeatable before Chinese manufacturers caught up, and noted that solid‑state batteries could be a game changer for electric mobility.
German automakers are investing in that technology: Volkswagen plans to begin mass production of electric cars with solid‑state batteries from 2028, while BMW and Mercedes‑Benz aim for around 2030. Pieper describes progress so far as incremental — a hallmark of German engineering — but stresses that these are sustainable improvements and points to a slow, steady turnaround.
This piece was originally written in German.