5 shocking figures: Why the German auto industry is now fighting for survival

Expensive electricity, cheap Chinese imports: The perfect storm for VW and Mercedes

The German automotive industry is facing perhaps its biggest crisis since the diesel emissions scandal. What some recently dismissed as a mere cyclical downturn is revealing itself in 2026 as a profound structural threat. The once-leading companies Volkswagen, BMW, and Mercedes-Benz are under immense pressure from both within and without. Plummeting profits, a historic sales collapse in the once-booming Chinese market, and the pressing import pressure from cheap Chinese electric cars are increasingly suffocating the automakers. Added to this are exorbitantly high energy costs and shrinking domestic production, which is already resulting in a shockingly large number of job losses. Let's take a detailed look at five alarming developments that ruthlessly demonstrate why piecemeal measures are no longer sufficient and why the industry is facing an unprecedented crisis.

Five figures the German auto industry cannot ignore: A profit slump that allows no further postponement

In the first half of 2026, BMW, Mercedes-Benz, and Volkswagen together delivered only 6.3 million vehicles – around six percent fewer than in the same period of the previous year – marking their lowest half-year figure since 2022. Volkswagen's net profit plummeted by around a third in the second quarter to €1.54 billion; for the entire first half of the year, profit fell by more than 30 percent to €3.1 billion. BMW also reported a significant drop in profits coupled with declining revenue. These are not cyclical fluctuations that every industry occasionally experiences. Consultants from Oliver Wyman are already describing the current situation as the biggest crisis in the German automotive industry since the diesel emissions scandal, and BMW, Mercedes, and Volkswagen are currently generating their lowest combined profits in 16 years. Anyone who considers these figures in context quickly realizes that this is not a problem limited to individual models or plants, but rather an industry-wide, structural shift.

China was the engine of growth, now it is the biggest risk

The most striking single factor in the current half-year results is the Chinese market. Sales figures for the three major German manufacturers there plummeted by more than 25 percent in the first half of 2026, to just over 1.4 million vehicles delivered – the lowest level since comparative data began being available in 2017. Volkswagen and Mercedes recorded declines of around 26 and 28 percent respectively, while BMW saw a drop of about one-fifth. For over two decades, China was the most important growth market and profit generator for German manufacturers. Today, it has become, conversely, their biggest operational problem area, and at a speed that has surprised even experienced industry observers.

The reason isn't solely in the electric vehicle segment. While German manufacturers sell hardly any electric models in China compared to their domestic competitors, their traditionally strong combustion engine business is also coming under pressure. The reason: Chinese manufacturers have continuously improved their quality, software, and pricing across all vehicle segments. This means German companies are losing ground on two fronts simultaneously – in future technologies and in their core business – which explains the severity of the decline.

Overcapacity in China is becoming a European import problem

The slump in Chinese sales for German manufacturers is only one side of the coin. The other side is a massive overcapacity in production within China itself, which is increasingly being reduced through exports, with Europe being one of the most important target markets. According to analyses by the European Parliament, Chinese electric vehicle production exceeded domestic demand by over one million units in 2024, while China accounted for 72 percent of global electric vehicle production. Automobile exports from China grew by 165 percent between 2020 and 2024, significantly more than overall industrial exports.

Even after the European Union imposed countervailing tariffs on Chinese electric vehicles, import pressure remained high. While the share of vehicles manufactured in China in EU electric car sales fell from a peak of 22 percent in 2024 to 17 percent in the first quarter of 2026, the share of Chinese brands among vehicles shipped from China simultaneously rose from 35 to 54 percent. This is partly due to European and American manufacturers scaling back their own production in China. For plug-in hybrids, which are exempt from tariffs, the share of Chinese production in EU imports even increased from 37 percent in 2024 to 60 percent in 2026. Despite the tariffs, Chinese electric vehicles remain on average 21 percent cheaper than comparable European models. For German manufacturers, this creates a pincer effect, working from two sides simultaneously: declining sales in the Chinese domestic market itself and increasing import pressure from Chinese brands in the European domestic market.

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The factories in Germany are producing noticeably less

Parallel to these market shifts, the crisis is directly reflected in German production figures. According to the German Association of the Automotive Industry (VDA), around 301,600 passenger cars were produced in Germany in May 2026 – a decrease of 18 percent compared to the same month of the previous year. In the first five months of 2026, a total of 1.724 million vehicles were manufactured, five percent fewer than in the same period of the previous year. Production was thus 19 percent below the level of the pre-crisis year 2019. Total German production had already fallen from 5.9 million vehicles in 2011 to 4.1 million in 2024, a decline of 1.8 million units within 13 years. For 2026, the credit insurer Atradius expects a further production decline of 2.7 percent.

This development has a direct impact on employment. According to Atradius, around 50,000 jobs were lost in the German automotive industry in 2025 alone, and a further 20,000 job losses are expected for 2026. At Volkswagen alone, according to Tagesschau reports, in addition to the already decided reduction of 50,000 jobs in Germany, up to 50,000 more jobs worldwide are under discussion, and four German production sites are considered at risk. Ironically, those plants that were already classified internally as particularly cost-intensive are especially affected, such as the VW plant in Zwickau, whose output declined significantly in the first two months of 2026.

Energy costs are exacerbating a problem that is already significant

One factor that often takes a backseat to sales figures in public discourse, but directly impacts structural competitiveness, is energy costs in Germany's industrial sector. According to the latest Energy Transition Barometer from the German Association of Chambers of Industry and Commerce (DIHK), for which around 3,100 companies were surveyed in June 2026, the overall index has fallen again to minus eleven points. Around two-thirds of industrial companies see their competitiveness hampered by energy costs. Among large industrial companies, the proportion already implementing production relocations abroad is around one-third, and approximately 60 percent of large industrial companies are actively exploring relocation options. The increase is particularly drastic for transportation energy: 83 percent of the surveyed industrial companies reported price increases within just one year.

For a capital-intensive, energy-consuming industry like automotive manufacturing, where press shops, paint shops, and increasingly battery production require significant amounts of electricity, these cost increases directly compound the existing weakness in sales. A plant struggling simultaneously with declining capacity utilization and rising energy costs per unit produced finds itself in a double cost bind that can hardly be resolved by simply increasing sales alone.

What follows from the numbers

The combination of these five developments – the industry-wide profit slump, the collapse of sales for German brands in China, Chinese export overcapacity putting import pressure on the European domestic market, the decline in German domestic production along with job losses, and structurally rising energy costs – paints a picture in which individual countermeasures are hardly sufficient anymore. A factory closure addresses the declining capacity utilization but does not solve the Chinese sales problem. A purchase premium for electric vehicles supports domestic demand in the short term but does nothing to change the cost gap compared to Chinese imports, which, according to current market analyses, are still offered at around one-fifth the average price. And while lower energy prices would improve the cost base in Germany, they would not regain the lost market share in China.

The German automotive industry is thus facing a confluence of problems that in the past usually arose individually and sequentially, but are now impacting balance sheets simultaneously. This explains why industry consultants classify the current profit declines at BMW, Mercedes, and Volkswagen not as a temporary period of weakness, but as a profound structural crisis whose outcome is completely uncertain at this point.

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