Earthquake in the automotive industry: Why BMW is celebrating while VW and Mercedes are trembling

The winners and losers of the electromobility revolution – An industry in transition

An earthquake is shaking the German automotive industry, and the latest quarterly figures are more than just a snapshot – they are the testament to a dramatic crisis. Rarely before has the gap between the domestic giants been so wide: While BMW is reaping billions in profits with a clear and consistent strategy and confidently shaping the future of electromobility, Volkswagen and Mercedes-Benz are plunging into a deep crisis, marked by strategic missteps, painful losses, and a desperate struggle to catch up.

The decisive turning point that will determine triumph or disaster is the irreversible transformation to electromobility. Bold strategic decisions at BMW are leading to record results and full order books for the "New Class," while hesitation and U-turns at Porsche are dragging the entire VW Group into the red. At the same time, Mercedes-Benz is struggling with its dwindling influence in the once-growth market of China, where local electric car manufacturers are redefining the rules of the game. This article analyzes the stark contrasts in recent financial statements, reveals the strategic maneuvers that lead to success or failure, and shows what is truly at stake for the future of Germany's key industry.

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Divergences in Transition: Why the German Automotive Industry Must Reinvent Itself

The German automotive industry is currently undergoing one of the most significant transformation phases in its history. While some companies are successfully navigating this turbulent period, others are experiencing substantial losses. The quarterly results for the third quarter of 2025 paint a mixed picture of an industry that is redefining itself in many areas, with strategic decisions between combustion engines and electromobility determining its success or failure.

Explosive profits through consistent strategic alignment – ​​The BMW phenomenon

BMW achieved an impressive pre-tax profit of €2.33 billion in the third quarter of 2025, representing a 178 percent increase compared to the same period last year. Net profit was nearly €1.7 billion, more than three times that of the prior-year quarter. These figures are remarkable in themselves; however, it should be noted that the prior-year quarter was impacted by significant brake procurement problems, which reduced production volumes. Regardless of this base effect, however, a solid operational improvement is evident, suggesting a well-conceived strategy.

The Automotive segment's EBIT grew by 33.3 percent, while the EBIT margin rose to 5.2 percent, compared to 2.3 percent in the same quarter of the previous year. The Group as a whole achieved an EBT margin of 7.2 percent. The company delivered 588,140 vehicles in the third quarter, an increase of 8.7 percent compared to the same period last year. Of particular note is the Automotive segment's free cash flow, which grew to €2.7 billion, underscoring the company's financial stability.

BMW is benefiting from a broad product offensive that is not solely focused on electric vehicles. The performance brand BMW M contributed significantly to growth, while electrified models simultaneously gained in importance. The share of electrified vehicles in total sales reached 40.9 percent in Europe, demonstrating that a mixed portfolio can be operated profitably under current market conditions. This strategy allows BMW to avoid dependence on a single drive technology and instead respond to the demand structure in different markets.

Chief Executive Officer Oliver Zipse described the business results as proof of the robustness and resilience of the business model. The company's financing structure enables it to simultaneously achieve European CO₂ targets without additional flexibilization mechanisms. This commitment signals clarity to the market regarding the strategic direction and provides security for both investors and customers.

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Strategic missteps and their consequences – The Volkswagen disaster

The Volkswagen Group, once a proud market leader in Western Europe and with strategic ambitions in Asia, recorded a net loss of €1.072 billion in the third quarter of 2025. This represents a decline of €2.632 billion compared to a profit of €1.56 billion in the same period of the previous year. Such a collapse may seem surprising for a company of this size, but the causes are fundamental and reveal deep-seated problems in corporate management.

The core of the problem lies with the subsidiary brand Porsche, which is facing an existential crisis. Porsche recorded an operating loss of €967 million in the third quarter, compared to a profit of approximately €1 billion in the same period last year. The reason for this dramatic change lies in a strategic realignment that must be described as misguided. Originally, Porsche planned to expand electromobility as a strategic focus. However, this plan was radically revised. Management decided to slow down the development of new electric vehicles and instead extend its commitment to conventional combustion engines. This decision resulted in massive one-off charges of approximately €1.8 billion for restructuring and adapting production lines.

For the Volkswagen Group as a whole, this means that special items, including write-downs on goodwill at Porsche, totaled approximately €7.5 billion. An adjusted result would have yielded an operating margin of 5.4 percent, but the special charges pushed the company into the red. The Group's sales figures also present a mixed picture. While total revenue rose by 2.3 percent to around €80 billion and vehicle deliveries increased slightly, these figures mask significant regional problems.

The core Volkswagen brand, however, showed initial progress through cost-cutting programs. Particularly noteworthy was the 64 percent increase in orders for electric vehicles in Western Europe in the third quarter. This suggests that the core problem is not a lack of market demand for electric vehicles, but rather strategic missteps at the group level, especially at Porsche.

Chief Financial Officer Arno Antlitz emphasized that these one-off effects are temporary and that the restructuring measures are intended to lead to long-term improvements. However, the figures reveal a deep crisis in the management structure and strategic planning. The Volkswagen Group is under enormous pressure not only to realign itself technologically but also to adapt its organizational structures.

Weakness in the premium class – Mercedes-Benz in crisis management

Mercedes-Benz, long a symbol of engineering excellence and profitability, faced significant challenges in the third quarter of 2025. The Group's net income fell by almost a third to €1.19 billion, compared to €1.72 billion in the previous year. Adjusted operating profit (EBIT) declined by approximately 17 percent to €2.1 billion, while reported EBIT plummeted by about 70 percent to €750 million, heavily impacted by restructuring costs exceeding €400 million.

The company's operating margin fell from 11.5 percent in the previous year to around eight percent. This is at the lower end of Mercedes-Benz's own forecast range of four to six percent and suggests inadequate management. Revenue declined by 6.9 percent to 32.1 billion euros, although analysts considered these figures less dramatic than feared.

Sales figures paint a global picture of weakness. Mercedes-Benz delivered 525,300 vehicles, a 12 percent decline compared to the same period last year. The biggest problem was revealed in China, where sales plummeted by approximately 27 percent. This is particularly painful, as China has long been a growth engine for the company. The reasons for this slump are manifold: high interest rates, geopolitical uncertainties, and, above all, the increasing dominance of local electric vehicle manufacturers such as BYD and Nio have significantly reduced demand for premium vehicles from European manufacturers.

Added to this are the new US tariffs on imported vehicles, which, according to the company, impacted the balance sheet by a mid-three-figure million-dollar amount. These external factors, combined with increased production costs and the pressure to restructure production, led to the weak balance sheet.

A bright spot emerged in the field of electromobility. The number of purely electric vehicles rose by 22 percent to 42,600 units. Together with plug-in hybrids, the share of electrified models reached approximately 18 percent of total sales. CEO Ola Källenius emphasized that the quarterly results met expectations and announced intensified cost-cutting measures. The company is focusing more on profitable segments and has begun launching new electric models such as the GLC to improve its competitiveness. The company has sufficient financial resources, with net liquidity of approximately €27 billion, to finance this transformation.

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Porsche at a turning point – The costs of strategic reorientation

Porsche serves as a case study for the consequences of contradictory strategic decisions. In the first nine months of 2025, the company recorded a 95.9 percent decline in net revenue to just €114 million. The operating margin, which in better years reached up to 15 percent and distinguished Porsche as the most profitable German automaker, fell to a mere 0.2 percent.

The reason for this slump lies in the aforementioned strategic realignment announced in September 2025. Instead of maintaining its planned aggressive electrification strategy, Porsche decided to delay or redesign key electric models and instead focus more on conventional combustion engines and plug-in hybrids. This decision was justified by market realities: demand for fully electric models was weaker than expected in many regions. However, this argument is questionable, as it is not based on empirical data but rather reflects ideological considerations.

Porsche's sales figures paint a mixed picture. Total sales fell by six percent between January and September to approximately 212,000 vehicles. The decline was significantly steeper in Germany, at 16.7 percent. China was particularly problematic, with a drop of around 26 percent. The 911 and the Cayenne remain the top sellers, with the electric share of new registrations in Germany (Macan and Taycan) at around 30.5 percent. This suggests that there is indeed market demand for electric vehicles in this segment.

The restructuring costs amount to approximately €1.8 billion for 2025 and include adjusting production processes, canceling planned battery manufacturing facilities, and redesigning model series. CFO Jochen Breckner justifies these decisions by arguing that short-term losses must be accepted to ensure long-term profitability. However, this logic is questioned by many market analysts, as global electromobility trends are moving in the opposite direction.

A change in leadership will take place at the end of 2025. Oliver Blume, who led the company during this crisis and is also Chief Executive Officer of the Volkswagen Group, will relinquish his dual role. From 2026, Michael Leiters, a former manager at McLaren, will take over the company. In parallel, Porsche is planning a comprehensive cost-cutting program with approximately 1,900 job reductions by 2029. Chief Financial Officer Breckner expects 2025 to mark the low point and a noticeable improvement to begin again from 2026 onwards.

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Global market forces: China as both driver and threat

The fundamental differences in the performance of German automakers can only be fully understood by considering global market dynamics. China is the key factor here. The electric vehicle market in China experienced growth of 24.5 percent in the first three quarters of 2025, with a total of 8.89 million new registrations. This corresponds to a market share of 52.4 percent of all vehicle sales in China. Battery electric vehicles (BEVs) recorded even stronger growth of 32 percent, increasing their share of the overall market to 32.1 percent.

This development poses a massive challenge for German automakers. The Center of Automotive Management found that the VW Group achieved a market share of only 0.9 percent in the rapidly growing electric vehicle market in China, a decline of 51.3 percent compared to the same period last year. BYD leads with a market share of 28.7 percent, followed by Geely with 12.3 percent. This reveals the deep problem: German manufacturers cannot compete in the fastest-growing market for the global automotive industry.

The reasons lie in several factors. First, Chinese manufacturers have developed cost advantages in battery production, enabling them to produce price-competitive electric vehicles. Second, they specialized in electromobility early on, while German manufacturers long wavered between combustion engine and electric technology. Third, Chinese manufacturers have a deep understanding of the local market and can produce vehicles that meet its demands. Furthermore, the Chinese government has clearly signaled that electric vehicles are no longer listed among the strategically important industries, indicating that subsidies for the sector will end and a period of market consolidation is imminent.

For German automakers, this means that long-term growth prospects in one of their most important markets are currently extremely limited. Mercedes has felt this most acutely, with a 27 percent decline in China. BMW, which is less dependent on this market, recorded an increase of 11.2 percent. This underscores the importance of a diversified geographic presence.

The picture is different in Europe. The electric vehicle market is growing more dynamically than expected. In the first nine months of 2025, 2.72 million new electric vehicles were registered, a growth of 27.7 percent compared to the previous year. The market share of electrified vehicles reached 27.4 percent in Europe. Battery electric vehicles (BEVs) grew by 25.4 percent. This offers German manufacturers an opportunity to maintain their market position.

Salvation through technological realignment – ​​The New Class from BMW

The centerpiece of Germany's competitive strategy is BMW's so-called New Class. This name harks back to the vehicles of the 1960s that led the company out of an earlier crisis. Today, the New Class marks a similarly significant turning point. The first production model, the iX3, was presented at the 2025 IAA in Munich and attracted considerable attention.

The BMW iX3 is based on a completely new vehicle architecture designed specifically for battery-electric powertrains. The vehicle promises several technological improvements. Its range is expected to reach up to 805 kilometers according to the WLTP test procedure. The 800-volt charging architecture enables significantly faster charging times compared to 400-volt systems. BMW has fundamentally revised the software and operating concept, thereby addressing known weaknesses of previous electric vehicles from German manufacturers, which suffered from jerky systems and interminably long charging times.

The starting price is under €70,000, which is significantly cheaper than comparable models in the premium segment and also below the price of the traditional combustion engine X3. This is a strategic signal that BMW not only wants to target customers with unlimited budgets but also aims to be competitive in the mass-market premium segment.

Market acceptance has been surprisingly strong. In the first six weeks after its unveiling at the IAA, the iX3 received over 3,000 orders. This is significantly higher than the levels of previous models such as the combustion engine X3. Remarkably, customers ordered the iX3 at this early stage without a test drive, indicating confidence in the brand and the compelling nature of the product concept. However, production capacity in Hungary, where the New Class is manufactured, could become a limiting factor. BMW managers are already indicating that the available capacity will not be sufficient to meet the high demand in 2026.

BMW plans to launch a total of six models in its New Class by 2027. These will cover the model range from entry-level vehicles to higher-end segments. The long-term vision is for the New Class to become the new standard at BMW and to dominate the product line in the coming years.

European coordination and its limits

Parallel to BMW's initiative, other European manufacturers have also developed new electric vehicle platforms. Mercedes is launching the GLC based on the MB.EA platform, while Volkswagen is presenting the ID. Polo and ID. Cross as affordable entry-level models. Analysts predict that BMW, with its iX3 strategy, could play a key role in shaping European competition.

The problem, however, is that this European coordination is staggered and not always based on the same strategic clarity. While BMW pursues a consistent line, Porsche and Volkswagen contradict each other. Mercedes balances between different strategies. This opens up opportunities for faster and more decisive players, both within Europe and globally.

Structural change: What the crisis really means

Beyond the short-term quarterly results, the figures reveal a deeper structural shift in the automotive industry. The ability to consistently pursue electromobility while maintaining cost efficiency is becoming a strategic differentiator. BMW has found this balance, Volkswagen and Porsche have lost it, and Mercedes is trying to regain it.

Analysts from management consultancies such as McKinsey and Oliver Wyman warn of drastic consequences for companies that fail to successfully complete this transformation. They project that up to a third of industrial value creation could be lost by 2035, amounting to approximately €440 billion, should the transformation fail. Job losses in the six-figure range are already underway. Volkswagen has announced 35,000 job cuts, and Porsche plans to eliminate 1,900 positions by 2029.

The German automotive industry is not merely experiencing a cyclical downturn, but rather undergoing a fundamental restructuring of its business models, value chains, and organizational structures. Companies that successfully navigate this transformation will emerge stronger. Companies that hesitate or choose flawed strategies risk long-term decline.

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The geopolitical environment is exacerbating the situation.

Another dimension of the crisis lies in the worsening geopolitical uncertainties and trade barriers. US tariffs on imported vehicles are already impacting the balance sheets of German manufacturers. New trade tensions and potential tariff increases could exacerbate the situation. This particularly affects manufacturers that produce in the US or import, and it intensifies the urgency of establishing or expanding local production facilities.

European regulations surrounding the ban on internal combustion engines from 2035 onwards are creating additional uncertainty. Some European politicians have attempted to weaken this ban and allow plug-in hybrids and e-fuels. This is causing confusion among consumers and investors regarding the medium-term direction of the industry. However, expert analyses show that this approach is counterproductive, as it delays the necessary investments in genuine electromobility and thus jeopardizes the competitiveness of European industry.

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A transitional market with clear winners and losers.

The quarterly results of German automakers reveal an industry in transition. BMW demonstrates that it is possible to achieve profitable growth while simultaneously pursuing a consistent electrification strategy. The secret lies in the breadth of its product portfolio, the clarity of its strategic direction, and its ability to combine cost management with product innovation.

Volkswagen and especially Porsche demonstrate the dangers of contradictory strategic decisions. The constant switching back and forth between combustion and electric technology, coupled with massive restructuring costs, leads to losses and confusion among stakeholders. Mercedes is in a transitional phase but possesses the financial resources and technological know-how to emerge from this crisis, provided its strategy remains consistent.

Global competitive dynamics, particularly in the Chinese market, will be crucial in the coming years. German manufacturers must improve their cost efficiency, rebuild their presence in China, and strengthen their European position. BMW's New Class could prove to be a game-changer, but success is not guaranteed. The next two to three years will be decisive for the long-term competitiveness of the German automotive industry.

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