German automakers struggle as China's market dominance reshapes global competition
Germany's auto industry is facing severe challenges as sales and exports to China plummet. Volkswagen and Porsche are among the hardest hit, with profits shrinking and market shares declining. Meanwhile, Chinese competitors are expanding their presence in Europe, deepening the pressure on German manufacturers. Volkswagen's financial struggles have worsened, with operating profits falling by 53% in 2025 to just €8.9 billion. Margins now stand at 2.8%, a sharp decline from previous years. In response, the company is exploring new strategies, including repurposing its Osnabrück plant to produce parts for Israel's Iron Dome missile defence system.
German auto exports to China have collapsed, dropping from nearly €30 billion in 2022 to €13.6 billion by the end of 2025—a 54% decline. The fall is largely due to China's state subsidies for domestic carmakers and an undervalued currency, making foreign vehicles less competitive. Germany's trade deficit with China has also hit a record €90 billion. Porsche's struggles are equally stark. Its shares now trade at around €37.50, barely above their 52-week low and 14% below the 200-day moving average. The brand's market share in China has halved since 2022, falling from 1.2% to roughly 0.6% by 2025. Weak sales, economic slowdowns, and rising competition from local electric vehicle makers have pushed Porsche behind rivals like Mercedes-Benz (stable at ~2.5%) and BMW (growing to ~3.2%). Adding to the pressure, Chinese automaker Geely has launched Geely Technology Europe. The move aims to cut the delay between product launches in China and international markets to under six months, further tightening competition for German brands.
The shift in China's auto market has left German manufacturers with shrinking profits and declining influence. Volkswagen's potential move into defence production signals a strategic pivot, while Porsche's falling sales and share prices reflect broader industry struggles. With Chinese firms accelerating their global expansion, Germany's automotive sector faces an increasingly difficult road ahead.
