Germany's automotive sector is grappling with its most significant crisis since the post-war era. Major manufacturers like Volkswagen, BMW, and Mercedes-Benz have reported substantial profit declines, with Volkswagen's China deliveries plunging 36.6% in the April-June 2026 quarter.
The crisis is multifaceted, stemming from intensified competition, particularly from Chinese automakers, and the industry's sluggish transition to electric vehicles (EVs). In the first quarter of 2026, German carmakers' revenues fell by 4%, while Japanese and U.S. manufacturers saw a 2% increase.
The impact on employment is severe. In 2025 alone, nearly 50,000 jobs were lost in the sector, totaling 111,000 since 2019. The shift towards EVs, which require fewer components, has further exacerbated job losses. The German Association of the Automotive Industry (VDA) warns that without bold decisions, the sector faces potential collapse.
The crisis is also affecting the supply chain. The ifo Institute's Business Climate Index for the automotive industry fell to -23.8 points in April 2026, down from -19.0 points in March. Companies are increasingly pessimistic about the future, with expectations dropping to -30.7 points.
In response, industry leaders are calling for urgent measures. The VDA suggests that opening German factories to foreign ownership could help preserve jobs. However, the path forward remains uncertain, and the industry's future hinges on strategic decisions and adaptation to the evolving global market.