It is an earthquake that is shaking Germany: its three largest automobile manufacturers are faltering simultaneously, endangering an industrial model more than a century old.
The figures are relentless: -84% profits for BMW, -91% for Audi, thousands of jobs threatened at Volkswagen. The German automobile industry, once the flagship of the European economy, is going through its most serious crisis.
The fall is particularly spectacular at BMW. The Munich manufacturer only earned 476 million euros in profits in the third quarter of 2024, compared to nearly 3 billion in the same period the previous year. A dizzying decline which can be explained by several factors: quality problems with the braking systems supplied by Continental, but above all a collapse in sales on the Chinese market.
The Chinese market, the Achilles heel of German manufacturers
China, once an El Dorado for German manufacturers, has become their biggest challenge. Faced with the rise of local manufacturers, including BYD, SAIC, Geely, Nio and Xpeng, and fierce competition on prices, German brands are quickly losing ground. Audi is trying a radical approach by developing a new electric brand with the public group SAIC, even abandoning its emblematic rings to attract Chinese consumers.
The situation is not much better for Volkswagen. The Wolfsburg group plans a vast savings plan of more than 10 billion euros, including drastic measures: 10% reduction in salaries, freezing of increases until 2026, and even the possible closure of factories in Emden and Zwickau. A situation which risks leading to a major social conflict, with the IG Metall union not ruling out strikes from December 2024.
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The electric transition, a poorly negotiated shift
The transition to electric also reveals the structural weaknesses of German manufacturers. At Audi, the two-year delay on the Q6 e-tron illustrates the difficulties in mastering new technologies, particularly software. BMW, despite a 10% increase in its electric sales, is struggling to maintain its margins in this segment.
The case of Audi is particularly worrying: up to 2,000 positions out of 10,000 could disappear in the development department alone. A situation which reflects the urgency of the transformation, but also the difficulties in maintaining employment levels in the face of the simplification of electricity production chains.
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The group dedicated to software at Volkswagen, Cariad, has accumulated delays, slowing down the marketing of its electric cars. A debacle which even cost former CEO Herbert Diess his job. Faced with this fiasco, VW decided to radically change its strategy by investing massively in the American Rivian.
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Faced with Chinese competition, the electric revolution and technological challenges, an entire economic model must be reinvented. The question is no longer whether German manufacturers will survive this crisis, but rather in what form they will emerge.
Caught between China and the United States
German manufacturers are the most exposed to this Trump earthquake. BMW, Mercedes and Volkswagen have an Achilles heel: their dependence on the premium American market, where they make a crucial part of their profits.
With colossal investments of more than 250 billion euros in electricity, these groups were counting on the comfortable margins of the US market to finance their transition.
The customs tariffs promised by Donald Trump, which could reach 25% for Europeans, would make their high-end electric cars almost unsellable compared to Tesla. Take a Mercedes EQS selling today for $120,000: its price would jump to $150,000, while Tesla's Model S would remain at $90,000. A tariff chasm which, combined with the elimination of federal aid and the American preference for Tesla and traditional American manufacturers, could cause their sales to fall by 40% according to analysts. Their entire economic model, based on international electric luxury, is collapsing.
Finally, the customs duties imposed by the European Union on Chinese electric cars present a huge risk for German manufacturers due to their heavy dependence on the Chinese market.
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Volkswagen, BMW and Mercedes generate a significant portion of their sales in China. These measures could lead to retaliation from Beijing, which would affect German exports to China and disrupt supply chains.
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