2025 was a record-breaking year for German carmakers, especially "Volkswagen" and "Mercedes". However, rumors of their demise have been greatly exaggerated. Why?
2025 was a record-breaking year for German carmakers. In addition to the tariffs imposed by US President Donald Trump, billions in strategic reorientation costs were added. The consequences for "Porsche" were particularly severe: instead of relying entirely on purely electric models, which did not sell as well as expected, the sports car manufacturer will once again develop new models with internal combustion engines. The costs of around 3.9 billion euros related to the change in strategy and customs duties ate up almost all of the company's profits.
Other manufacturers such as "Volkswagen" and "Mercedes" also saw sales stagnate in 2025 and profits collapse. BMW was the only exception: it managed only a three percent negative net return, while profits at "Volkswagen" and "Mercedes" shrank by almost half.
The mood in the industry is gloomy, but companies are still making money
Overall, German car companies earned nearly 44 percent less money last year than in 2024. According to calculations by the "Handelsblatt" newspaper In 2025, BMW, "Mercedes" and "Volkswagen" together reported earnings before interest and taxes of just 24.9 billion euros, the lowest level since 2020.
The mood is accordingly gloomy. But German carmakers are still far from collapse, Frank Schwope, an automotive consultant and lecturer at FHM University in Cologne, tells DW: "Everyone is still reporting profits, even dividends are being distributed. German manufacturers were spoiled during the Covid pandemic years from 2021 to 2023, when they reported extremely high profits." Therefore, comparisons with the size of profits from 2019 and earlier are more relevant, he adds.
After the net profit of the three giants in the industry collapsed to a record low of 16.6 billion euros in 2020 (the first year of the pandemic), the following 2021 the profits of the Big Three literally exploded to over 40 billion euros. The reasons: car prices rose significantly due to problems with supply chains and limited production capacity. And since chips and components were in particular in short supply, manufacturers preferred to produce expensive models, from which they earned significantly more per car.
The automotive market remains unstable - even in China
The figures clearly show how unstable the automotive business has always been. Automotive analyst Jürgen Pieper summed up the current problems to DW as follows: "First of all, I see the technological transformation and the associated costs, then come the structural problems, for example the excessively long decision-making procedures, and thirdly, the weakness of the Chinese market."
"Volkswagen" is a good example of the consequences of the increasing competition from local manufacturers. If in the past the German concern had up to 40 percent market share in China, the largest car market in the world, now this share has fallen by almost three times.
At the beginning of 2026, however, a surprising change in the trend emerged: according to data from the China Association of Passenger Car Manufacturers, in the first two months of the year "Volkswagen" has regained its leadership - with a market share of 13.9 percent (together with partners SAIC and FAW), the German manufacturer has climbed to the top again.
Following it are "Geely" (13.8 percent) and "Toyota" (7.8 percent). The previous leader BYD, on the other hand, has collapsed to 7.1 percent. The reason for this market turmoil: decreasing state subsidies for electric vehicles are making it significantly harder for manufacturers of purely electric cars like BYD, while demand for classic models with internal combustion engines from "Volkswagen" and "Toyota" remains stable.
The sector remains dynamic and challenging
But regardless of how things develop in the key markets of China and the USA, the pressure to adapt, accompanied by job cuts and plant closures, remains high for German car companies. Expert Frank Schwope is convinced of this: "Automakers remain permanent construction sites and will have to review their structures every year. The geopolitical situation, punitive tariffs and new Chinese competitors are not making things easier. In addition, autonomous driving is expected to be widespread from 2030," he says.
Automotive analyst Pieper believes that BMW is in a particularly good position. The Munich-based concern benefits from the fact that it has not only focused on electric vehicles, that the costs of developing new models are now largely behind it, and that by putting the plant in the American city of Spartanburg into operation it has managed to avoid some of the customs costs in the USA.
Frank Schwope is optimistic about "Porsche": "A luxury car manufacturer like "Porsche" will certainly come out of the crisis faster than mass manufacturers like "Renault" or "Fiat." In addition, customer loyalty also plays a role: "The "Porsche" customer remains loyal to the brand, and the "Opel" customer buys a Chinese car," Schwope claims.
The rumors of their demise are greatly exaggerated
If we believe the pessimists, the days of "Volkswagen" and company that failed to get involved in software and battery development are numbered. Frank Schwope sees things differently: "Their funeral is hasty. A few years ago, it was believed that "Tesla" had an unattainable lead, and then the Chinese manufacturers suddenly caught up. In addition, the so-called solid-state battery (Solid State Battery, using a solid electrolyte - ed.) could once again become a game-changer in electromobility."
And manufacturers around the world are already working hard on this issue. BMW, for example, plans to mass-produce electric vehicles with solid-state batteries from 2030, and Mercedes - even before that. The first BYDs with such a battery are expected to roll off the assembly line after 2030 and have a range of over 1,000 kilometers. At "Toyota" things will happen much earlier - as early as 2027, and at Volkswagen - from 2028, if all goes according to plan.
And Jürgen Pieper does not look so negatively at the future: "There are actually encouraging signs, mainly because the products are getting better", says the automotive analyst. "There is still no sharp jump, but rather the slow improvements typical of Germany. On the other hand, these are sustainable improvements, so we can talk about a gradual turn for the better," he adds.