The global auto industry saw significant growth in 2024, with the world’s 16 largest car manufacturers surpassing the €2 trillion revenue mark for the first time. A new report by consulting firm EY reveals that global auto revenue increased by 1.6% compared to the previous year. However, German automakers struggled, bucking the trend with a collective revenue decline of 2.8%. While Volkswagen managed to post slight gains, BMW and Mercedes-Benz faced setbacks, and Stellantis suffered a sharp 17% drop.
Despite the challenges, Germany remains a key player in the global auto market. The country’s car manufacturers generated approximately €613 billion in 2024, accounting for nearly 30% of total industry revenue. However, their market share is shrinking as competition intensifies, particularly from Asian and American brands.
Japanese and American Carmakers Gain an Edge
While German automakers struggled, their counterparts in Japan and the United States reported strong financial performances. Companies such as Toyota, Honda, and Ford posted revenue and profit increases, capitalizing on changing consumer preferences and technological advancements. According to EY analyst Constantin Gall, the shift is largely due to a combination of factors, including weak demand for premium German vehicles, high but unrewarded investments in electric cars, and operational setbacks such as software failures and costly recalls.
“Last year, premium brands benefited from strong pricing power,” Gall explained. “But now, the market is shifting. Consumers are more price-conscious, and competition is intensifying, especially from affordable, high-tech models produced by Asian manufacturers.”
Trump’s Tariffs Add to German Automakers’ Woes
In addition to market challenges, German automakers face new trade barriers. U.S. President Donald Trump recently announced a 25% tariff on imported vehicles, set to take effect in April. This poses a significant threat to German manufacturers, as the United States remains their largest export destination.
The impact of these tariffs could be severe. Not only could they hurt sales, but they may also reduce profitability for companies that depend on U.S. consumers. German automakers are already struggling with a sluggish European economy and an increasingly competitive Chinese market. Now, higher tariffs could further strain their financial outlook.
Industry experts warn that the tariffs may force German carmakers to reconsider their global strategies. Some companies might shift production to North America to bypass import duties, but such a move would require significant investment and time. In the short term, they may have to absorb some of the costs or pass them on to consumers, potentially making their vehicles less competitive.
Cutting Costs Won’t Be Enough
In response to declining profits and mounting challenges, many automakers have implemented cost-cutting measures. Some have reduced their workforce, while others have restructured operations to improve efficiency. However, analysts caution that simply cutting costs will not be enough to ensure long-term success.
“You can’t cut your way to health,” Gall said. “Companies need to rethink their strategies, innovate, and focus on the future. That means embracing new technologies, refining their brand identity, and adapting to changing market conditions.”
Some German carmakers have already begun shifting their focus. BMW and Mercedes-Benz, for example, are investing heavily in electric and hybrid vehicles to stay competitive. However, their progress in the EV market has been slower compared to Asian rivals like BYD and Tesla, which have dominated the segment with more affordable and efficient models.
A Pivotal Moment for Germany’s Auto Industry
The coming years will be critical for German car manufacturers. While they still hold a strong position in the industry, their dominance is no longer guaranteed. To maintain their relevance, they must adapt to evolving consumer demands and geopolitical shifts.
The electric vehicle transition remains one of the biggest hurdles. While German brands have invested billions in EV development, their offerings have struggled to match the affordability and efficiency of competitors. High production costs, supply chain disruptions, and software integration issues have slowed their progress, putting them at a disadvantage in an increasingly EV-driven market.
Additionally, China’s aggressive push in the global auto industry presents another challenge. Chinese brands like Nio, XPeng, and Geely are rapidly expanding their presence in international markets, offering cutting-edge EVs at lower prices. If German carmakers fail to keep up, they risk losing more ground to their Chinese rivals.
The path forward requires bold decision-making. Investing in next-generation technology, optimizing supply chains, and forming strategic partnerships will be crucial. Companies that successfully navigate these challenges can regain momentum and strengthen their market positions. However, those that fail to adapt may face continued declines in revenue and influence.
As the global auto landscape evolves, German automakers stand at a crossroads. The decisions they make now will determine their place in the industry for years to come. Whether they can reclaim their leadership or continue to struggle remains to be seen.