Commentary: Germany's auto industry has lost its rhythm

German automakers Volkswagen, BMW, and Mercedes aim for a profit margin of 8 to 10 percent in the coming years – with Mercedes aiming for it by 2029, while Volkswagen and BMW aim for it by 2030. Toyota has already reached this level. The world's largest automaker made a crucial decision to focus on hybrid vehicles, which is currently the global standard.

However, Chinese manufacturers like BYD and Geely are moving ahead with battery-electric vehicles, while German automakers are clinging to internal combustion engines. This is the fundamental issue facing the German car industry – they are falling behind in the technologies that will shape the future. Global standards are already being set elsewhere.

For instance, Volkswagen is the only German manufacturer producing battery cells on an industrial scale, but it still lacks the scale to compete with companies like CATL or BYD. Stellantis and Mercedes have largely abandoned battery projects in Europe for now. In the realm of autonomous driving, German automakers are more likely to buy or collaborate rather than develop independently.

An ambitious joint venture between Volkswagen and Bosch on this front failed. The German-German cooperation missed the mark by not investing early in emerging AI models. Consequently, BMW, Mercedes, and Volkswagen are now left hoping for two things. First, to defend their strong European market position as China has become less of a profitable market and the US has imposed tariffs.

Second, to generate significant revenue from electric vehicles, just as they once did from internal combustion engines.