German carmakers hit a dead end as China drives past

In a shocking turn of events, Germany's top carmakers are facing a steep decline in sales in China, leading to significant job losses and restructuring efforts. Volkswagen, Europe's largest carmaker, reported a 5.8 billion euro (£6.5 billion) loss for Q3, marking a historic shift in fortunes. BMW and Mercedes-Benz have also cut jobs and issued profit warnings this year.

The fall in sales has been rapid and severe, with annual vehicle deliveries in China dropping by about a third between 2019 and 2025. Chinese carmakers have now captured 65.3% of the domestic market, up from 37.8% in 2019, according to the China Passenger Car Association (CPCA).

German carmakers had long dismissed Chinese competition, viewing themselves as pioneers of the automotive industry. However, the rise of Chinese electric vehicle makers such as BYD and Xpeng, supported by government subsidies and infrastructure, caught the German brands off guard. These newcomers brought digital technology to a market accustomed to internal combustion engines, rendering the German brands' expertise in this field increasingly obsolete.

The German brands must now adapt by integrating Chinese technologies into their vehicles for both domestic and global markets. Volkswagen, for example, aims to design cars entirely in China and is planning to export vehicles from the country to the Asia-Pacific region, with the ID.Every1 electric model set to launch in Europe in 2027.

Despite these challenges, Mercedes-Benz CEO Ola Kaellenius remains committed to China, stating that the company will not abandon the market.