The global automotive industry showed moderate growth in 2024, but German manufacturers faced setbacks. While the world’s largest carmakers collectively increased their revenue by 1.6%, German brands such as BMW, Mercedes-Benz, and Volkswagen saw a 2.8% decline. This marks a clear shift in the global automotive landscape, where competition has intensified, and the dominance of German manufacturers is under pressure.
German Brands Face Decline Amid Global Growth
The worldwide car market surpassed €2 trillion in revenue for the first time, driven largely by manufacturers in Asia and the U.S. In contrast, the major German automakers, while still generating substantial revenues, are losing their grip on the market. BMW, Mercedes-Benz, and Volkswagen together earned €613 billion in 2024, but their collective revenue shrank by nearly 3%. Of the big three, only Volkswagen managed to show a slight increase, while Stellantis experienced the sharpest drop of 17%.
This decline in revenue is a significant blow for Germany’s automotive sector, as it has traditionally made up nearly a third of the global automotive market. However, the situation is changing. The global dominance that German carmakers once enjoyed is now under threat, as other regions, particularly Asia and the U.S., have surged ahead in key metrics like sales volume and technological innovation.
Asia and the U.S. Outperform German Brands
Japanese and American automakers are surpassing their German counterparts, especially in the growing electric vehicle (EV) sector. Experts point to the weak demand for EVs in Europe, slower-than-expected sales, and high investment in electrification that has yet to pay off as some of the key reasons for the struggles of German brands.
Constantin Gall, an analyst with EY, highlighted that German carmakers have also faced internal challenges, such as software issues, product recalls, and costly restructuring efforts. In 2023, premium pricing helped brands like BMW and Mercedes-Benz hold their market share. However, this advantage is starting to fade. Cars from Asian automakers are increasingly tech-savvy and affordable, pressuring German manufacturers to rethink their strategy in a price-sensitive market.
As Gall notes, “German brands are no longer able to rely on their premium pricing alone. With more affordable and high-tech cars flooding the market, German manufacturers need to adapt to stay competitive.”
New U.S. Tariffs Complicate Matters for German Manufacturers
Adding to the strain on Germany’s auto sector are new tariffs announced by U.S. President Donald Trump. Starting in April 2024, a 25% tariff will be imposed on all imported cars, which will have a particularly harsh impact on German exports. The U.S. is Germany’s largest market for new vehicles, and any disruption to this trade could significantly affect sales.
In addition to the tariffs, German carmakers face challenges in the European and Chinese markets. Europe’s economic growth has been sluggish, and aggressive pricing from Chinese manufacturers has put German brands at a disadvantage. The competitive landscape is shifting, and German carmakers find themselves caught between rising costs and pressure to lower prices.
Cost-Cutting Measures and Future Strategy
In response to these challenges, German automakers have begun laying off workers and implementing cost-cutting measures. However, analysts believe that these efforts alone won’t be enough to secure the industry’s future. As Gall points out, “You can’t save your way into the future.” Cutting costs may help in the short term, but it’s not a sustainable solution.
For German manufacturers to thrive in the rapidly changing global market, they must undergo a strategic realignment. This means making smarter investments, sharpening their brand appeal, and focusing on long-term goals rather than short-term savings. The future of the automotive industry is not just about cutting costs but about developing innovative products, embracing new technologies, and improving efficiency.
The Road Ahead for German Automakers
The road ahead for Germany’s auto industry will not be easy. As global competitors gain ground, the German brands will need to innovate and adapt quickly to stay relevant. Whether through advancements in EV technology, new manufacturing processes, or improved digital services, the future of the German car industry will depend on how effectively these companies respond to the changing market dynamics.
The world’s automotive industry is rapidly evolving, and German manufacturers must be willing to evolve with it. While 2024 has been a challenging year, the next chapter for the German auto industry will depend on bold moves and swift adjustments. The competition is fierce, and only those who can adapt to the new market realities will succeed.
