Germany fights to save Auto Industry from China

Mark O'Neill May 07, 2026 21:02

The automakers of Germany, the symbol of its industrial resurrection after World War Two, are fighting for their future against the threat of cheaper, better Chinese electric vehicles (EVs).

On March 10, Volkswagen announced a drop in operating result of 53 per cent last year to 8.9 billion euros and the loss of 50,000 jobs across the group between now and 2030.

Last September Porsche lost its place from the blue-chip DAX Index, after its exports to China fell to 40,000 units in 2025 from nearly 100,000 in 2021.

No country in the world loves motor vehicles more than the Germans. “They have petrol in the blood,” is a popular saying. With the Isle of Man, Nepal and Uttar Pradesh state in India, it is one of the few countries in the world with no speed limits on its expressways. Drivers can go as far as they wish.

After World War Two, the motor car became, with football, a symbol of the recovery of Germany from the shame and defeat of World War Two.

In 2024, Germany was the biggest auto market in Europe in terms of production and new registrations, with 32 per cent of the continent’s passenger cars and almost 22 per cent of new registrations. That year, it produced 4.1 million passenger cars and 351,000 commercial vehicles.

But the golden era has ended. A study earlier this year by the German Economic Institute showed that German car exports to China in 2025 fell by roughly a third, with the value of automotive and parts exports falling below 14 billion euros, compared to nearly 30 billion in 2022.

The automakers’ foothold in China, the world’s largest auto market, is shrinking at an unprecedented pace. Competition from Chinese makers, especially those of EVs, is increasing every year.

"The competition in the Chinese market is ​the most intense competition in the world," ​Hildegard Mueller, president of Germany's VDA auto lobby, ⁠told reporters at the Beijing Auto Show in April.

“We must accept that our historically strong market share in China can no longer be held ​as a benchmark for success. The Chinese ​manufacturers will have a bigger role now and in future," she said. “Patriotism plays a role among Chinese consumers.”

German government data published in November said that the number of jobs in the auto industry at that time was the lowest since 2011. In 2025, the number fell to just above 700,000, compared to 820,000 in 2019.

German makers did not see the competition of Chinese firms nor their capacity for innovation. Jurgen Dispan, of the Institute IMU in Stuttgart, said: “They thought they had the time to adapt but have been surprised by the transition to electric vehicles.”

Andreas Knie, a sociologist at the Institute for Scientific Research (WZB) in Berlin, said that Chinese firms started researching electric vehicles more than 20 years ago. “The Germans believed themselves the best. As with football, they thought that they would remain champions. But no! The automobile crisis is also a crisis of identity.”

On April 29, VW launched its counter attack for 2026. It unveiled one of its cheapest EVs – the ID. Polo will retail for about 25,000 euros, compared with just under 23,000 euros from the Dolphin Surf made by BYD, The new car has a basic range of 329 kilometres.

VW said that the new EVs would be released this year across three group brands – VW, Skoda and Cupra. The vehicles share a common platform, have almost 80 per cent of the same components and will be produced at a single factory in Spain. Labour costs there are cheaper than in Germany.

In 2027, VW will release a smaller and cheaper electric vehicle, the ID.Every1 with prices starting at 20,000 euros.

Andreas Knie said: “the automobile world is dominated by elderly men who hold key posts but belong to another epoch. This is only the beginning of the decline. The spectre of Detroit is not a myth.”

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.