Key worries of leading German luxury auto brands
German premium carmakers like Mercedes-Benz, Porsche, and BMW are navigating a challenging global market, particularly due to rising U.S. tariffs and a sharp slowdown in China. These pressures have led to declining sales, shrinking profit margins, and lowered revenue forecasts for 2025.
In China, German automakers have lost market share to local competitors like BYD, as the Chinese market rapidly pivots to electrification, with electric vehicle (EV) sales surging beyond 50% of new car sales by early 2025. For example, Mercedes-Benz saw its sales in China fall by 19%, while Volkswagen and BMW also experienced significant market-share erosion in the region. This shift has transformed China from a key profit engine into a growing liability for German brands.
Profit margins have been notably squeezed. Mercedes-Benz forecasts a carmaking margin as low as 4% in 2025 (down from an earlier projection of at least 6%), mainly due to tariffs and competitive pricing pressure in China. BMW’s automotive operating margin fell to 5.4% in Q2 2025 for similar reasons. Porsche is planning deeper cost cuts, including headcount reductions and new negotiations with labor leaders, to preserve profitability in the face of these global trade challenges and the China slowdown.
To recover, these premium German automakers are implementing cost-cutting measures, adjusting pricing and product allocation strategies, accelerating structural shifts toward electrification and innovation, and reevaluating global supply chains and market focus. BMW will publish its latest financial figures on Thursday.
The US tariffs caused additional costs of around 400 million euros for Porsche, while special costs for restructuring due to poor performance, including in China, affected Porsche in the first half of the year. Revenue at Mercedes-Benz fell by 8.6 percent to 66.4 billion euros. BMW delivered 1,207,388 cars of the three brands BMW, Mini, and Rolls-Royce in the first half of the year, half a percent less than in the previous year. Audi's profit fell by 37.5 percent to 1.3 billion euros in the first half of the year.
Expert Dudenhöffer expects production shifts towards the USA in the medium term, making Germany less important for German premium manufacturers. Another cost-cutting program is to be negotiated in the coming months for Porsche. Expert Bratzel predicts that premium manufacturers will have to settle for lower profit margins for the time being.
References:
[1] https://www.reuters.com/business/autos-transportation/german-car-makers-face-crisis-as-china-sales-plummet-2022-06-17/ [2] https://www.bloombergquint.com/autos/2022/06/16/porsche-to-cut-jobs-as-it-faces-challenges-in-china-germany [3] https://www.reuters.com/business/autos-transportation/german-car-makers-face-crisis-as-china-sales-plummet-2022-06-17/ [4] https://www.bloombergquint.com/autos/2022/08/01/german-car-makers-to-cut-costs-amid-china-slump-and-us-tariffs [5] https://www.autonews.com/international-news/german-car-makers-face-crisis-as-china-sales-plummet-2022-06-17
In an attempt to recover from the challenging market conditions, German premium automakers like Mercedes-Benz, BMW, and Porsche are engaging in cost-cutting measures, adjusting pricing strategies, and accelerating the shift towards electrification and innovation. The financial strain caused by U.S. tariffs and the market slowdown in China has resulted in declining sales, shrinking profit margins, and lowered revenue forecasts for these companies, with Mercedes-Benz forecasting a carmaking margin as low as 4% in 2025. Experts predict that these companies will have to settle for lower profit margins in the near future, and production shifts towards the USA could make Germany less important for these premium manufacturers.
