German Automotive Industry Falls Behind in Global Competition

The German automotive sector is reportedly losing its competitive edge when compared to international rivals, particularly those from Japan and the United States. A recent analysis by the consulting firm EY has revealed that major German automakers experienced substantial declines in both revenue and profit last year.

According to the analysis, while the revenue for the 16 leading automotive companies worldwide grew by 1.6% in the past year, German manufacturers collectively saw a revenue drop of 2.8%. Japanese automakers, in contrast, thrived with an impressive increase of 7.8%, and their American counterparts reported a revenue rise of 5.7%.

In terms of operational profit (EBIT), German firms faced a staggering decline of 27.2%. Japanese manufacturers recorded a minimal loss of 1%, while American companies managed to achieve a profit increase of 1%.

EY's report specifically examined the performance of German giants such as Mercedes-Benz, Volkswagen, and BMW, alongside Japanese competitors like Toyota, Nissan, and Honda, and American firms including Ford, General Motors, and Tesla. South Korean companies Hyundai and Kia, as well as European manufacturers Renault and Stellantis, were also included in the study.

Constantin M. Gall, a Managing Partner at EY, commented on the current challenges faced by German automakers, indicating that they are experiencing weak sales and that the significant investments in electric mobility have not yielded the expected returns due to lower-than-anticipated demand. He further noted that internal issues such as costly software failures, restructuring expenses, and recalls have compounded the difficulties. Gall does not foresee a turnaround for the industry within the current year.

In terms of revenue growth for 2024, Suzuki topped the list with a remarkable increase of 14%, followed by Honda with a 12% growth. On the contrary, Volkswagen registered a modest increase of 1%, while Mercedes-Benz and BMW faced declines of 4% and 8%, respectively. Stellantis lagged significantly with a revenue drop of 17%.

When it comes to profit, Suzuki again led the pack with a 39% increase, followed by General Motors with a 32% rise. Volkswagen found itself in the tenth position with a profit decrease of 15%, while Mercedes-Benz and BMW reported much steeper declines of 31% and 38%, respectively. Stellantis faced a staggering 84% plunge in profits, placing it at the bottom.

The automotive industry is currently grappling with a crisis fueled by slow economic conditions and reduced demand for electric vehicles. Several manufacturers and suppliers have already announced cost-cutting measures, including layoffs. The situation is expected to worsen due to the ongoing trade disputes with the United States. Recently, U.S. President Donald Trump confirmed plans to impose additional tariffs of 25% on all automobile imports starting in April, which could significantly impact German manufacturers, as the U.S. remains their largest export market for new vehicles.