Global Competition Germany's Top Three Automakers Continue to Lose Ground

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According to dpa, the three German automakers—VW, Mercedes-Benz, and BMW—are continuing to lose ground to their international competitors ...

In the first half of the year, revenue for Volkswagen, Mercedes-Benz, and BMW fell to about 284 billion euros ($326.6 billion). That is 2.9 percent less than a year earlier, according to an analysis by the auditing and consulting firm EY. By comparison, the 19 automotive groups surveyed as a whole increased their revenue by 3.6 percent (to just under 1,048 billion euros / $1.205,2 billion). According to the data, this marks the third consecutive first half-year in which German manufacturers have seen a decline in revenue. The gap is even more pronounced in the corporate rankings. According to EY, 15 automakers reported an increase in revenue—but the three German companies ranked 16th, 17th, and 19th. Incidentally, Tesla posted the strongest growth, followed by Suzuki and Geely.

Even When It Comes to Profits, We're No Longer Making a Good Impression

German automakers are also struggling on the earnings front, as their earnings before interest and taxes (EBIT) fell by 19 percent (to 13.0 billion euros / $14.95 billion). In absolute terms, VW, Mercedes, and BMW remained far ahead of manufacturers from other countries, but according to the analysis, this is currently the lowest figure since the pandemic year of 2020. Manufacturers from China (down 21.9 percent) and Japan (down 36.5 percent) also fared worse. In contrast, the U.S. automakers Ford, General Motors, and Tesla saw a 32.9 percent increase. According to the report, the combined profit of all manufacturers under review rose by 11.4 percent (to 43.7 billion euros / $50.255 billion). However, the comparison is skewed by the fact that several companies had taken massive write-downs on their electric vehicle businesses during the same period last year. This makes the increase appear larger.

Germany's Automakers Caught in a Cost Trap

According to EY industry experts, Germany’s auto industry is in the midst of a profitability crisis. German manufacturers are not only losing market share but, more importantly, their profitability. And while international competitors have stabilized their margins, VW, Mercedes-Benz, and BMW are increasingly falling behind in terms of profits and returns. The report cites structural cost disadvantages as the main reason for this. For a long time, the high proportion of production in Germany was a competitive advantage and a symbol of quality and strength. However, given far-too-low labor productivity, high energy prices, and high costs associated with regulations and bureaucracy, it is increasingly becoming a burden. Necessary changes have not been consistently implemented here. As a result, it will be difficult to regain ground against the global leaders in terms of profitability. Added to this are U.S. tariffs and sluggish business in China.